Choices galore for financial advisors, but pick the one suitable for you

Nowadays, registered investments advisors (RIAs), financial planners, financial advisors, wealth managers, even money doctors are pretty much tossed around and used interchangeably. But while each could claim of giving you sound financial advice, each would be using an entirely different model for doing so. And, what may work for your co-worker may not necessarily work for you. If you are looking to focus on your money life in 2020 and wondering of all the options out there, read on. 

Sebi-RIAs: When it comes to money management, there are basically two models used by those providing the service; fee-only and fee-based. RIAs follow the former. As per the fee-only model, RIA charges a fee for the consultation service. The amount of fee you need to pay depends on the service you avail. Some RIAs charge a flat fee; some may even charge a percentage of the assets under advice. The range could be in between Rs 5,000 and Rs 1 lakh a year, but some could also ask for more. Mrin Agarwal, financial educator, money mentor and founder of Finsafe India says, “Sebi, mandates a fiduciary responsibility on Sebi-RIAs. This helps in making RIAs accountable to their clients and work only in their best interests.” There are several services RIAs offer, right from investments advice, tax planning, monitoring investments, rebalancing as per need, providing periodic reports on investment performance and others. Many offer liability management and restructuring assistance. Keep in mind when it comes to investing in mutual funds, they always offer the direct route. 

Good for investors seeking specialised services, and the situation is complex. You want to meet your financial advisor in person. 

Online and app-based RIA: For instance, Mobikwik, Kuvera and Paytm Money, to name a few. Most of the online and app-based RIA is in the form of investment platforms which offer direct plans for mutual funds at zero commission. Backed by technology, many of these platforms have goal-based, risked-based customised mass advice for goal planning, tax optimisation or portfolio rebalancing. Gaurav Rastogi, CEO and Co-Founder, Kuvera.in says, “Our AI-led advisory engine learns from over 11 million transactions to create effective nudges for our investor to make the right decisions. Your advisory needs changes over time and our platform handles that and provides the right guidance at the right time. For first-time investors, we have simplified the KYC and investment process – made it jargon-free and simple. We nudge them to plan for specific goals and build a goal-driven asset allocation.” Online RIAs do not charge a commission since they only help you transact through direct plans from MFs. However, for additional services, they may charge an additional fee, based on the type of service and duration. 

Good for investors who want help in investing for financial goals like retirement, but don’t want or can’t afford a complete life financial plan.

Traditional advisors/planners: These earn a commission from the products they sell to you. Some even charge a flat fee, as well as the commission received. They pretty much follow a distributor model and are registered with AMFI, have IRDA and all other certifications needed for selling financial products. Many are agents, sub-broker for financial product distributors. Some are certified financial planners, too; many CFPs might charge extra for writing a complete financial plan. Keep in mind that many CFPs also follow a fee-only model. 

Good for investors seeking a financial advisor at a lower cost than a fee-only advisor. If you need a written life financial plan, a CFP is may perhaps be better equipped due to the rigour of qualification and certification.  

Online advisors/planners: These are again investment platforms that sell financial instruments and get a commission for the same. Take, for instance, Groww.in, Happyness Factory and Scripbox.com, to name a few. Lalit Keshre, Co-founder and CEO, Groww says, “We can provide scalable solutions at low prices. For instance, some services like mutual fund investing are free of cost on Groww.” Happyness Factory is a goal-based financial planning platform and free to use. According to its website, “The schemes are recommended to you, taking into account the time frame and risk potential of your investments.” Most online advisory/planning platforms provide commission disclosures. Scripbox.com doesn’t charge any fee to the investors. According to their website:” We earn a small fee from the mutual fund companies for the additional services we provide to our investors.” 

Good for investors seeking to invest for broader financial goals like retirement, but don’t want or can’t afford a complete life financial plan. 

As far as direct plan investing platforms go, no one bothers to read their privacy policy. Remember, there isn’t a thing as a free lunch. Thirdly, even online advisors websites cannot customise exactly when you need. It will always be mass-customised advice. So, you might not even get a choice of certain funds. 

You are surely spoilt for choices, but choose the model which you think is most suitable for you. Assess how much you are willing to pay and if you need a regular connection with the planner or prefer a buy- and-forget approach. Most importantly, understand every aspect of the model you choose before you start investing for a more prosperous 2020.