Published By: Gurpreet Kaur

Five questions to always ask your financial advisor

When it comes to money and investment decisions, most of us are busy. It might be because of the sheer lack of sincerity or disinterest in managing our money. However, it is also because you are not well-versed with the questions you need to ask your financial advisor. Add to this; there is no single agent for your different financial needs - like there is an agent for insurance, a broker for the stock market, a banker for advice on mutual funds and so forth.

So the main question is: how do you find a perfect financial advisor and what are the top five questions that he really needs to answer well. We list the questions:

  1. Are you a fiduciary?
The finance industry in India is crowded with agents, not advisors. The latter are the ones who offer unbiased advice customised for you by charging a certain amount of money. So you should know that a ‘fiduciary’ is a Registered Investment Advisor (RIA) in India, and he is mandated by law (SEBI) to put his client and his interest first. So he will have to offer unbiased advice to you based on your requirements and not just indulge in the sale of any specific products.
  1. Fees and commissions?
Wherever your banker or an advisor pitches a new investment product to you, make sure to ask them their fees and the commission they would be making. Don’t feel shy; just ask it to ensure transparency in your investments. If he/she is unwilling to answer, check on the bank’s website for commission disclosures.
  1. Risks involved?
Don’t just get lured by high returns whenever you make an investment. So always ask the risks involved. Ask your financial advisor about the best returns and poor returns. Don’t forget to prod about what will happen if you lose 100% of your investment in this line of business. A good financial advisor will always do a ‘risk profiling’ exercise before suggesting any product.
  1. When to exit any investments?
While you and the advisor might be enthusiastic about making fresh investments, make sure it is a disciplined and well-thought act. They should also tell you when to exit and how that you don’t keep investing in a high-risk plan.
  1. Reviewing these investments?
Last and most important, ask your advisor to tell you a plan about every review of your investments and discuss the progress or loss of them at regular intervals.