When it comes to investments, we always preferred to consult either with our friends, family or from the Google. Rather than considering other options like spending time on looking for an expert advice or reading investment books.
The reason why people gives priority over friends & family is because of the trust & the lack of financial awareness with respect to the various available investment avenues in the Indian Market.
It doesn’t mean that taking advice from friends & family is not a good option but at least they must be aware of the fact that with time, the new product/services may come in the market which needs an advice from the person who has experienced in dealing/advising on such instruments.
Consider an example like: Covid’19, the pandemic where everyone in the world is struggling with the vaccination of this disease, but the WhatsApp University and the Social Media has flooded their free advices everyone’s smart phone in such a way that if anyone has Covid’19 symptoms they have their own family doctor called WhatsApp or Facebook.
Similarly, it works with investments. With over more than dozens of Investments Avenues and hundreds & thousands of their varieties – it’s obvious to have doubts or confusions, which leads to Decision Fatigue.
And this fatigue can only be resolved with the help of a Doctor which is called as Investment Advisor. As per SEBI, Registered Investment Advisor Regulation, 2013 – Investment Advisor means any person, who for consideration, is engaged in the business of providing investment advice to clients or other persons or group of persons and includes any person who holds out himself as an investment adviser, by whatever name called.
So, before taking any advice from any advisors better ask the advisor whether he is certified under SEBI- RIA, 2013 guidelines or not. Or here’s the brief comparison with IA & other agents which help you out in identifying to whom to consult with.
|
Types of Advisor |
Commission Based Advisory |
Fee + Commission (Composite) Based Advisory |
Fee-Only Advisory |
|
Advisory Services |
Free |
Chargeable |
Chargeable |
|
Products and Services |
Mutual Funds, Insurance, Direct Equity or Combination of all |
Financial Planning or specific to particular product or services |
Financial Planning |
|
Transparency |
Less |
Full |
Full |
|
Confidentiality |
Very Less |
Full |
Full |
|
Quality of Advice |
Low |
Moderate |
High |
|
Net cost to clients |
High |
Very High |
Cost Effective |
|
Benefits |
Commission based product Advice |
Commission based Product/Service Advice |
Need & Goal Based Product/Service Advice w.r.t Risk Profile |
|
Designations |
Insurance Agents, Mutual Fund Distributors (IFAs or Corporate Distributors), Stock Brokers, or Combined |
Investment Advisors, Portfolio Managers, MF Distributors, Insurance Agents, Stock Brokers, or Combined |
SEBI Registered Investment Advisor (RIA) |
|
Fiduciary |
Less |
Moderate |
High |
|
Example |
Individuals, FundsIndia.com, Scripbox.com, ICICI Securities, Zerodha, etc. |
Axis Securities, Angel Broking, Kotak Securities, etc. |
Individuals, Kedia Capital Services, Small Boutique Firms, etc. |
Conclusion
It is not easy to decide which investment avenue to choose from the list of 6000+ Mutual Schemes, 5000+ listed Stocks, 30+ AIFs, 20+ PMS Providers, 1000+ Bonds, 800+ Insurance Policies, 10+ precious commodities, 250+ Crypto Currencies, 30+ P2Ps, and many other options. The confusion of optimal selection, the knowledge & the proper diversification of portfolio needs an expert advice. Because, all these investment avenues have its own pros & cons associated with it. Only thing matter is whether these avenues helps you to achieve Financial Goals within your Budget & Risk Profile or not.
