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10 qualities to look for when choosing your financial advisor
15 Mar 2023

What are the characteristics of a good financial advisor? That is always a difficult question to answer because it involves a mix of quantitative and qualitative factors. There is the basic issue of advisor skills and qualifications. But there is something more qualitative and emotional about a financial advisor that gives comfort to you. What are these qualities of a financial advisor that will impel you to be totally honest with your financial advisor? Remember, an honest interaction lies at the core of the success of your relationship with your financial advisor. After all, it is a relationship of trust and you need to nurture it over a period of time.

10 Qualities you must look for in your financial advisor
You must look for a mix of quantitative and qualitative factors in your financial advisor. Above all, also focus on the emotional quotient. His ability to navigate your financial plan through tough times is what will actually set him apart..

1.  Look for proper academic credentials. You can argue that formal education is not everything but you need to focus on this aspect for two reasons. Firstly, a formal education exposes you to huge body of knowledge which includes products and strategies. Secondly, a formal education instils rigor in a financial advisor and the most basic quality you are looking for in your advisor is the rigor to deal with mountains of data and make sense of the same. In fact, a proper qualification is also a statutory necessity before you can qualify as a financial advisor.

2.  Look for their reputation in the market. You can always dig around and ask people who are more willing to share details. Remember, good reputation and bad reputation normally precedes financial advisors in the market. A good reputation is essential because you are entrusting your financial futures and surely want someone who is ethically above board.

3.  The advisor must really know the body of knowledge both theoretically and practically. It is OK to know all the financial products but the big challenge is to fit these products into your unique needs. That is what really makes a good financial advisor. Customization is the key for a financial advisor.

4.  Is your financial advisor proactive? This is a qualitative judgement but you can make out in 2 or 3 sittings with your advisor. A financial advisor cannot be waiting for a crisis and then react to it. You need a proactive advisor who measures the risk in advance and accordingly tweaks your portfolio mix. That is the key to being a good financial advisor.

5.  Ensure that your financial advisor does not have any conflict of interest. Check out two things here. Is your advisor charging you fees or is he earning commissions from principals for selling their products. The former is a better situation to have even if it means higher fees. Secondly, check if the advisor is also working with other players in the financial sector as a consultant. Such advisors may be loath to being objective about the products of companies that they are consulting with.

6.  Choose an advisor who gives you a long term view. Don’t fall for an advisor who always talks about short term opportunities. That is the not reason you are looking at a financial advisor. A better idea will be to look for a financial advisor who prepares you for the long term challenges and allocates your funds accordingly.

7.  Is your financial advisor having a complete support team with advisors, analysts and executives? At the end of the day you need solutions not just consultancy from your advisor. He should help you translate your dreams into reality. That is possibly if the advisor has execution skills of the highest order. Also, see if the advisor has a backup such that your financial plan has a touch point even when your advisor is unwell or travelling. Too much dependence on one person is not a good idea.

8.  Is the advisor making you the centrepiece of the entire discussion? That is exactly what you want. You do not want an advisor who spends more time explaining products and advantages. You are more interested in products and solutions that are workable for you. Unless that is achieved, your advisor is not doing his job properly.

9.  Does your financial advisor panic when faced with a crisis? That is not a very good sign of a financial advisor. For example, you need a financial advisor who can keep his cool in tough macroeconomic conditions. How does your advisor handle tough situations like a Lehmann Brothers or a global war-like situation or a sharp correction in the market or even sudden change in rules? A good advisor always moves with a Plan-B in place and has options for every situation.

10.  Look for a financial advisor who is, by default, conservative. Remember, you do not want a cowboy shooting from his hips. You need a methodical advisor who is first and foremost committed to protect your assets. Unless this is a factor you are not convinced of, don’t accept anybody as a financial advisor.
These 10 points are illustrative and not exhaustive. They will surely serve to give you a proper perspective of what one must look for in a financial advisor.

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