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Session 23: How to select your Advisor

We are glad to have you with us for our Twenty-third Session - How to select your Advisor

So let us now begin with our learning session today.

So far in our learning sessions of money simplified we've learnt about how to put your savings to productive use through investments. We introduced you to various asset classes - equity, debt, gold - and also told you how go about allocating your assets depending upon your risk profile, investment horizon and financial goals. We also explained how mutual funds work, the ways of investing in them and selecting winning mutual funds the prudent way.

In our learning session today, we will tell you about the care you should take while selecting an investment or a mutual fund advisor.

You might have come across several investment advisors or mutual fund distributors who operate actually as agents.

It is noteworthy that the Association of Mutual Funds in India (AMFI) has made the Know Your Distributor (KYD) certificate mandatory for mutual advisors, which enables you to check the credentials of the mutual fund advisor whom you are dealing with. Here are some valuable aspects which you should look into, to select an independent and an unbiased investment and / or mutual fund advisor.

Aspects to evaluate while selecting an Advisor

  • Seek References (...It becomes imperative to judge and possibly check his client testimonials through some references.)

  • (Then you should also check the...) Advisor's qualification ( You see, SEBI makes it mandatory for individuals engaging in mutual fund advisory service to have an advisor's certification issued by the National Institute of Securities Management (NISM). Likewise in the case of insurance agents, it is mandatory for them to have passed the IRDA examination and completed the requisite number of hours of training. Apart from these certifications, it would be an added advantage if the advisor holds a post-graduate or a professional degree in finance / investments; which may facilitate you to get better qualified advice. But that's not enough. It is vital to look at the philosophy by which he / she operates.

  • (You should also assess the...) Infrastructure and value added services (Judge whether he has the right infrastructure set up, in order to provide a proficient and prudent advice and service on a continuous basis. Remember, after having done your investments they need monitoring and tracking on a regular basis. Therefore as a value addition, your investment or mutual fund advisor should ideally provide you with various tools and calculators for online tracking of your investments. Moreover, he/she should persistently advise you on your portfolio in accordance to the change in market conditions and financial goals.)

  • After sale support (...should not be ignored. As there could be several reasons for which you may need to seek support, such as changing the bank mandate for your investments, obtaining account statements, submitting redemption requests, switch request, a timely review of the portfolio and action to be taken thereon, etc. So there should be proper accountability. Likewise in the case of insurance, you need after sale support at the time of premium payment and claim. So, an advisor who is easily accessible would generally make sense.)

  • (And finally you also need to check the...) Track record of the advice (...If an advisor can provide you this, you can judge his credibility. The data if provided by the investment advisor can be cross verified with some of his clients as a reference check. This exercise may help you not only understand the advisor's performance track record, but also recognise whether he does provide prompt and reliable after sales service, or he is merely a bluff master.

As an investor you should not be swayed by tall claims regarding the performance of some of the schemes. This leads to many investors getting swayed in their pursuit of getting wealthier. But what they fail to recognise is, what the outlook for the future is and most importantly, whether the investment product is meant for them.

Here's why you should adopt caution while selecting your advisor.

Why adopt caution while selecting an Advisor

  • (Agents / distributors / relationship managers (RMs) are...) Responsible for offering you appropriate advice (...taking into account your investment objective and risk profile.)

  • Be led by advice that keeps you as the focal point, rather than a product (Question suitability relative to your needs rather than past performance. Question this suitability more so, when it is a new fund launch, whether it is really required and whether an existing investment option with a good track record can provide the same.)

Now before we end our learning session today, here are some points you need to remember...

Points to Remember...

  • Choose your investment advisor after proper due diligence

  • Do not get swayed by tall claims made by an investment advisor (...about himself or about any product. Verify and know the facts.)

  • AMFI has made the Know Your Distributor certificate mandatory for mutual advisors (...which can enable you to check the credentials of the mutual fund advisor)

  • (But...) Evaluate the attitude / rationalisation of the advisor
  • (Then, also ...) Check your advisor's qualifications

  • (You should also...) Assess the Infrastructure and value added services (...provided by your advisor)

  • Evaluate whether he can provide you with sufficient after sale support

  • Ask for a track record of his advice

  • Ask your investment advisor questions that are relevant in the context of your risk appetite, investment objectives and time horizon

  • (And last but not the least...) Do your own due diligence, do not simply be led by brands or influential individuals for investment advice

So to end our learning exercise today, we now invite you to test your learning by taking up this simple quiz (and win exciting prizes!)

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Disclaimer: The contents of this document are only for informative purposes and are not to be used or considered to be an offer to sell or buy units of Franklin Templeton Mutual Fund schemes. This video is for information purposes only, provided on an 'as is' basis. Nothing in it should be construed as personal financial advice. You are responsible for your own investment decisions and you should seek advice concerning suitability from your investment adviser regarding any of the investments mentioned. The video is for personal non-commercial use only and may not be copied, stored, redistributed or broadcast in any way. We recommend you read the complete Terms of Use.

Mutual Fund Investments Are Subject To Market Risks, Read All Scheme Related Documents Carefully.

The Retirement Planning Guide

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