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7 Important Roles of an Investment Advisor to Make Your Finances Work

7 Important Roles of an Investment Advisor to Make Your Finances Work

 While you have got your financial plan made from an expert financial planner, now you need an investment advisor. Someone who can guide you for the best investments for each of your goals. If you are wondering why do you now need an investment advisor for making your investments, then this blog is for you.

Who is a Registered Investment Advisor?

When the Government of India wanted to differentiate between advice and buying of mutual funds in 2012-13, it brought out a draft legislation. After getting the feedback from the public, it made a legislation called as SEBI (INVESTMENT ADVISERS)) REGULATIONS, 2013

This new regulation, which came into effect on 21st April 2013. Here I wish to quote from SEBI website as:

The regulations specify conditions for registration, certification, capital adequacy, risk profiling and suitability, disclosures to made, code of conduct, records to be maintained, the manner of conducting an inspection etc.

In terms of the IA Regulations, no person shall act as an investment adviser or hold itself out as an investment adviser unless he has obtained a certificate of registration from SEBI on and from the commencement of IA Regulations unless an exemption specifically applies.

“Investment advice” is an advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products, and advice on investment portfolio containing securities or investment products whether written, oral or through any other means of communication for the benefit of the client and shall include financial planning.

Who is required to make an application to get registration under IA Regulations?

Any person, who for consideration, is engaged or willing to engage in the business of providing investment advice to clients or other persons or group of persons is required to make an application to get registration under IA Regulations unless specifically exempted under IA Regulations.

What are the obligations which are required to be fulfilled by the investment adviser?

An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise. He shall act honestly, fairly and in the best interests of its clients and in the integrity of the market. He shall also act with due skill, care and diligence in the best interests of its clients and shall ensure that its advice is offered after thorough analysis and taking into account available alternative based on risk profiling and suitability of the client.

With these guidelines in place, the Indian government has tried to make sure that no investments are made which have a bias of any of the following:

  1. When a mutual fund distributor sells any particular scheme or promotes it, he would naturally be remunerated by a commission. Hence, higher the commission, the higher is his earning.
  2. Therefore, the chance of you being “sold” a particular scheme where the benefits more than you, is higher!
  3. Hence would it not be possible to find out an advisor who gives advise not based on where he earns more, but where you benefit more. Simple!

Therefore, you may choose to invest in “direct” mutual fund schemes rather than commission based regular mutual fund schemes. Thus, you would benefit more in the short as well as the long run!

Direct mutual fund schemes are offered by same mutual fund houses, called as Asset Management Companies which provided regular schemes. Here in the direct option, the fund provides no commission but you, as an investor, have to visit or liaison with each of the AMC on your own. that you may face, while making your own investments on your own!

While you may have now decided to start investments on your own, in direct mutual funds. But you face some issues! This may make it difficult in operations and regular maintenance of your investments over an extended period of time. There would not be anyone to offer you personalised service or get your streamlined, cohesive implementation. Proper execution and delays could jeopardise your plans also.

What would be the role of an investment advisor in making your financial plan work for you?

7 reasons on why you need an Investment advisor:

  1. or his firm is registered (in India, USA) as a Registered Investment Advisor: As you have read above concept of India’s regulation, it is essential to check if your investment advisor/ firm is registered with SEBI as “Registered INvestment Advisor“. There are currently over 755 such registrations (as of updating this blog).
  2. He is an expert professional, with relevant investment experience. Experience brings knowledge, so that you may take decisions based on what has worked for others and is not merely an information!
  3. He has relevant qualifications or necessary certifications: a CFPCM(CERTIFIED FINANCIAL PLANNERCM) made me an expert not because of passing the requisite examinations, but to be able to work on specific processes, systems.
  4. To be able to gauge the given information, facts, made be legible to read between the lines. Being able to understand as to which fund would perform better in future rather than the past information, made me more knowledgeable and experienced to give an expert opinion.

  5. He can provide you with an unbiased opinion and works for you as a “fiduciary: From Point no 3, came that independent, unbiased ability to give a piece of advice. Being a fee-based financial planner, it gave me to an ability to first make a financial plan. Plan based on a client’s goals, risk profile, time horizon. Then be able to give investment ideas now what would be the best suitable asset class. Then, how much equity and debt. Then to ensure that I have this mandate to work continuously for my client’s interest.To see into the future that where would my client’s money is better. Or, where could my client’s cash flow get affected due to man-made disasters or be it natural disasters.  This kind of ability to see into the future and then suggest various options like insurance, contingency fund, makes me a different financial advisor.
  6. He or his firm is capable of helping in implementation and monitoring your investments: Once the basic plan is in place for a client, I am able to make judgements and decide where he/she should be making investments. To comply with RIA regulations (as explained above), my firm does not sell any commission-based products or any such options.  Here, it is important to note that the regulation clarifies:( I quote from SEBI website)
     All fees and charges paid to distribution or execution service providers by the client shall be paid directly to the service providers and not through the investment adviser.
  7. With this option, (remember, it is an option for my clients), they are offered the services of an online mutual aggregator. This online aggregator provides all mutual fund schemes offered by all 43 mutual fund houses under one roof. With a seamless digital platform, working through an app also, my clients are able to invest in direct mutual funds as per their goals and based on the individual’s time horizon and risk profile. Thus a comprehensive investment statement offers a one-page view or a detailed portfolio summary. These viewing options, also available on an app for our clients, give them the following facilities:
  1. Transparency in buying and selling without any glitches.

    Facility to invest as per their freedom and choice.
    Portfolio summary and detailed transactions in one go

Your investment advisor should be offering the following:

  1. Risk profiling
  2. Suitability Study
  3. Disclosures to clients
  4. Maintenance of Records
  5. Redressal mechanism
  6. Segregation of Execution declaration
  8. It is important to note that the regulation clarifies:(I quote from SEBI website): An investment adviser shall not divulge any confidential information about its client, which has come to its knowledge, without taking prior permission of its clients, except where such disclosures are required to be made in compliance with any law for the time being in force. will you know that your investments are efficiently working as planned?

It is now clear that after such due diligence, your investment advisor now helps you with the implementation and execution of your mutual fund investments.

He should also be equipped to monitor all your investments on following five ways.

  1. There are assumptions in your financial planning. They should be cross-checked at regular intervals
  2. There is rebalancing to be done in your equity-debt ratio
  3. Fund performance be checked, and non-performing funds be replaced with better options
  4. Proper client review of the financial plan is essential. This brings in checks for issues like sudden cash required or made available.
  5. An understanding of terms and conditions prevalent. The advisor should communicate the economic conditions and viability of the options suggested by him.

How to find an expert investment advisor with experience, qualification, registration?

SEBI website provides all such information. However, don’t just find out all the advisors in your area, but check for experience, qualifications, abilities, infrastructure etc. before deciding your investment advisor

What would be your role, meanwhile?

  1. You are the investor! You have to be well read. Your time spent on such matters has to be well balanced between what is essential for you and what is urgent.
  2. You should cross-check all regulations and mandatory conditions of your investments
  3. You should be a well-informed investor, not a researcher!
  4. You need to make your investment advisor a friend and provide all relevant information to him. Thus he should be your trusted friend.

Happy investing!



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  1. […] Soon after I got, this certification came a government notification, which made it mandatory for all those giving advice as a financial professional to register themselves or their firm. The new law brought about a change the way people " bought" advice from a financial expert. Read more about this new law in my blog on the role of an investment advisor. […]


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