Investment advice is available free at many places these days. Talk to your uncle or colleague. Just ask them ‘What is a good stock bet now’ or ‘how is our economy doing’ and you’re likely to get a speech.




Free advice is not necessarily good advice. Good financial advisors are hard to find and you have to choose your financial advisors wisely.

There a lot of financial institutions who have taken up the role of financial advisory. If you remember the 1980s-90s institutions only adviced large corporations on where and how to make their investments, how to source money etc. .Since India is a very big country every one of them has started to make financial advisory a part of their business and that too for retail investors.

The conglomerates control every piece of the financial industry. Once you could buy insurance only from an insurance agent, real estate from a real estate agent, stocks and bonds from a stockbroker.

But now if you take any big financial conglomerate, you can’t fail to notice that they are ultimately involved in every piece of the financial industry. They run insurance businesses, they act as traders or brokers in securities markets, they own and manage mutual funds.

They also have a part of professional financial and wealth management portfolio services.So the clear distinction between different financial institutions is pretty much blurred nowadays.

How to choose your financial advisor or planner

If you are someone who prefers to make his own investment then by all means you should to do that. It is going to take you a lot of time and you need to learn a lot. You will make mistakes along the way and lose some money. However that is the best route I can suggest.

You need to hire an expert sometimes but how do you know he is also interested in YOUR success and not his commission alone.

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You are the only person who is more interested in your financial well-being than any other person out there.

So if you decide to manage your own investment then by all means you should do that. However, most people have kind of a job that they need to take up.

They have a career which they need to concentrate on and that brings in money for them. So people consider their investments a bit of sideline but at the same time they also realize that these investments are really important.

So nowadays, as they get more and more educated Indians are starting to seek professional advice about their investments. They will consult with their lawyers or with their accountant readily but still hesitate to use a financial planner.

You use a lawyer or an accountant when you need  doctor when you have any ailment or illness. You should also have a sound financial planner for your investment. There should be no hesitation in this.

How to find financial planners near you

You have a lot of choices in this regard but trust me none of them is simple. If we just log into Google and search for a financial advisor you will see that they are literally hundreds of them.You must always choose a certified Financial Planner(CFP). You can find one in your area here.

You can also approach institutions if comfortable. Many of them have of different kinds of entry criteria for clients. If it is a niche or a big investment firm you will see that their entry amount is quite big which a normal man cannot afford.

Then ultimately you can invest in mutual funds. Mutual funds are nothing but investment pools that manages pool your money with money from other investors and invest in a diversified portfolio of stocks, bonds or real estate or whatever.

But again the problem of plenty is here too. There are literary hundreds of mutual funds and in India alone. There are more than 45 mutual funds houses and each of them have nearly more than 10 different funds under their management. So practically have hundreds of mutual funds to choose from and choosing them is no easy task.

For many people working with a stockbroker is an effective way of building and managing a portfolio of investments. A broker, financial advisor, registered representatives, and account executors whatever you want you can call them.

They help you to select and manage a portfolio of investments. I believe that you need to have trusted and good investment advisor. You might argue that brokers are usually paid a commission and their interest is to sell you something.

An intelligent advisor will realize that he is better off in the long run having a satisfied customer who come back for more rather than having a bad customer who will obviously give negative feedback about them to any prospective clients.

If he is not intelligent enough to know that , you can’t trust him to make intelligent financial decisions for you. Large financial corporations must also understand that the best source of new accounts is the reference from happy customers.

CLIENT & ADVISOR CHEMISTRY

And now getting into the process of selecting the right financial advisor, there is no fixed prescription to finding the broker who is right for you. It is just like how you meet your first love, chemistry needs to be work out 🙂 .

An important part of your relationship with your broker is how comfortable you feel that around them. Also choosing a person or a broker in all aspects of personality cannot be quantified or known before hand. You know it’s not like choosing a mutual fund or choosing a stock that you can just quantify everything in terms of numbers of quality.

You need to be pretty comfortable around that financial advisor; you need to trust him above all. So that person who you choose as a financial advisor must act in a way that he gains your trust. Remember he should not be acting. He should genuinely be the person who tries to gain your trust.

ASK RECOMMENDATION FOR GOOD ADVISOR FROM FRIENDS/FAMILY

One way to choose a financial advisor is by asking friends for recommendations. Or you can just directly walk into the office of a reputable brokerage firm and ask them what they can do for you.

Don’t feel shy about adopting this approach because brokers are there to help/advice you. That is their source of income. Many of them would in fact be glad to assist even if your means are modest because a small client today might ultimately become a millionaire or a major client tomorrow.

Even if you are not a rich client right now they might be able help you by putting your cash into a bonds or money market funds to start you off with small systematic investment plans, or in a particular mutual fund.

Brokerage firms don’t spend millions of dollars advertising because they don’t want people to drop by. They want clients. So don’t hesitate.

IS THIS ADVISOR/PLANNER GOOD FOR THE JOB?

When you first enter a brokerage firm you may ask to speak to the manager. This person usually sets the tone for the place and his attitude generally will reflect how the firm is likely to behave with you. He must answer all your questions promptly and must make sense that you approached the right broker office.

You should talk to prospective brokers as if you are interviewing them for a job. You are, for the job of being your personal investment advisor. So you should make every effort to make sure that you are choosing the right person for you.

There are other few cautions to be noted though. Be aware of any broker who promises you too much or seems to know everything. Yes he needs to be well informed but he should not be a person who says/claims that he knows everything like how the market will do tomorrow or in the near future. He or she should talk at least as much about the risk of investing as about its rewards.

He or she should not imply that the process of making money in the market is cake walk. If the broker boasts that he can identify Rs.500 stock that will go to Rs.2000 in six months or that he or she can substantially increase the value of holdings by frequent trading in and out, you should be wary of such brokers.

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WHAT IS EXPECTED FROM A GOOD FINANCIAL ADVISOR ?

You want a broker who wants to know a lot about you. How much you earn, how you save, what is your financial situation, how much time you need to realistically achieve them. How much risk you can afford take and how much risk you feel comfortable taking.

You also want to make sure that the broker advises you towards making a commitment to device a well diversified investment program to help you meet your goals.

He should also monitor any investments once you purchase them. He needs to review them periodically in a continued manner and to check if that orients towards your financial goals instead of just selling you something and disappearing from your life forever.

You also need to make sure that the broker will provide you with leadership position towards your goal. He needs to be your guide, he needs to restrain you when your investments are plummeting, and restrain you again when investments soaring and you decide you have figured out the secrets of Wall Street.

Remember when you approach a broker you should not be embarrassed to accept his guidance in area like your personal finances. It is simply good management to rely on the specialized knowledge of others in the field where you are an amateur. Successful business executives do it all the time.

You must be comfortable with your broker’s style of leadership. One person inspiring guide is another person’s dislike. So it differs from person to person and what matters is your comfort level.

And at last you want a broker who will help you develop realistic expectations for the purpose of your investment program and who will establish yardsticks to measure whether those expectations are being met.

If you are constructing castles in air, he should warn you. For eg., If you expect 25% return every year from stocks he should bring some normalcy to your expectations like 10-15%.

ARE FINANCIAL INSTITUTIONS GOOD AS INDIVIDUAL ADVISORS?

In large institutions, there are a few brokers who are true geniuses and get quickly promoted to senior executive positions at their firms. They handle accounts of very luxurious and rich people and so spending much of their time handling elite clients.

They will not be saying hello to drop-in customers at a neighborhood brokerage office. All you want is a broker who will do a good, honest, average job of handling your affairs.

Remember the annual average appreciation of stocks in all Indian corporations during most of this half-century have been just average around 8-10%. A broker who can get you little above that return year after year will be doing a very nice job of leading you towards your financial goal.

Note: This is only my personal opinion. It may differ from yours and your expectations.

Also you need to remember that not every broker will be able to get that return for you. The difficulty of achieving average returns has been dramatically demonstrated by a performance of mutual funds managers who handle huge mutual funds and billion-dollar clients.

Year after year studies have found that the majority of these mutual fund managers fall short than the average index returns. As a result some investors have given up trying to perform their best. They simply invest in index funds which is also one of the prudent things to do.

In this way they make sure that they always get the average market returns and never something below that. This technique is known as the index fund approach.

When to use a broker as financial advisor

One way broker can help you is by calling on the resources of the brokerage firm’s research department. That department will be made up of security analysts who devote all their time to investigating the outlook for various investment opportunities.

They come up with new ideas for investment, but make sure that you do your own analysis before invest in the recommendations of these analysts. Most of them are under pressure to turn out reports either a buy report or sell report, and sometimes they do not have any idea what they’re publishing and what they are recommending. So you should not entirely rely upon the data of these analysts.

What they do is prepare analysis of publicly held corporations your broker will make these reports available to you. Just get the data from them. What is the net profit? The return on equity? And all those stuff which you need to calculate on your own.

Just get this data from this research reports, don’t look at whether they are trying to say to buy hold or sell. Once you get the data think logically and make the decision for yourself. Ultimately what is probably the most valuable service a research department is helping avoiding losers.

While the researchers are uncovering well managed companies with bright futures there’re also uncovering poorly managed companies.

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How to use your broker effectively

If your portfolio is well diversified it will tend to at least average the normal returns in the market. Don’t be stingy about paying commissions to your broker. I do not mean that you should be paying by frequent trades, but if you are going to make one particular investment you in anyway need to pay a commission.

So if you are a sophisticated investor you can make use of discounted brokers these brokers are nothing but people whom you just call and ask them to make a trade. They will do a trade on your behalf. So these sophisticated investors are people who have the time confidence to make their own investment decisions.

Most investors including all beginners will be a lot more comfortable dealing with the full service broker who will provide them with the research materials, explanation and advice as well as follow up monitoring of their investment.

Your relationship with your broker is likely to play a significant role in your life. A successful broker-client relationship will last for many years and be profitable for everybody involved. An unsuccessful one will make you miserable.

Try to make yours work be sure that you and your broker share the same goals and you should understand what you can expect from your broker and what you cannot.

You get what you choose..

You must also keep in mind that you are not the only client for your broker. He may indeed enjoy chatting with you but he or she is likely to be equally dedicated to earning a descent living.

So if a broker breaks off conversations with you when you shift some topics on investments to then stocks don’t be insulted.

The best investments are ones which are bought and held for long. So if you broker fights you on this, you have the wrong broker. If he cannot accept this and are constantly tempted to go for a quick killing it will be easy to find a broker who will oblige you. Ultimately we all get the brokers whom we choose and not deserve.




How did you choose your financial advisor. Do you agree with my view on this. Please take some time and Let me know your thoughts..