How to choose your Financial Advisor

Over the years and in the course of my work, I have had the opportunity of meeting different sets of investors, who could be broadly classified in two groups – the discerning and the undiscerning!

The discerning type of investor is a growing breed. He is characterised by having a clearer idea of his financial goals and objectives. He is someone who knows what he wants and how to go about getting it. This kind of investor has a distinct idea of his short term and long term requirements, a fair understanding of market dynamics and is able to understand complex products and debate upon their features. Most importantly, he approaches investments with discipline.

The undiscerning type is the investor who often believes he is too caught up to take time out for investments. He has a vague idea of his short-term and long-term financial goals, has superficial knowledge of markets and products. He is the kind who often invests on tips and follows a ‘herd mentality’ when entering or exiting investments.

Most investors in India often share their relationship with more than a couple of wealth managers (Financial Advisors) managing independent and separate portfolios. This action results in no single wealth manager having a holistic knowledge of the investor’s portfolio which is the first step towards a sound financial plan.

If He/she is not interested in doing a periodic review and every meeting is about selling a product, its high time to change you financial advisor.

The discerning investor, however, attracts the right people to work with. I have heard some very good things about wealth managers and I have listed some of the feedback below. These can be construed as desirable traits or qualities in a good advisor:

Your wealth manager should be more like a member of the family. He/she should have been with you for many years and understands your requirements well. He/she must meet you regularly and does regular portfolio reviews.

Your advisor should be well educated with good domain knowledge and a fair understanding of markets and products. He/she must follows a process based approach to manage your portfolio and not an ad-hoc and undefined approach.

Therefore, the first step in making your money work starts with you. Be informed. Be demanding. Be discerning.

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