Investing is simple, and you do not REALLY need an adviser. However, it helps to have an adviser to do the simple things of investing. He could set your expectations right, choose 3-4 mutual fund schemes which do not overlap, make sure that you do not withdraw when the markets are low or when you are clueless about why you are withdrawing..etc.
However there are too many fraudulent guys around who are looking to ‘help’ you. Here are some of the characteristics:
1. Giving you very complicated solutions: The easiest thing to do is to scare you away from simple solutions. This makes you dependent on the adviser, and this does not make sense. Look for simple solutions.
2. Suggesting Equity trading, F n O, and other high, quick action schemes: normally if you need to trade, and your adviser is a sub-broker / adviser attached to a broker, the chances are he/she will make tons of money, and the RISK will be on your account. If you are not in a mood to trade, or do not know how much risk you are taking for ‘earning’ the profits that you are making, this is a ‘lose all’ kind of a deal.
3. Suggesting Real Estate in Installments: this is tricky if you buy land and pay for it in installments. See the catch? if you do not know the WHY of the price, and why somebody is OFFERING it to you in INTEREST FREE installments, think hard. Make sure that it is not a ponzi scheme – there are too many of them going around.
4. The adviser promises CONSISTENTLY high returns, as if on cue to help you close.
5. Adviser issues statements on his / her stationery (even if it is a bank) and does not give you your folio numbers with mutual funds, etc. This is very common among HNI customers – when the adviser plays the card of being convenient, consolidated, and easy to access. And the cost of doing this is ‘only 1-2%’ per annum is a brilliant sales ploy. Works brilliantly with Innumerate clients. Seen this too often.
6. The sales pitch is too pushy.
7. The adviser / RM has signed up with a lot of your colleagues making similar pitches.
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