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  • Writer's pictureTeam ArthaPurna

Need of Financial Advisor


One of the first pieces of advice you undoubtedly received when you first started making money, especially from those who cared about you, was to save aside money for your future goals. You initially held your savings in your savings accounts for a short period of time before transferring them to a few fixed deposits and government bonds. You are nonetheless aware that despite inflation, the value of these assets does not rise with time. Additionally, you would have to significantly cut back on your current spending, which isn't realistic for everyone, in order to save the money, you need to achieve your goals. We all need to produce higher returns than inflation in order to increase our corpus more quickly and achieve our financial goals while maintaining a manageable level of savings.


You properly deduce that you must invest in a variety of asset types depending on your goals to accomplish this. You first attempt to accomplish it independently by investing in a few top-notch companies or mutual funds based on your weekend reading and browsing. If not, you would have asked a friend, family members or distributors for assistance before verifying their advice, which can be dreadfully inadequate. And here comes a Registered investment advisor (RIA). Regardless of the difficulties in locating a qualified and trustworthy advisor, we must locate and work with one.


Why do you need an Advisor?

1. Saves you from Yourself

When it comes to making money from your investments, guess who is your worst enemy? The answer is – you, yourself! Even the most seasoned investors can fall victim to greed, fear, and a variety of other psychological traps when markets swing between the lowest points of pessimism and the highest points of exhilaration. Experienced Advisors can help you avoid unpleasant financial choices like selling at market bottoms or buying more at market tops by drawing on their knowledge of previous market cycles.


2. Keeps you away from Bad investments

A bad investment is always just around the corner, which is a terrible truth. From the YES Bank AT-1 bond write off disaster this year to the ULIP drama of the 2000s, investors frequently succumb to poor investments, which are typically encouraged by salespeople posing as financial planners. You'll be able to avoid becoming tied into bad investments that could wind up damaging a significant amount of your hard-earned money over the long term by having a reputable Financial Advisor read through the fine print on your behalf.


3. Helps you see the Bigger Picture

A financial advisor can assist you in seeing the wider picture with regard to your assets by matching your investments to your long-term and short-term goals. Your advisor makes sure that your investments are completely connected with the scope of your goals by ensuring that you invest in accordance with a fixed roadmap with pre-defined time-bound milestones, as a result, only long-term capital flows into higher risk assets. As a result, you'll be much more resistant to market fluctuations because your viewpoint on investment will be significantly and favourably changed.


4. Helps you invest in Right Assets

When left to their own devices, most investors have a propensity to choose investments based on recent short-term gains. What goes up must come down, and vice versa, therefore this myopic propensity is the exact opposite of ideal. A financial advisor can make sure that you choose the appropriate investments for your portfolio by utilising their experience and concrete research that is typically not available in the public domain. By doing this, your advisor makes sure that your portfolio is comprised of securities that have the potential to perform well in the future and provide you with excellent risk-adjusted returns throughout the course of your specified investment horizon.



Comes the SEBI RIA: -

Every profession has a governing body whose mission is to ensure that competent and trustworthy service is provided in that field. It aims to preserve certain standards and hold professionals accountable, even though it cannot guarantee this will happen every time. Regulators work toward this goal by issuing certificates based on competency, usually a specific degree of education and occasionally experience, as well as establishing a "code of conduct" and enforcing it to the best of their ability.


A registered investment advisor (RIA) is a person or organisation that provides individual investors with financial advice. In order to serve their clients' best interests, RIAs have a fiduciary duty to give them financial advice. RIAs are registered with the market regulator Securities and Exchange Board of India (SEBI). Thanks to SEBI and RIAs, investors may expect their advisors to provide them with professional and ethical advice. In order to protect investors, SEBI also creates a few fundamental rules for how RIAs should run their advisory businesses. SEBI then ensures that these rules are followed by mandating audits and widely publicising these rules in the public domain. Compared to distributors of mutual funds, they have a greater duty of care to their clients.


RIAs take their investors' goals, available resources, and current conditions into account when developing a financial plan for them. Registered investment advisers must always put the interests of their clients ahead of their own, according to SEBI laws. In addition, the investment adviser must always uphold their responsibilities.


Additionally, Registered Investment Advisers RIAs are required to disclose any possible conflicts of interest to their clients. In all of their business dealings, they must act ethically. Some RIAs may charge a fee to their clients based on a percentage of the assets they are managing. While some bill a flat price or by the hour for their services. The two types of fees collected by RIAs are as follows:

  • Percentage of assets: This is comparable to the trail commission on mutual funds in terms of percentage of assets. The main distinction is that this fee is paid by the client directly, as opposed to the fund house. The costs vary according to the size of the assets. Typically, the cost is 1% of the assets, and it decreases as the asset base grows.

  • Flat fee: The annual flat price that the advisor charges clients. The investor and advisor agree on a price with one another.

A few of the various roles that SEBI RIA can perform are financial counsellor, tax savings advisor, and portfolio manager. The filing of income taxes will ultimately be aided by effective tax planning, and some investments can also help to lower the tax liability. These can be listed on tax returns as a deduction.



Difference between RIA and MF Distributors

Without giving any thought to the tasks assigned to them by SEBI, mutual fund distributors and investment advisers are frequently used interchangeably.


An MFD, or mutual fund distributor, aids investors in purchasing and selling of mutual fund schemes. A single mutual fund house or a number of mutual fund houses may be linked to an MFD. They receive a commission for the mutual fund plans that they promote to potential investors. Often you would find MF distributors convince you to invest into Regular Mutual Funds, this is because, for the sales they make, a trail commission is given to them. MFDs are not given an upfront commission. An MFD facilitates:

  • Buying a mutual fund scheme in one go

  • Registration of an investment strategy (SIP)

  • Changing between strategies (systematic transfer plan or STP)

  • a mutual fund scheme's lump-sum redemption

  • registration of a withdrawal strategy that is gradual (SWP)

  • Any additional services connected to the aforementioned


A RIA can assist you if you lack the time or the necessary expertise of mutual funds and financial plans. To determine your financial and psychological well-being, they will perform a scenario analysis. After developing a risk profile, they will establish a comprehensive financial plan. This plan will incorporate a variety of assets that go well with your people and financial resources. The present value of your human capital represents your expected future earnings. Younger people typically have more human capital since they have had more time to accumulate financial wealth.


When recommending a financial plan, a qualified RIA will take into account both your human and financial capital. In order to address any changes in your life and to modify your portfolio as necessary, your RIA will stay in touch with you. The RIA will charge an advising fee. Remember that the expense ratio you will incur is larger than the advising fee a RIA charges. The RIA can offer you investing advice, but you can choose to either act on it yourself or have a mutual fund distributor help you with the transactions.


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