Why you should have a financial adviser ?

Why you should have a financial adviser ?

In India, working with a financial adviser is still not a preferred way to manage personal finances. We get informal advice from mutual fund or insurance agents on various products. We rely on these agents because we do not want to pay for financial advice. We invest in the products and later regret our financial decisions. Bad financial investment decision often leads to dis-interest in financial markets. Then, we tend to prefer keeping money in just fixed deposits. 

A pleasant experience of financial market is critical to growing your wealth. You need to acknowledge the difference between an agent and a financial adviser. There are various ways you can deal with financial services providers:

Brokerage firms

Generally these companies offer mutual funds, PMS and direct equity. The primary reason these companies exist and grow is brokerage through distribution of products. 

Wealth Management Firms

There are numerous wealth management firms that operate in India primarily focused on clients who can invest more than Rs 2 crores. These companies primarily offer mutual funds and PMS. These firms also earn through brokerage.


Banks are major distributors of financial products. In fact any financial product manufacturer would first reach out to banks for pushing the sales of new offering. Most of the banks offer mutual funds and insurance products. However, banks also earn only through brokerage.

Mutual Fund/Insurance Agents

There are thousands of these agents selling financial products especially MFs, insurance policies, LIC etc. Again these agents also earn through brokerage. 

Financial Advisory Firms

As per the guideline of SEBI, any firm or individual who claim to be financial adviser, have to register with SEBI and get investment adviser license. These firms or individuals are regulated by SEBI and have regular audits. Additionally, these firms or individuals cannot make money from commissions, hence avoid conflict of interest with the client. 

Most of the brokerage houses, banks and wealth management companies present themselves to be advisors but they aren’t. Brokerage houses, banks and wealth management companies push financial products to earn brokerage and have no interest in client’s objective. These firms do not care about quality of clients but just care about ‘quantum of clients’. On the other hand, mutual fund agents and insurance agents cannot afford to be selective because of ruthless competition and hardly any differentiation. 

Select a financial adviser after thorough understanding of their processes and approach. Make sure that you get unbiased advice from the financial adviser. This is possible only when the source of revenue for the adviser is not linked with the financial product.

Comment (1)

  • srsoftwaresolutions| September 8, 2018


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