CAFS Investment

Investment advice to plan your Personal Finance

Personal finance is very important for every individual. Investment advice from a professional investment advisor can add value to your financial planning and help you achieve your investment goals.

    Definition of Investment Advice

    Investment advice is a set of recommendations that guide, help, and instruct investors to make informed investment decisions and plan their personal finance. Financial planners, financial advisors, and Banks provide investment advice where they suggest suitable investments. 


    Sources of investment advice? 

    Below are the sources from where you can get financial advice for personal finance and financial services.  

    1. Asset manager 
    2. IRDA registered Insurance agent 
    3. Relationship manager 
    4. SEBI registered Stock advisor 
    5. Financial service provider 
    6. Financial Robo-advisor 
    7. Fee-based advisor 
    8. Mutual fund manager 

    Let’s know about these sources in detail. 

    • Asset managers are financial experts who manage your assets that include real estate, Stock market investments, and foreign investments. 
    • Insurance agents, registered with IRDA can also provide advice for hybrid investments that include insurance cover and investment.  
    • Relationship managers are Bank employees assigned to account holders to assist with banking-related queries. They can also assist you in your investment journey. 
    • Stock advisors registered with SEBI can provide investment-related suggestions as they are directly recognized by SEBI. 
    • Financial service providers provide all types of services related to investments. You can use them for all of your investment-related queries. 
    • A Robo-advisor is a computer algorithm that asks for your investment details and goals. The algorithm examines the users’ goals and suggests investment options based on the algorithm.  
    • Fee-based advisors are financial advisors who provide financial advice for fees. Most of the advisors would charge investors on an hourly basis. Investors can clarify all their investment-related queries. 
    • Mutual fund managers are SEBI registered advisors who can provide mutual fund-related advice. Investors can directly contact a mutual fund manager from any bank if they require such services. 

    How much will financial advice cost me? 

    Financial advisors provide financial advice and they charge based on their experience and skill. The below table is a list of the average cost charged by financial advisors in India. 


    Time period  Fees 
    Commission-Based  Yearly variable  0.5% – 2% 
    Fee-Based  Yearly fixed  ₹ 10,000 – ₹ 50,000 
    Consultants  Hourly fixed  ₹ 1,000 – ₹ 3,000  
    Advisors  Monthly fixed 

    ₹ 5,000 – ₹ 10,000 

    • Investors who are looking for long-term advice can choose commission-based advisors. They charge a yearly basis, between 0.5 percent to 2 percent which depends on their expertise, skill, and potential returns. 
    • Investors who prefer fixed fees can choose Fee-based advisors. They charge a yearly fixed rate between ₹10,000 – ₹50,000.   
    • Investors who hold financial knowledge but require expertise can choose financial consultants. They provide hour-based service where they charge between ₹1,000 – ₹3,000.  
    • Investors who plan to invest between one month to two years can prefer financial advisors. They charge monthly between ₹5,000 – ₹10,000. 


    When to seek financial advice? 

    Investment advice is for beginners who have less financial knowledge. When a SEBI registered financial advisor provides investment advice, the investor can make a proper personal financial plan. Consider the below points as a checklist to decide whether you need investment advice based on your needs. 

    1. Understand about investments. 
    2. Take better investment decisions. 
    3. Utilize various investment options. 
    4. Make more profits. 
    5. No time to invest. 
    6. Having less financial knowledge. 
    7. Making wrong investment decisions. 
    8. Wanting an expert’s opinion. 

    Who can give investment advice? 

    Any individual or firm who is a Registered Investment Advisor (SEBI RIA) can provide investment advice for your personal finance.  SEBI regulates the investment advisors and makes sure that they follow the rules and regulations levied by them. The SEBI RIA has to prioritize their client’s interests more than their personal interests and act fiduciary.  

    SEBI RIA can charge for the investment advice that they provide to their clients. SEBI RIA charges clients based on a percentage of assets or work on fixed fees. They can also provide consultation for which they can charge on an hourly basis.  

    As they are directly monitored by SEBI, investors do not have to worry about any fraudulent activities. SEBI RIA has to follow the rules of regulations listed by SEBI. Investors can also check SEBI RIA registrations on the SEBI site 


    How to find a trustworthy and efficient financial advisor? 

    Based on experience and certain qualities, the investor can find an efficient financial advisor.  Below are such characteristics. 

    1. Professional traits: – 

    • Experience with investments 
    • Expertise in relative field 
    • Understanding investors intent 
    • SEBI registration 


    1. Personal traits: – 

    • Trustworthy 
    • Calmness 
    • Practicality 
    • Futuristic 
    • Patience 

    Professional trails: – 

    • Investment advisors who have five to ten years of experience with investments can provide advice that has a high probability of profit-making.  
    • If the investors are looking for specific investments like Mutual funds, Mutual fund managers will be a good choice as they have higher expertise in mutual funds. 
    • Unless the advisors understand the investor’s needs, they cannot form synergy over investment decisions. An advisor without empathy creates a high chance of miscommunication. 
    • An investor can sue the SEBI registered advisors if they use the money for their personal benefits.  

    Personal traits: – 

    • An advisor must be trustworthy so that the investors can trust the advisor to handle their money. 
    • For handling investments, the advisor must maintain his calmness. If an advisor loses his temper, it results in a high chance of loss-making. 
    • The goals set by the investor should be practical and achievable. A false commitment given to the investor will result in a bad experience for the investor. 
    • An advisor should make futuristic plans to manage the performance with respect to market volatility. 
    • The advisor should wait patiently till the fund starts to perform after making the investment. Any misalignment with respect to time leads to losing potential opportunities. 


    What does a financial advisor do? 

    A financial advisor’s role does not stop with just investing the money of the investor. An advisor stays with the investors from the initial planning stage till retirement. An average investment journey takes up to 25 years. 

    The roles of financial advisors are as follows: 

    1. Acquire relevant knowledge and skill to suggest suitable investment options to the investor. 
    2. Own a SEBI registration and follow their rules and guidelines. 
    3. Understand the financial goals of the investor and prepare a financial plan. 
    4. Provide financial guidance to the investor so that the cash inflow is stable. 
    5. Suggest suitable investment products like Insurance and SIP that add value to the investment journey. 
    6. Make the investors understand the logic behind the investment so that they stay informed and build confidence with the advisor. 
    7. Solve the concern of the investor related to investments and other financial products. 
    8. Follow the financial plan and achieve the goals discussed with the investor. 
    9. Keep the investor properly updated with every movement of the investment. 


    What are the types of investment advisors? 

    Independent and Restricted are the two classes of investment advisors. Independent financial advisors have no restriction while suggesting products as they are not tied to one investment product. Investment brokerage firms are independent advisors. Restricted advisors have restrictions with investment products are they work with a single investment firm. 


    Who is a fiduciary financial advisor? 

    Financial advisors become fiduciary when they build trust with the investor and acts upon their benefits.   Below are a few traits of fiduciary financial advisors. 

    1. Owning the investor’s trust and convey all investment-related details. 
    2. To properly communicate with the investor to avoid conflicts. 
    3. To ensure the advice given to investors is accurate and practical. 
    4. They do not use the investors’ money for personal benefits. 
    5. They do not do unwanted trades to raise the commission. 
    6. To take proper approvals before making an investment. 
    7. Holding registration with SEBI. 


    Why get financial advice? 

    Getting financial advice is highly beneficial, financial advisors have high experience with financial planning that leads to profit booking. In addition to profits, there are other financial benefits which you can avail from the investment advisor.  

    The financial benefits from an investment advisor are as follow: 

    1. Analyze your income tax filing and suggest alterations that lead to tax savings. 
    2. Act as a long arm for your investments which saves a lot of time. 
    3. Emotionally stable which is crucial for profit booking. 
    4. Certain advisors can get you discounts on investment products. 
    5. They come with experience which helps them narrow down the efforts taken for profit booking. 
    6. The financial advisor also shares accountability for the investments. 
    7. They can also act as an advisor for your whole family and take part in their financial planning. 


    Where should I invest my 10,000 rupees? 

    The investment option depends upon the risk factor the investors want to take. As there are various investment options subjected to a risk factor, the investor should determine his capability to manage risk. 

    • For low-risk investments, the investors can invest 10,000 ₹ in FD, where the return is around 5% to 6%. Investors can invest in FD from their respective banks. 
    • For medium-risk investments, investors can prefer Liquid and Midcap mutual funds, Experienced fund managers manage these funds. 
    • For high-risk investments, the investors can invest in blue-chip stocks which have high risk and can land profits up to 12 % to 15 %.

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