How to Choose your Financial Advisor? Top 3 Factors To Consider

Finding financial advisors or sales representatives who call themselves advisors, is easy. They are seemingly on every street corner. More than 50 Lakh people in India sell investment and insurance products. The low entry barrier for selling financial products has ensured that anyone at all can become an advisor.

How to Choose your Financial Advisor? Top 3 Factors To Consider

Must Check – What is Financial Planning?

The basic expectation from an advisor is that he would offer unbiased advice. But recent interventions from the regulator about fixing the code of conduct for these advisors in many industries have clearly indicated the gap. They have become part of the problem and not part of the solution. You would be shocked by reading my last sentence… but it’s true.

How to Choose your Financial Advisor?

Let me share a few points which will help you to find your financial advisor. The list can be long… but let me keep it simple & stick to the top 3 points, which merit attention.


Someone rightly said, “To a man with only a hammer, every problem looks like a nail.” For all your financial needs be it – Saving, Children’s Education, or your Retirement Planning an Insurance Agent will be ready with a Policy. Also, the agent obviously will only promote his company’s product and may not even know much about other company’s offerings. Similarly with mutual fund agent, he will hate to talk about post office schemes, corporate FDs, or Bank FDs.

Has any advisor ever told you that you should repay your loan first & then think of investment or you should keep some amount for emergency needs in a savings bank account or liquid fund? Your advisor should follow one principle – “people have one thing in common that they all are different”. He should not try to fit the person into an already tailored coat. He should look at every aspect of the client’s financial situation. That’s the only way to give truly customized, comprehensive advice.

How to Choose Financial Advisor

Must Read – How to Setting SMART Financial Goals?


Is your Best Interest his Only Interest or something else is cooking in his mind when he is talking to you. Is he thinking about his monthly target or yearly bonus which is dependent on an expensive product being sold to you? If your advisor is working with any bank, brokerage firm, mutual fund house, or insurance company, there is a good chance that your goals & requirements are on the back burner. His sales pitch is derived/motivated from something else. This type of advisor is very dangerous for any individual. Try to search for an advisor who is genuinely interested in your goal & long-term relationship with you. His ethics should guide him rather than his boss & company.

So if you are looking for above mentioned 2 qualities you will mostly end up finding an Individual Financial Planner – but In India, the term “Financial Planner” has been in confusion for quite some time now. In the absence of any local regulation or guidelines, anyone can call himself a “Financial Planner” without having the necessary training, education, or certification. There are so many individuals who decide to start putting the term “Financial Planner” in their business cards leaving the public more confused. So here comes the last point which is equally important.


Have you ever tried to find out what is the education, knowledge & experience of the advisor who is guiding you? Warren Buffett quoted “Wall Street is the only place people ride in a Rolls-Royce to get advice from people who ride the public transport.” That’s true in India also I have seen many people taking stock advice from those who are sitting on terminals or brokers which have zero knowledge about Investments. Employees from banks who have just joined after completing their management course will pose that they know everything related to investment world & they are masters in it.

The best way to find the right advisor is to shortlist a few advisors that you feel have good knowledge. Draw a questionnaire – ask some questions that will help you to analyze them. There is nothing wrong in asking these questions. Along with education and experience, ask about his association with financial companies. Is his earning linked to his performance and if yes, by how much? These questions will answer your concerns over his advice.

Finding a good advisor is time-consuming but this will decide your financial success. Try to find a good advisor that’s right for you.

This also got published in Business Bhaskar Newspaper


    • @Every Reader

      We believe that Mutual Funds are best way to invest but even here many distributors take investors for ride. In Mutual Fund side, Monthly Income Plans are sold aggressively by distributors and within one year the overall AUM in MIPs have increased more than 8 times; not because the product has suddenly become so good for investors but the reason is the sheer greed of agents who now get more commission in MIPs than in Equity Funds. Systematic Transfer Plan from MIP is another way to take investors for a ride. Also year end is approaching, so soon you will find your agent asking you to invest a big amount in one go as he may be receiving a foreign trip on your business.

  1. I had a query and seek your advise for the same.
    I worked with an organisation for 4 years and left the same about 6 months back.Now I want to withdraw my PF but I am told that the withdrawl will attract tax since I have not completed 5 years of PF membership.
    Can you advise what tax it is ? And is there any arrangement by which the same can be claimed for refund ? Please advise ….

    • Yes tax will be there – best option remains that you transfer that amount to new employer. Never withdraw that amount till your retirement; this can become big chunk of your retirement corpus.
      If the employee withdraws accumulated provident fund amount (EPF) before rendering five years’ of continuous service, the sum representing the employer’s contribution and interest on employer and employee contribution is taxable in the hands of the employee. So this amount will be added to your current years income & you have to pay tax according to your income tax slab. There is no way to claim it as a refund.

      • Hi,

        I would like to know whether only interest earned on EPF is taxable or the total accumulated amount withdrawn is taxable? If it’s on total amount, is there any option to invest it some where, other than those under 80C, so that tax on it can be saved.

  2. hi Hemant,
    just read your article about chosing the financial advisor,I certainly agree with you.We’ve recntly moved to a city

  3. Hello Hemamt
    nice articles, very recently I joined your website and I must say that you re doing a wonderful job by educating the investors. as you said, one must take utmost care in selecting a financial planner, what about those, who have just moved to a new city and hardly knows anyone, whom to trust or not..
    couple of days back, I met one agent of LIC as we intended to buy a term insurance for me,30 yrs, male, so we were checking the different plans with different companies.though the premiums were very high of LIC term ins plan, when i asked her that we re getting the same plan with less premiums in ICICI, she tried hard to convince me that ICICI does not clear the claims easily etc etc..moreover a lot of terms and conditions are also there with ICICI.i checked ICICI brochure but could not find one.
    can you please tell me how the claim processing is different in case of LIC and other private companies?

    • @ Vishal & @ Vijeta

      You both have same question – when someone move to new city.

      When we move to new city we try to find out good shopping market, best restaurant, and good doctor – similarly try to find one good financial advisor. Secondly advisory service is not an emergency service – if you have a written financial plan you don’t need anyone to consult on day to day basis. New advisor/agent will focus on ‘what’s new’ in the market rather than ‘what’s good for your goals’. I am constant touch with more than 20 practicing CFPs and they all have 40-50% clients which don’t belong to their city. So try to find out an advisor which suits your requirement & try to build a long term relationship.

      There are 3 criteria of selecting a term plan – death claim settlement ratio(even ICICI have a decent claim settlement ratio),
      brand & financial position and the least important is premium that you pay. Basic process of claims is same for every insurer but still that leaves a big room for everyone to add their criteria. 80% of the claims that are rejected are due to false information shared by insured or his agent.

  4. Hemant

    I have two property loans of Rs 76 lacs and Rs 18 lacs with EMI of Rs 70000 and Rs 25000 respectively , the 70K emi shall start from Jan 2012 , I intend to pay off Rs 18 lacs loan before the 70 k emi starts , the plan is to invest Rs 10 lacs in equity (direct equity) and Rs 35 k per month through various Diversified equity mutual funds SIP’s , This is planned in order to reach the amount of Rs 18 lacs in a years time so as to pay off my one loan and if something is left pre pay a part of bigger loan too.
    I will be thankful if you can guide if the thinking is on the right track

    • I don’t know what will be the final outcome of your decision – but going by rules it’s a poor strategy. One should not mix short term goals(2 years) with long term investments(Equity). You should read this article:

      As such there is no strategy to generate higher returns in short term & repay your loan. I don’t have any information regarding your others savings & investments – so it won’t be possible for me to give any suggestion..

  5. Hello Hemant,

    Thanks for the informative article. My wife is the only child of her parents and she is a housewife. Her father did not do his retirement planning well and now her parents are financially dependant on me. Moreover, her father has been diagnosed with diabetic nephropathy since November. Presently I am covering for all his medical expenses. Is it possible for me to claim tax benefits for these expenses under section 80DD ? If so then what documents do I need to provide in order to claim the benefit ? Are there any articles elaborating the clauses under this section ?


  6. Hi Hemant,
    I will say Nice Site,
    I am surprised yesterday i was discussing a Plan” LIC Samridhi Plus (highest NAV guaranteed) ” with LIC FA. and I was goggling to compare it with MF and found a nice article LIC Samridhi Plus Review. I joined and feel this is very good site for novice people like me. Although I m 79 born, but I never think before about Finance Management(May be because of I am science student or found only specific Advisor).
    After reading few of your article I come to know that I should had invest in Term Plan and Mediclaim policy earlier.
    could you suggest me something?
    Currently I am investing Rs 3000/- in MF of 3 year Tax saving plan and have planned to buy a Home.


  7. Dear Hemeant Sir,
    I am investing as follows.
    1. Genral Provident fund – Rs.6000/- per month
    2. ICICI Prudencial Lifestage Pention Policy- Rs.15000/- per year
    3. LIC Money Back Policy – Rs.268/- per month
    4. LIC Life Insurance Policy -Rs.800/- per year
    5. LIC Saral Jeevan – Rs.255/- per month
    6. Postal Life Insurance – Rs.2400/- per year
    7. Pearl’s RD – 1770/- per year
    8. Reliance Gold Saving Fund SIP – 500/- per month
    9. HDFC Equity Fund – Rs. 1000/- per month
    10. ICICI Prudencial Focused Bluechip Equity Fund SIP – Rs.1000/-
    11. Personnal Saving (Private) – Rs.250/- per month
    I am a Salaried person having Govt. job. I have Salary about Rs.23000/- per month. My Salary increasing upto Rs.26000/- from Aug.2011. I am taking Home Loan from ICICI Bank and the EMI for that is Rs.5500/-. Are the above investmentz good & beneficial for my future? Suggest me some Mutual funds SIP for investment giving high returns.

    • Hi Mahesh,
      Sorry for such a delayed answer – I don’t know how I missed this one.
      One thing that I would like to highlight in your portfolio is that you have many investment linked insurance policies – these polices are expensive & also will not be able to provide you good insurance.
      My suggestion is draw down a task sheet – every week select 1 insurance policy & do complete research. End of the week take a final decision that you would like to continue it or not. This will also help you in developing your own process & also enhance your decision making skills which is very important for every person.
      You can also read this article

  8. I have same query as Mahesh,
    I am investing:
    1. LIC jeevan saral – 2000
    2. LIC Market plus – 1500
    both are 30 years plan. I want to invest in some SIPs and by my R&D i have narrowed down the search to HDFC top 200 and DSP BR funds and also thinking of taking home loan for which EMI will be 13-15k per month…will these be beneficial for me, please advice….

    • Hi Saurav,
      As you mentioned Mahesh’s Name – I will suggest you to read what I have just replied him regarding insurance.
      Your MF selection looks good – in loan my suggestion will be that you should limit your EMIs to 40% of your monthly income.

  9. Hi Hemant,
    This is nice article.
    I want to be a Financial Advisor but i dont have that background.I am Production Engineer & belongs to same domain.Only thing is i love this subject & want to gain some knowledge in this.I really dont want to build Carreer in this sector but atleast guide my friends & relatives for Financial planning. I can look this as Second Income.Some questions:

    1). From where should i get the FP degree ?
    2). How to be Financial Advisor for LIC (Not LIC Agent,Dont want targets)
    3). What exam should i pass for LIC FP ?
    4). As compared to other forms of Investment and Insurance, i have less knowledge in Shares/Bonds.Is it neccesary to be master in this ?

    Can you please guideme in this regards.

  10. HELLO SIR, actually my brother is facing a problem that he is in business of real estate dealing on commission bases. earning is average you can say needs are fulfilled. my father is unemployed. 2nd brother is earning 15,000 in a month. we have a house costing 1.25 cror which is in our native place. nw we are residing in ghz. in rented house. There are no saving yet. we have no bank balance. and our father is not in favour of selling the house. ther is no fix income in real estate business. we want 50,000 fixed monthly income. So what we can for this purpose.

  11. Dear Hemant,
    So far I have not taken any term insurance and only thing I done is construction of two houses only. Now i am 39 , with wife and 2 small children. Could you please tell what term insurance and for what amount i have to taken. My monthly income comes to around 60,000/- Any medical insurance I need to take now for my oldger age.

    Kindly avice.


  12. Hello Hemant, this is not just a question so if you could reply…please do so :
    I am a commerce graduate. Later I did MBA in Finance & Personel thru correspondence.
    I want you to help me understand if I can learn more on this subject : Financial Planning ? If yes, then please provide guidance to proceed in this direction.

    Regards, Nishi

      • Thanks Hemant.
        I checked with various institutes which offer CFP course but I am confused to see that the course duration varies from 2 months to 2 years.
        Please suggest which one to opt.
        Also if CFP (Certified Financial Planner) & CPFA differ ?


  13. Dear Mr.Hemant

    Very nice article, i am 44 year old , having diabetes from 4 years but under absolute control, looking for term insurance, pl suggest which plan i go to, which is the best comapny which will not disallow the claim on a/c diabetes, also let me know wheter should i discolse the disease during taking plan or no

    i am confused please help me

    Pramod shinde Mobile : 9867100000

  14. Hi,
    I am an NRI and i would like to set my investments in indian. I have some insurances but i would like some help in investing in the right places etc….

  15. Hi,
    I am a 24 years guy who recently joined in a Govt organization(Going to complete one year). I am earning 23k per month. I am investing around 7k per month in various savings(RD, LIC, PPF, NPS(Tier-II)). I can stretch 2k more.

    I have a aim to buy a home. I just want to know which is the best savings monthly plan to achieve my aim.

  16. HI,


  17. Hemant,

    Thanks for the clarity that you have been providing on investments !!

    Can you me help me finidng a fund manager contacts in chennai ?
    I have my financial planning done but unable to find a fund manager/broker for getting to know various schemes to start with and manage them.

    Plus, would like to know the best/leading insurance companies for the following :

    Mediclaim: for family floater
    Debt linked schemes on monthly investments
    Gold fund Savings schemes

    Thanks !!

  18. Hi Hemant Ji,
    I am in Govt job , have monthly take home salary of 95,000/-
    I have recently invested in property under subvention plan.For which I had applied for loan of 38,00000/-for 20 years. Total cost of property is around 52,00000/-.I had done payment of 7.5 lacs. This property is under construction and possession will be offered after 3 years.I dont have to pay EMI for next 24 months as per subvention plan. After that EMI will start.
    My query is should I invest my savings in Mutual fund for 2 year and after 2 years once the EMI start, I will remove money from MF and prepay some of the loan so that EMI will be less or loan duration will be reduced.
    What should I do??
    Thanks in anticipation!!

  19. Hi hemant,
    This is santosh my monthally salary is 50,000. i can invest 9ooopm through Mf.
    i have started investing three fund.
    HDFC top 200 1500
    ICICI Prudential Focused Bluechip Equity Fund – Retail – Growth 1500
    SBI Emerging Businesses Fund-Growth 1000
    I have one daughter three month old How do i plan for her education Can i take education plan or mutual fund.
    For my retirement how do i make investement plan.

  20. Respected Sir,
    What is your view on Quantum Mutual Fund? I want to add Quantum Long Term Equity fund Sip In my Portfolio. Please Give me your suggestion.

  21. diffrence between FPSB india course certified financial planner and insurance institute of india cours CPAIM- certification programe of advance insurance marketing, which has more value.

  22. Sir,
    I am a retired person. I have to undergo by-pass surgery and cost of it around 4 lakhs. I have mediclaim of Rs. 2 lakhs from employer for ex-employee and wife also has mediclaim of Rs. 3 lakhs. Can I use both the mediclaim policies? and if yes, can I avail the cashless facility from both the policies? Pl note, both the mediclaim policies are from difference insurance companies.
    Best regards

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