Why and How to choose the best investment adviser

Reading Time: 6 minutes

In this article we will talk about why DIY investors should hire an Investment adviser before taking the plunge in the investing world. Investing is more than just buying few stocks and making profit. There are many other things you need to consider in your financial journey such as insurance, debt, savings, goals etc that you might not know early on in your investing journey. So choosing the right investment adviser and asking the right questions is of utmost importance

Investment Advisory Landscape in India

To provide Investment advice in India, you need to be registered as an investment advisor by SEBI. You can register as an individual or as a firm. As on Sep 2020, there are 1300+ investment advisors in India. While not all may be active, you can also look at Investeek’s adviser portal to choose an investment advisor.

Investeek’s Adviser Portal – Find your adviser today!

Importance of Investment Adviser

Many individuals shy away from availing the services of an investment adviser as they either feel the same is not required or that they do not have large enough investable amount to warrant such a service. The truth, however, could not be further from that.

An investment adviser is an expert on matters related to your investment portfolio and could be a vital asset in helping you grow your wealth.

Further, the size of your investable assets has nothing to do with requiring the services of a professional. This argument is equivalent to saying that you don’t need to visit a doctor just because you have persistent fever, because it is just fever. A fever could be only that, or it could be indicative of something more serious.

So whether you have Rs 10,000 to invest or Rs 10 lakh, an investment adviser provides your portfolio a professional edge which you may not either have or not have the time to utilize even if you do.

Your needs from an investment adviser may be different: some may just want to get started, some may want a bit of handholding before they start managing their investments themselves, while others may want the adviser to be around as and when needed. In fact, in the technology-driven world of today, there are advisers who work completely online and with social distancing having become the norm in all spheres of life, this kind of advisory service is becoming popular.


There will still be people, though, who would advise against hiring an investment adviser. A valid reason is having a bad experience with one. But that does not mean that experiences with all advisers are bad. It may just so happen that this person hired someone with selfish motives and little to no concern about the benefit of investors.

Alike with anything that is important in your life, you need to do a bit of due diligence before you hire an investment adviser. Here are a few questions that you can ask in order to check whether you objectives align with that of the adviser.

Questions to ask an Investment Adviser

Deciding that you want an investment adviser is just step 1 of many. There is no dearth of “investment advisers” in India and finding the right one is the key to your financial future. So take some time, ask around, take referrals, ask as many questions as you want because choosing the right investment adviser is critical to how your money will grow in the following years.

1. What qualifies you as an investment adviser?

There was a time when anyone could become an investment adviser. There was no specific qualification required to become one. That also meant that many people who trusted unqualified advisers with their money bore the brunt.

In order to alleviate the situation, capital markets regulator SEBI formulated the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013. This regulation mandates all advisers to register with it. Hence, while you may or may not desire to check for academic qualification, you must ensure that the adviser you are interviewing is a Registered Investment Adviser (RIA).

As an RIA, the adviser would have taken the NISM Series X-A and NISM Series X-B exams. Qualifications like Certified Financial Planner (CFP) are helpful in ascertaining that the adviser you are considering to hire is professionally qualified to render advice.

2. How do you ensure that you are a fiduciary?

Fiduciaries need to ensure that they are working in the best interest of their client. One of the reasons that you may not trust advisers is because you may think they are working in their best interest and not yours. So it becomes critical that you ask this question directly. Some of this worry is taken away by the aforementioned SEBI regulation.

Also Read on FinMedium:  Bear Market Rally Driven by FOMO or a New Bull Market? – Value Investing India Report

However, it is still important that the adviser is able to convince you about putting your interests ahead of his. If this is not the case, it signals a red flag and you should avoid hiring such an adviser.

One way to determine the extent an adviser may work in your interest is the way he charges you for his services.

3. What is your manner of compensation?

While this may seem like an intrusive question, it is an important one because it tells you about what you can expect from your adviser.

If you primarily invest in mutual funds, there are mutual fund distributors you would come across. They can provide basic advice on funds and they primarily make money via commissions paid by fund houses whose funds they sell. Then there are RIAs that we mentioned earlier.

Given that they are regulated by SEBI, they have a fiduciary duty towards their client. There are fee-only advisers who charge you a fixed fee regardless of the amount invested. Some advisers may charge you variable fee as a percentage of the assets under advisement.

The list of RIAs is available on SEBI’s website. You should take a look at it and talk to an adviser in your city to learn more about his manner of compensation and the fee you are expected to pay. Then, based on the kind of services you require, you can finalize who you want to work with.

Also read – Different types of fees advisers charge

4. Which services do you provide?

While all investment advisers will help guide your investments in the right direction, there are some that may provide additional services. These services may include solutions for goals like retirement, insurance, educational expenses and aims like tax and estate planning.

It is important to ask this question so that you are aware of the services on offer by different advisers and choose the one which caters to most of your requirements. This will eliminate the need for hiring another adviser who can provide you the additional services which your primary adviser may not be providing.

5. What is your approach to investments?

This question will help you determine your fit with an adviser. It will also help you get an overview of the steps undertaken by a potential adviser towards providing you a solution to your problem.

For example, some people may prefer an adviser who is detail-oriented while a few others may prefer an adviser who, after initial input, operates on his own and takes responsibility for his decisions. Knowing this, among other things, before hiring an adviser will save you from compatibility issues later on.

Also Read on FinMedium:  Don’t Buy ‘Return of Premium Term Plans’

6. What will be the frequency of engagement?

There is no right or wrong answer to this question; it just tells you the right match for you. You may be somebody who wants to talk to your adviser frequently. In such a case, an adviser with set frequencies of meetings will not work for you.

On the other hand, you may believe in buy and hold and once you have signed off on the investment plan, you may not want to engage too frequently. However, if an investment adviser insists on meeting at short intervals, he may not be who you want to hire.

7. What are your three best traits as an investment adviser which your clients respect?

Though this may seem like a generic question, it tells you a lot about the adviser you are interviewing. An investment adviser who remains in touch with his clients and is aware of the needs of different clients will not find it too difficult to answer this question.

His job is that of working closely with the client. Though he may not be able to enumerate all of his attributes that clients like as it is a subjective matter, he would certainly be able to outline a few which he knows his clients value.

Questions like these will help you select the right investment adviser for your portfolio and will also help him get to know what you expect of him thus leading to a symbiotic relationship.


Just selecting an investment adviser is not the end of your financial journey, You should be cognizant of your investments at all times and keep asking questions from time to time. Do not get an adviser if all they will do is suggest you some stocks. You dont need an adviser to suggest you good stocks to buy. You need an adviser to understandyour risk profile, goals, financial situation and give you a holistic plan to change your financial journey.

Source link

Every Wednesday and Saturday, we send Info-Graphic and FinMedium Weekly Digest newsletters to our 25000+ Subscribers.

Join Them Now!

Prateek Goel

Prateek Goel

Co-founder of Investeek, Prateek has been investing in the stock markets since 2006 and has beaten the NSE/BSE on a consistent basis. At the age of 24, he was also featured in India Today for his expert insight on gold trading.
Please Share :)