How good is your financial planner?

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If you do not understand the nitty-gritties of the market and your investments, you might end up believing what others are saying. There is no dearth of people dispensing free, unsubstantiated financial advice. Not only will it wipe off your investments, but also discourage you from investing further. That is why it is important to choose the right financial planner. But, what are some things that you should look out for while choosing one? Let’s find out.

Whenever you decide to avail the services of a financial planner, your financial goals depend on them. So, before choosing a planner, do your homework. First off, understand the ability and educational qualifications of the financial planner you choose. Then, check if he or she is registered with SEBI or not, and their experience. Further, check their area of specialization. Some financial planners only offer services to high net-worth individuals. Also, just like we do not rely solely on a doctor’s degree while availing their services, but rather also pay attention to their track record, it is important to check the financial planner’s performance history as well. Asking for references of a financial planner from acquaintances can be a good starting point. Also check for the fees they are charging.

According to a report, only 14% Indians take the services of financial planners. A major reason behind this is a serious insufficiency of financial planners. According to SEBIs guidelines dated March 2013, individuals involved in distribution of financial products cannot give investment advice. Only independent planners are eligible to give financial advice, after getting duly registered with SEBI. Due to these stringent rules enacted by SEBI for RIAs or registered investment advisors, only 1,299 investment advisors have registered with SEBI as of March 2023.

If we set aside those financial planners working in the corporate sector or those who give stock tips, we are only left with 700 independent advisors who are giving investment advice. This means that for a population of 140 crore, there is a single RIA for every 20 lakh people.

SEBI RIA Jitendra Solanki says that in order to create a strong portfolio, it should have a balance of all types of financial products. This makes achieving your financial objectives easier. A good financial planner can be a great asset.

If your financial planner is into the business of distributing mutual funds, it is possible that he will emphasize investments only in products that benefit him, or focus all your investments solely on mutual funds. That is why an essential prerequisite for deciding on your financial advisor is that they should be an RIA. After this, discuss their way of investing, and whether it aligns with you or not. Also talk to some of their previous clients. Take a final call only after you’re convinced.

Financial planners understand the intricacies of the share market, and have foresight on what is to come. Not only are they experienced, they are also authorized to give advice. RIAs are regulated by SEBI, and can be fined and have their licenses revoked if they are found giving wrong advice. Still, do your homework before choosing a financial planner. After all, it’s a matter of your hard-earned money, and you should not be careless about it.