| Usually people don’t choose financial advisors; | | | | the time. |
| they simply get in touch with them. Many a times | | | | Most of the time an advisor will suggest you |
| in some private banks you will find a super | | | | some fund and will show you its annual returns. |
| consultant or super advisors who will sell you | | | | Most of the top ranking funds are sectoral funds |
| everything like insurance, credit card, and even | | | | and they carry a certain amount of risk. Usually |
| mutual funds. Banks are distributor of mutual fund | | | | sector funds being a fund with major allocation to |
| and not the advisors. | | | | specific sectors they are high risk funds. Many |
| Mind it; if you are investing advice from any bank | | | | times in order to generate large funds from the |
| you actually take advice from a distributor and it | | | | market the fund houses have fallen prey to herd |
| that case it is not necessary that you get a fair | | | | mentality and launched similar offerings in quick |
| and quality advice. | | | | succession. The banks and investment advisors |
| An adviser should be one who can provide his | | | | have played their part by indiscreetly pushing |
| customers with real value based advice rather | | | | these products since they get better commission. |
| than simply pushing sales in order to earn a better | | | | Think again before you take suggestion from |
| commission. Advisor’s role assumes significant | | | | such advisors. |
| importance in an exuberant scenario like the | | | | If the advisor always have an NFO to pitch for. |
| present one, when it is easy for investors to lose | | | | Investment advisors have earned well through |
| track of their objectives and make wrong | | | | the mutual fund New Fund Offer’s by |
| investment decisions. Conversely, an association | | | | convincing investors that it is cheaper to invest |
| with the wrong investment advisor can spell | | | | during the NFO stage. But be careful this is not |
| disaster for investors. We present a few pointers | | | | the truth. Mutual fund distributors and advisors |
| which will help investors gauge if they are with | | | | mostly take benefit of the lack of knowledge on |
| the wrong investment advisor. | | | | investor’s part by pitching the mutual fund |
| If the Advisor is offering rewards in terms of | | | | NFOs as stock IPOs, distributors have only |
| payback. | | | | discredited themselves by not being true to their |
| Select an advisor for his ability to recommend the | | | | investors. Advisor should only recommend a new |
| right investment avenues and manage your | | | | fund if it add value to the investor’s portfolio |
| investments rather than his willingness to refund | | | | or is a unique investment proposition. Any advisor |
| commission. By offering payback the advisor is | | | | who is true to the profession will pitch for an |
| not doing justice to his to his work as he is luring | | | | existing scheme which has a good track record |
| you towards doing that investment. This specifies | | | | and proven rather than a similar scheme in its IPO |
| that an advisor is putting your money at risk by | | | | stage. |
| giving you commission. | | | | If Advisor’s role is restricted to delivery and |
| This practice (widely prevalent despite being | | | | pick up of forms. |
| explicitly prohibited) among investment advisors is | | | | Investment advisor’s primary role includes |
| to rebate a part of commission earned, back to | | | | creating a portfolio for the investor based on his |
| investors i.e. the investor is ‘rewarded’ | | | | needs, risk profile and successfully managing the |
| for getting invested. What investors fail to realize | | | | same. While maintaining high service standards is |
| is that the commission offered by the advisor is | | | | pertinent, it shouldn’t gain precedence over |
| actually reward for taking more risk. Wealth | | | | the advice part. Most of the advisors I have seen |
| creation for investors should come from the | | | | are usually working for big distributors such as |
| investments made and not commissions. Select | | | | banks, big brokerage houses. The main work for |
| an advisor for his ability to recommend the right | | | | them is meeting the targets rather than provide |
| investment avenues and manage your | | | | value base advisory service. Independent individual |
| investments rather than his willingness to refund | | | | Investment advisors prefer to make their work |
| commission. | | | | simpler by showing them selves only when they |
| The advisor only advices top few funds most of | | | | had to collect the form. |