In this article, SEBI-registered Investment Adviser IRIA) Ajay Pruthi provides his take on how a client should select an RIA. Ajay is a member of fee-only India, an informal association of SEBI RIAs who charge a flat fee. He is also on freefincal’s list of SEBI-registered advisors. You can contact Ajay via his website, plnr.in.
Please note that the suggestions mentioned below are based on Ajay’s expertise and experience. The operating style of each RIA, even with the freefincal list or fee-only India, is quite different. Therefore, do not expect them to respond similarly to your requests or questions. It is up to you to decide if the adviser’s style of functioning will match your expectations. See: Client Survey: The most important factor in choosing a fee-only advisor
Before starting the article, let us understand a few things:
- Some RIAs charge a fee as a percentage of your net worth covered by the advice. Some RIAs charge a flat fee independent of net worth. This is why Fee-only India’s Financial Advisors Don’t Charge Wealth-Based Fees.
- Keep in mind that whatever parameter you choose based on this article, or different articles on the internet or social media, having references from your friends, selecting an investment adviser for the first time is a leap of faith. The relationship may go well or may go bad after the first year.
- If you are unsure at what level you should hire an investment adviser, the answer is as soon as you start earning. Reason – the fee of an investment adviser may not justify the amount you can invest since their fee might be higher than your monthly investments. However, it will definitely help you with the basics of financial planning—like term insurance, health insurance, and an emergency fund—and most importantly, it will help you avoid bad financial decisions early in your career. Many people tend to make poor investment choices at the beginning of their careers, so getting professional guidance can be very beneficial.
Now, let us start
Check Authenticity. I am sure if you have heard about a SEBI-registered investment adviser from some source like social media, Google, newspapers, or a few articles, your first step should be to check their authenticity. Verify whether they are actually registered with SEBI as an investment adviser or if they are your bank’s relationship manager, an insurance agent, mutual fund distributor, or someone else.
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How to check the authenticity?—Click on the link below and check by entering the name or trade name https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=13
Now, you have checked the authenticity; let us move on to the next steps.
Put some effort. You already have a list of a few Investment Advisers from some sources; now, put in some effort. Some efforts mean minimal effort—there’s no need to dive into the entire world of financial planning. Visit the websites of the investment advisers and check their services and pricing pages. For most people, it can be difficult to understand the services section through long paragraphs written by the adviser. Don’t try to grasp everything; understand what you can. Now, check the pricing—how much they are going to charge, whether it is a fixed fee or a percentage-based fee.
Select a fee range that you can afford or are willing to pay. No matter whether it is a fixed fee or a percentage, you need to decide your comfort level.
Make a Call and Just Listen. So, you have selected a list of investment advisers. What is the 2nd step? Do not go to ChatGPT and ask what questions I should ask the investment adviser? Of late, I have started getting a lot of emails having 15-20 questions, and the line starts with in the interest of saving time 😊, and sometimes the email is marked to 15-20 advisers, that too in CC and not BCC.
Start with listening without any biases, like a kid trying to learn the alphabet. Most investment advisers give the first introductory call for free. Call without hesitation and let them explain the process. After talking to a few advisers, you will understand what financial planning is all about and what type of services different investment advisers offer. Just answer the questions fairly that an investment adviser is going to ask. Do not start with what I want and how you can help me achieve this. Just listen and answer what they ask.
At his level, you more or less start understanding the basic process.
Put in some more effort! It is time to put in some extra effort. Now, write down your expectations from an investment adviser. Why not do this in the beginning? Because when you talk to different advisers, you may learn about various things that were not part of your initial thought process or things that you were not clear about. Now, it will help you to write your expectations with more clarity.
In this process, if you have already selected one or two investment advisers, go back to their websites and check their relevant experience, educational qualifications, team, and services pages to understand them better.
Ask for a Sample Financial Plan. It is time to see a sample financial plan. Nothing clarifies more than an actual document because it shows you exactly what you are going to get in the financial plan. Are your expectations in line with the sample financial plan shared with you?
Is there anything missing? Write down your expectations and note what is missing. Also, identify where you can compromise and where you can’t—your priorities. Remember, no investment adviser can fulfil 100% of your expectations. Some of you will ask for tax filing, estate planning, higher returns, and many other things. So, you need to choose someone who is closest to fulfilling your expectations.
Time for a 2nd Call. If your doubts have been cleared by the investment adviser during the first call, either while explaining the process or after reviewing the financial plan, you can go ahead and hire the investment adviser.
If not, call the adviser again and clarify your doubts. If you are still not satisfied, make a list of another five financial planners and repeat the process.
Please understand, your effort is very important when choosing an investment adviser, as it is your entire money you are trusting with them. But do not hire one just by asking GPT, sending questions to ten investment advisers, and choosing one based on those answers.
Always remember—financial planning is very personal and should be tailored to your specific needs. So, if you do not have complete conviction, do not hire an adviser.
Some initial steps to filter out your list of investment advisers:
- Reviews on Google
- References from friends who have already used financial planning services
- Checking if the investment adviser is more inclined toward selling products rather than understanding your goals (you will usually get this clue in the first call)
Again, selecting an investment adviser for the first time is a leap of faith. Hire someone with whom you can connect (though this is very subjective; sometimes it’s about matching the frequency), after going through the above process.
*Disclaimer- Nothing in the article is my solicitation, recommendation, endorsement, or offer. If you have any doubts as to the merits of the article, you should seek advice from an independent financial advisor. Registration granted by SEBI, BASL membership, and NISM certification do not guarantee the intermediary’s performance or provide any assurance of returns to investors. Investment in the securities market is subject to market risks. Read all the related documents carefully before investing.
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Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 13 years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), LinkedIn, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
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