Identifying Financial Advisors: A registered financial advisor will have an AMFI
Registration Number (ARN) and identity card e.g. I am a registered financial advisor/ mutual fund distributor with ARN-126335.
A financial advisor gets an ARN only after passing the AMFI Certification Test, providing the Know Your Distributor (KYD) details and going through a verification process which includes submission of various document proofs, in person verification and bio-metric process. AMFI stands for Association of Mutual Funds in India.
These procedures are as mandated by Securities and Exchange Board of India (SEBI). There is a validity period for the certification and you should check if your advisor's certificate is still valid, since your financial advisor needs to go through refresher tests in order to renew his/her certification. A financial advisor will also offer a wide range of products covering major asset classes such as Equity, Debt, Commodities, etc so that there are enough financial instruments to choose from to meet your financial goals.
Don't get confused: Don’t confuse planners with stockbrokers — these market mavens people call to trade stocks. Financial planners also differ from accountants who can help you lower your tax bill or those insurance agents who might lure you in with complicated life insurance policies. A financial advisor will offer a wide range of products covering major asset classes such as Equity, Debt, Commodities, etc so that there are enough financial instruments to choose from to meet your financial goals.
Should You Use a Financial Advisor? You can certainly go it alone when it comes to managing your money. But you could also try to do it yourself when it comes to auto repair. In both areas, doing it yourself is a brilliant idea for some, and a flawed plan for many, many others. Mastering personal finance requires many hours of research and learning. For most, it’s not worth the time and ongoing effort. As you get older, busier and (it is hoped) more wealthy, your financial goals – and options – get more complicated. Read more on why you need financial advisor.
I am absolutely not suggesting that you ignore personal finance and turn over all your concerns to an advisor. But even if you know the basics, it’s a comfort to know that you have someone keeping watch over your money. It may sound crazy to give someone 1% of your annual assets to manage them, but you get a buffet of advice about almost anything related to personal finance. The price becomes sensible when you consider that you’re paying to establish a comfortable retirement, save for your child’s college or choose the right mortgage when borrowing hundreds of thousands of dollars.
Ask These Questions Before You Hire a Financial Advisor:
The right questions can help you weed out financial advisors whom you don't communicate well with, or who don't typically work with clients like you.The key to any question you ask is making sure you understand the answer, or if you don't, be sure you feel comfortable asking follow up questions.
1. Ask a Potential Financial Advisor to Tell You About His or Her Ideal Client: Any good financial advisor will have an area of expertise. You want someone who has expertise working with people like you. If you’re about to retire, and they tell you they work with young families, maybe this isn’t the person for you. Find a financial advisor whose ideal client sounds very similar to your situation in terms of age, stage of life, and asset level.
2. Ask a Potential Financial Advisor to Explain a Concept to You What you are looking for here is, can you understand their explanation? If they speak over your head, or their answer makes no sense, ask for clarification. If you still don't understand the answer, then move on. You want to work with someone who can explain financial concepts to you in a language you can understand. Below are some concept oriented questions to consider asking:
3. Ask How the Potential Financial Advisor Is Compensated The key here is to listen for an honest answer. A financial advisor should be willing to clearly explain all fees you will pay to them, and all expenses you will pay associated with any investment they recommend. Answers such as “My company pays me,” or “You won’t pay anything out of your pocket” are not acceptable. Common sense tells you that a person’s primary loyalty will be to the hand that feeds them. If they are paid directly by fees from you, as in the case of a fee-only financial advisor, then they will have an incentive to provide advice and service that is in line with your goals. If they are paid by commissions or fees that are filtered through a broker-dealer, then they are first and foremost bound to the products their broker-dealer prefers them to use.
A financial advisor gets an ARN only after passing the AMFI Certification Test, providing the Know Your Distributor (KYD) details and going through a verification process which includes submission of various document proofs, in person verification and bio-metric process. AMFI stands for Association of Mutual Funds in India.
These procedures are as mandated by Securities and Exchange Board of India (SEBI). There is a validity period for the certification and you should check if your advisor's certificate is still valid, since your financial advisor needs to go through refresher tests in order to renew his/her certification. A financial advisor will also offer a wide range of products covering major asset classes such as Equity, Debt, Commodities, etc so that there are enough financial instruments to choose from to meet your financial goals.
Don't get confused: Don’t confuse planners with stockbrokers — these market mavens people call to trade stocks. Financial planners also differ from accountants who can help you lower your tax bill or those insurance agents who might lure you in with complicated life insurance policies. A financial advisor will offer a wide range of products covering major asset classes such as Equity, Debt, Commodities, etc so that there are enough financial instruments to choose from to meet your financial goals.
Should You Use a Financial Advisor? You can certainly go it alone when it comes to managing your money. But you could also try to do it yourself when it comes to auto repair. In both areas, doing it yourself is a brilliant idea for some, and a flawed plan for many, many others. Mastering personal finance requires many hours of research and learning. For most, it’s not worth the time and ongoing effort. As you get older, busier and (it is hoped) more wealthy, your financial goals – and options – get more complicated. Read more on why you need financial advisor.
- A financial helper can save you time.
- Financial planners can also help you remain disciplined about your financial strategies. They’ll make the moves for you or badger you until you make them yourself.
- Procrastination can cause all sorts of money problems or unrealized potential, so it pays to have someone riding you to stay on track.
I am absolutely not suggesting that you ignore personal finance and turn over all your concerns to an advisor. But even if you know the basics, it’s a comfort to know that you have someone keeping watch over your money. It may sound crazy to give someone 1% of your annual assets to manage them, but you get a buffet of advice about almost anything related to personal finance. The price becomes sensible when you consider that you’re paying to establish a comfortable retirement, save for your child’s college or choose the right mortgage when borrowing hundreds of thousands of dollars.
Ask These Questions Before You Hire a Financial Advisor:
The right questions can help you weed out financial advisors whom you don't communicate well with, or who don't typically work with clients like you.The key to any question you ask is making sure you understand the answer, or if you don't, be sure you feel comfortable asking follow up questions.
1. Ask a Potential Financial Advisor to Tell You About His or Her Ideal Client: Any good financial advisor will have an area of expertise. You want someone who has expertise working with people like you. If you’re about to retire, and they tell you they work with young families, maybe this isn’t the person for you. Find a financial advisor whose ideal client sounds very similar to your situation in terms of age, stage of life, and asset level.
2. Ask a Potential Financial Advisor to Explain a Concept to You What you are looking for here is, can you understand their explanation? If they speak over your head, or their answer makes no sense, ask for clarification. If you still don't understand the answer, then move on. You want to work with someone who can explain financial concepts to you in a language you can understand. Below are some concept oriented questions to consider asking:
- What is passive vs. active investing?
- How do you determine how much of my money should be in stocks vs. bonds?
- How do you determine how much money I can safely withdraw each year without running out?
- What do you think of annuities based investment returns like in NPS?
3. Ask How the Potential Financial Advisor Is Compensated The key here is to listen for an honest answer. A financial advisor should be willing to clearly explain all fees you will pay to them, and all expenses you will pay associated with any investment they recommend. Answers such as “My company pays me,” or “You won’t pay anything out of your pocket” are not acceptable. Common sense tells you that a person’s primary loyalty will be to the hand that feeds them. If they are paid directly by fees from you, as in the case of a fee-only financial advisor, then they will have an incentive to provide advice and service that is in line with your goals. If they are paid by commissions or fees that are filtered through a broker-dealer, then they are first and foremost bound to the products their broker-dealer prefers them to use.
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