Trusting advisors can be difficult… Especially financial or Mutual Fund advisors!
The financial industry is extremely notorious for doling out advise that is in the best financial interests of the advisors and not the investors.
Being in the financial industry for some time now, here are a few questions that will help you identify a genuine Mutual Fund Advisor. You ask these and you will be able to determine whether the advisor is worth your time.
Not all of these are questions you can directly ask to the advisor. This is because he will try to answer in a pleasing way and then you end up with false promises.
You can answer these questions yourself basis –
- Your interaction with the advisor
- Reviews of the advisor from his existing clients
- Your initial experience with the advisor
So here are the questions you need to seek answers to from your financial advisor…
Are you capable of handling my finances?
Sounds absurd, doesn’t it?
But the typical mutual fund distributor (the one who sells you regular plans of mutual funds) has not passed any serious examination. The exam is, for all purposes, namesake.
A fee-only advisor (the ones who offer direct plans), on the other hand, has earned his right to advise you by passing a relatively tougher and more holistic test.
So, if you are thinking of being associated with a mutual fund distributor, it is very important you assess him for capability.
An MBA in finance, CFA, CA, actuarial sciences professional, economics degree are strong signs of capability.
If these are absent, it is important you check his past record of managing the finances and investments of previous clients.
Will you be available at my disposal all the time?
While this sounds like it is too much to ask, I believe this is important.
If you see that slowly the advisor starts ignoring your calls and doesn’t reply to your messages unless you strongly nudge, it is a bad sign.
He should be available to you at all times because even though you he helped you set up your mutual fund investments, he earns a perpetual commission on them (unless the investments are redeemed). So, he’s earning his bread because you invested via him.
If there is an emergency redemption requirement, the investment advisor should ideally be able to process it for your quickly. Or any small but important action like change in bank account for transaction, addition of a nominee.
The above two problems sort of go away if you choose to invest using a top online mutual fund advisor like Finpeg.
Finpeg is a robo-advisor which helps you do all investment related processes online. At the same time, there will also be a human interface 24×7 at your disposal in the form of a relationship manager. The relationship managers at Finpeg are hand-picked. They have up to Master level education in financial markets, economics and statistics. Additionally, they pursue professional courses like CA, CFA and Actuarial Sciences. Our team of investment experts – Finpeg Team.
While investing via a robo-advisor like Finpeg, you get the best of both worlds – online convenience and a human interface!
Will you help me review and rebalance my portfolio?
This is a part that very few mutual fund advisors focus on.
Investment is not a one-time process. You don’t invest just once or start an SIP just once.
It is very important that you keep track of the performance of the funds.
Also, you could seek market outlook from a professional or your advisor if he is that good and shuffle between different fund types basis it.
Will you try to sell me insurance related products that are sub-optimal and not useful?
This is something you cannot really inquire up front. Every advisor will say no!
But over time, if you see that your investment advisor is really pushing you to buy weird insurance related products, you know it is time to find a new advisor.
Insurance and insurance-related products pay the highest commissions to advisors which incentivises them to push these products to the end customers; whether customers really need it or not.
In most cases, the products are such that they are sub-optimal for everyone!
Will you be honest and upfront about the investment choices that we make together?
As an investor, you will have a certain risk appetite, biases etc.
It is quite possible that your advisor might not share the same investment philosophy as you do.
For example – whether the asset allocation should be fixed or tactical as per changing market conditions.
In scenarios like this, you should have an understanding with the advisor. The understanding should be the advisor advises you to the best of his knowledge and not simply to maintain the status quo of your relationship.
Meaning, if you believe that the equity allocation of your portfolio is very high but the advisor thinks it is just right, the advisor should not give in and simply reduce the equity allocation because you think so. Ideally, he should make a case for his view and then let you decide.
If your advisor is afraid of advising you because that might lose him a client, then he is a weak and a bad advisor.
You will be better able to answer this question over time as more and more decisions are to be made.
So those are the 5 questions that every mutual fund advisor should answer satisfactorily to earn the job of managing your finances.
As an additional note – Finpeg, as an investment advisor, answers these questions comprehensively. We have had a great journey in helping hundreds of clients with their mutual fund investments and are one of the fastest growing robo-advisor in the country.
You can check out our offerings here – Finpeg’s Offerings
Our investment team here – Finpeg Team
The post 5 Questions To Ask Before Choosing Your Mutual Fund Advisor appeared first on Finpeg Blog.
