How to choose a financial advisor?

How to choose a financial advisor?

How to choose a financial advisor?

How to choose a financial advisor ?

If you have decided to approach a financial advisor, take a pat on your back.  You are one of the few, to rely on a profession to let you grow your money. We can also see how to choose a better financial advisor. There are Insurance agents, mutual fund advisors and many IFA’s who call themselves as Financial advisors. SEBI has issued a notice and asked all those who want to be called themselves as “Financial advisor in India” by abiding the rules framed by them.

How to Choose a Financial advisor ;

More than technical factors,  you can look at the below 7 factors while choosing a financial advisors,

  1. Trust Factor
  2. Years in Business
  3. Is he over promising?
  4. Get a sample financial analysis
  5. Analyse the report after the meeting
  6. Look if he is pushing a particular product
  7. Fee structure

Case Study;

It will be easy to understand the need for financial or Investment advisor, if i had explained with a case study. Here is a family living in Chennai, both bringing in a monthly income of close to 1 lakh. They have a child who has joined school in 2016. Also they had bought a new flat for 45lakhs. Is it not a happy family considering everything falling in place n 2016.

After interaction with this family, able to identify the financial gaps they want to plan for,

1) Securing their Child education

2) Securing money for child marriage

3) Planning for home loan repayment

4) Planning for retirement

At present after analysing their financial income, they were able to identify that after paying the home loan EMI’s, car loan EMI’s they are left with only 5000 for any investment per month. They had a big gap in terms of risk protection in the form of insurance. They didn’t had any sort of insurance apart from health and term insurance provided by the office they working in. As of now, they had asked to plan for their small gap in tax investments as well. Financial advisor can guide you on this.

Financial Plan for this family;

Investments – Tax saving mutual fund products were recommended for now. This helps in long term investment planning for their retirement or child education.

Separate investment plans will be done when there is increase in their income or when their car loan gets closed. So all other investment planning will be continued once their income increases only.

Insurance – Insurance is needed for risk protection. Though there is insurance provided by both of their employers. They have changed job in the last couple of years. So it is better advised to get a term insurance for both of them as they have huge home loans in both of their names. Along with health insurance as at this moment any incumbent health issue can dent their small savings also.

Term insurance can provide the financial cushion. Though the emotional support is different, this financial support can be helpful. This amount can help for offsetting loans and ensure the child has better education. For any health issues, they can utilise the health cover provided by the employer or the external cover. If you are from central or state government, then it is wise to get a “Top up health insurance” to get extended coverage to get better treatment.

Financial planning is an evolving process and it continues to life long by enhancing your lifestyle in each and every step, and these financial advisors acts as financial doctors for your life.

Basic things for Financial Planning;

The very basic thing in financial planning is analysing your current situation.  Risk you can take with your financial goals and then working towards achieving it. Best financial planning has equal investment planning and insurance protection. Insurance protection is needed one as it helps to keep your investment plan in line without losing its path.

Don’t think about insurance payment as waste of money as it needs to be seen only as risk protection. These payments made to insurance companies can be recovered from proper investment planning. Once a family survives the investment period, there is a huge corpus with which they can lead the rest of their life.

So basically below are the things with should be in place,

  1. Term Insurance
  2. Health Insurance
  3. Investment plan for each goals

Most importantly these financial advisors helps you in avoiding the 7 common mistakes of Money Management

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