Choosing your financial advisor - eNidhi India Travel Blog

Choosing your financial advisor

Keywords: Financial Planning advice, Insurance agents,wealth management tips

Come March and lots of salaried people and financial advisors or tax planners will be hunting for each other. Many people invest in insurance primarily for tax benefit.

How do you select your insurance agent? On what basis do you take a decision of buying an insurance policy of a specific company and from a specific agent?

Traditionally, we buy policies from the agent who were referred to you by your friends/relatives, or from agents who are distant family members/friends/relations or from agents who kept bugging you till you bought a policy from him.

A bad investment equivalent to financial loss. Because it is your money it is your responsibility to ensure that you’re taking advice from right people when investing it. Don’t do investments just to gain tax exemptions or to please the agent (or say to get rid of him)

This post gives you some tips for selecting your financial advisor and tells you some key points you should keep in mind to avoid ending up with a bad investment.

1.Knowledge and Respect on competition products
Your advisor/agent, though he might be representing one company, should have good knowledge about products and services offered by other companies. If he claims his company is the best and everything else is totally useless probably you should be more careful with him. If he doesn’t show some basic respect towards the competition and fails to justify his claim with illustrations and evidence better avoid him.

2.Tells negative factors as well
A good adviser tells negative points without your asking. For example, if your agent asks you to invest in ELS and says you have tax advantage on them, he should voluntarily declare that ELS have lock in period of 3 years. When he proposes money back policies, he should highlight that money back policies have a higher premium than conventional policies. If he intentionally or unintentionally fails to tell such matters, you’ll suffer later

3.Doesn’t share his commission
As per IRDA (IRDA stands for Insurance Regulatory and Development Authority, a governing body for insurance companies in India) an insurance agent is no supposed to share his/her commission with the customer. For endowment policies, the agents usually get 20-30% of first year premium as commission and hence many agents offer to pay 2-3 months of premium themselves. Though this might appear like a financial gain, please keep in mind that such agents will be having a strong calculations running in the backend as to what profit they’ll be left with (after sharing it with you) and all their advice will have influence of this calculation, which means you may not get a genuine advice

In India the qualification to become an insurance agent is Class 12 pass (Class 10 in rural areas). In addition prospective agents shall have to attend a 100 hours IRDA stipulated training, followed by an optional product training by their insurance companies. This minimum qualification is not adequate to give a professional advice these days and if a person has some additional financial background (education or experience) it will be better. It’ll be great if he/she is a certified financial planner

5.Fund Management
You’re never supposed to invest all your money in one single scheme/policy/fund however interesting and beneficial they may be. Suppose you have Rs.50000 per year to invest and if your agent advices to buy one policy with annual premium of Rs 50000, he just doesn’t know the basics of money management. You should diversify your investment into multiple investments. This is mainly to mitigate the risk and will also give you more options to control your money. Accepting such wrong advices will be fatal for your financial well being.

The advisor you choose must be dynamic enough to follow the developments in the market on a day to day basis. Those who have strong contacts to get key information (like dividend to be declared) in advance are an asset

7.Avoid over the counter advisors
Avoid buying policies from tele-callers, those who have set stalls at supermarket and such people. Better go for people you know well.

8.Should put you first
There may be some policies by selling which advisor may not get enough money or sometimes products from a competitor company might be better suited to your needs. An agent having genuine interest in you will not hesitate to compromise on his earnings and advice you the best option. If he discourages you from considering certain products without giving a valid reason, he’s not sincere in his approach.

Hope these tips will be useful.
Similar post: Govt Guarantee for LIC | Market Analyst's job is easy |Brokers do not give prompt tips |Customer Relationship Management at Provision store |


  1. May be i wanted to add one comment .People should always decouple Investment from Insurance .Insurance is never an Investment :-) .

    For Ex :- If we are looking for Insurance as just matter of insuring please do enquire abt Term Policies .wherein u invest Rs 2000 for one year and u are insured .No money back ...etc .Most agents never reveal this

  2. that's good advice Raghavendra.. here we are taking about selecting an advisor and were not focusing on how to invest better.

    But then, thanks for dropping by and leaving a comment

  3. It is rightly said:
    “Compounding is the eighth wonder of the world.”
    -Albert Einstein
    “Take away the terms asset allocation, long term and compounding from a financial advisor’s vocabulary, and he is pretty much tongue-tied,” remarks a friend.
    Let me show you exactly how much saving can help. Say you spend Rs 40 every day on cigarettes. Let us see what could happen if you stopped smoking.
    Read full article:


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