Real Financial Advisors

Think about it. If we are talking here about Real Financial Advisors, does it also mean that someone else might be a Fake Financial Advisor?

The answer is sadly, Yes.

Indian investment advisory and financial planning space is filled with people who pose as financial advisors but in reality are just product-sellers. Product-sellers get commission selling financial products. So you can be sure that he or she will do anything to sell you the product. After all, there income depends on it.

And that is why the conflict-of-interest raises its ugly head!

It is for this reason that these products sellers, like Mutual Fund Distributors, Insurance Agents and Bank Relationship Managers should be your Financial Advisors. I have written in detail about this in the below articles:

• When Mutual Fund Distributors (MF Agents) Give Your Wrong Advice and How much commission do MF agents earn?
• Why you shouldn’t take Investment Advice from your Bank?

I strongly suggest you read the above two articles. It will open your eyes.

But before we discuss who is the Real Financial Advisor, let me say something.

I don’t think everyone requires Financial Advice. There are many who can manage their investments just fine on their own. But such people are very few. And for everyone else, there is a genuine need for financial advice.

Unfortunately, those-in-need-of-real-financial-advice have been fooled into believing that the free advice which MF agents, insurance agents give is good for them. But the reality is quite different.

If you are looking for an investment advisor or are looking for a financial planner near me, then you just need to do two things:

1. Avoid taking advice from product sellers
2. Use common sense to find a trustworthy Investment advisor

Avoiding product sellers is easy. As soon as you get close to those friendly insurance selling agents and uncles, mutual fund distributors (or those selling regular plans of mutual funds), bank relationship managers, just turn around and run away!

Half the battle won.

Now how to find a good and real financial advisor – who can give proper and commission-bias-free advice?

Easiest option is to go to SEBI Registered Investment Advisor or SEBI Registered Financial Planner in India. And why are these SEBI RIAs the best option for you? I have written in detail about this at Why you should choose SEBI RIA for Financial Advice?

And if it helps, know that these Real Financial Advisors, i.e. the SEBI Registered Investment Advisors (SEBI RIAs) – already are held accountable by law to a fiduciary standard. That is, they need to put their client’s interest first. It is only the brokers and others who sell financial products for a commission (like MF agents, Insurance Agents, IFAs) that can give questionable and biased advice.

But it is important to understand that how the advisor is compensated is what helps you find who the real advisor is.

Just ask any prospective financial advisor:

• How are you compensated?
• Do you get paid ONLY by the client?
• Or you also get paid (commissions) for products you recommend/sell?

Assuming the person isn’t lying, if he tells you that he gets commission, then you know that he isn’t a Real Financial Advisor. And you should avoid him.

An Investment Advisor whom you should engage should only get compensated by the clients. That is, he gets fee only from clients and does not receive any commission from product vendors. And once you have found the Real Financial Advisor, you can be sure that he will take a simple yet powerful goals-based approach to your finances and instead of talking about things like ‘beating the market / alpha / top funds / etc.’, he will create a financial plan that increases the probability of your goal achievement. Here is a small sample of good financial planning exercise.

The Real Financial Advisor will not give you shallow advice of just buying this or that financial product. He will diagnose your financial life before prescribing anything. And if the advisor does his job truthfully, then a financial plan can really change your life for good forever!

Just Like a Doctor.

A doctor doesn’t write a prescription full of medicines without understanding your problems. Right? The same is the case with a good investment advisor. They listen to you, understand your unique financial situation and then make suggestions.

And those mutual fund distributors and insurance agents and bank RMs are like that fake doctor who writes a prescription even without asking you what you really need. Strangely true isn’t it? And most people don’t think of it like this.

Finding a good, real Fee-Only Financial Advisor is hard. And once you find one, And once you have found the right one, you need to look at your arrangement with the financial advisor as a long-term relationship.