As a newbie investor, you would definitely want to place your investment portfolios into safer hands. You would want to embark upon the services of a financial advisor who looks at your investment portfolio using an unbiased approach.
This is where you want a SEBI registered fee only financial advisor to help you with an objective and unbiased approach with respect to helping you build robust and tailor made investment portfolios.
SEBI stands for Securities and Exchange Board of India. SEBI is the governing authority that lays down guidelines and norms for investors and financial companies to operate ethically. Therefore, a SEBI registered fee only financial advisor would strictly comply with the norms and guidelines as laid down by the SEBI.
Keep reading to understand 6 important ways by which a SEBI registered fee only financial advisor protects the interests of investors on the whole:
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Financial Advice Without Any Conflict of Interest
A SEBI registered financial advisor gives solicited investment advice in an unbiased manner and would not work with a conflict of interest with respect to helping investors spike up their portfolio values.
On a generic note, fee only financial advisors do not receive any commissions from the sale of investments and financial products. Therefore, a potential conflict of interest is removed here.
This way, the fee only financial advisors who have registered themselves with SEBI purely act towards protecting their client’s interests and do not make recommendations based on a financial product’s services or benefits. Therefore, the advice and recommendations the financial advisors give their clients would be unbiased and purely from an objective point of view.
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Fixed Fee Structures
A fee-only financial advisor generally charges a fee structure that is transparent and genuine. The fee structure for these advisors is based on the following parameters:
- a fixed fee structure
- fees that are levied on an hourly basis and
- A percentage of assets under management or AUM.
Let us have a brief overview of each of the above:
2.1 A fixed fee structure
Under a fixed fee structure, the financial advisor agrees upon a fixed sum that is agreeable between the advisor and the investment client. This can be a one-time fee that is levied by the investor to the financial advisor who takes care of the client’s portfolios on the whole.
2.2 Fees on an hourly basis
Here, the fee only financial advisor charges on an hourly basis for the services the advisor performs for the investor clients. The hourly charges can differ from one independent advisor to another.
2.3 Percentage of Assets under management
This is a scenario wherein the investor already holds a diversified wealth or asset portfolio. The portfolio can comprise a mix of equities, shares, bonds, commodities, and fixed-income securities to name a few.
Suppose the total assets the portfolio comprises are to the tune of INR 50,000 and the AuM percentage is 5%, the financial advisor receives INR 2500 from that client for supervising the portfolio.
Therefore based on the percentage of assets the advisor manages, the fee is charged under AuM.
3. Fiduciary Responsibility
A SEBI registered fee only advisor must work with a fiduciary responsibility with respect to helping investors and not work based on his/her vested interests alone. This means the registered fee only financial advisors are required to comply with the guidelines as advocated by the SEBI.
Therefore, these advisors are required to work ethically to protect the investor’s interests alone. They are expected to act only on the sole interests of the investors and not work for their gains or promote financial products for investors.
Here, they must adhere to avoid those actions or recommendations that could benefit them instead of their clients.
4. Perform Objective Advisory Functions
A SEBI registered fee only financial advisor is empowered to perform their fiduciary duties and responsibilities purely to safeguard the financial interests of their clients or customers alone.
Therefore, the financial advisor under a SEBI registered forum must only work to safeguard the interests of the investors and must not indulge in functions that would add to the personal gains or prompt investors to take investment products wherein the financial advisor can earn extra commissions or incentives.
5. Customized Solutions for Financial Planning
A financial advisor who is registered under SEBI is a fiduciary investment consultant who purely works from an unbiased and objective point of view.
Therefore, when you look for a SEBI registered fee only financial advisor, you can look for more holistic and customized solutions when it comes to building diversified investment portfolios to help you achieve long-term financial growth and stability.
Here, you can also consult a SEBI registered financial consultant to provide you with personalized investment portfolios that you have in mind in a tailor-made fashion. This way, you can have your investment portfolios built to achieve your short-term, medium-term, and long-term financial goals.
6. A Transparent Approach to Investment Ethics
A financial advisor who is registered under SEBI norms is expected to follow the guidelines and rules as laid down by SEBI. SEBI or the Securities Exchange Board of India issues guidelines and ethics mainly to protect investors belonging to the mid-level or lower strata of the society too.
Therefore, these financial advisors are required to maintain a transparent approach to investment-based ethics. They must provide clear and upfront disclosures with respect to the fees involved. The fee structures also involve the other potential costs that might be required in lieu of the financial planning process.
This level of transparency helps investors identify what returns they would earn on their portfolios and what charges would be deducted towards processing fees.
This way, the investors get a clear picture of how much they would earn at the end of every tenure that comprises 3 months, 6 months, or annually. The fear of unexpected or hidden charges that might be levied in the name of fees does not arise here.
Conclusion
The registered fee only financial planners and investment consultants work hand in hand with their clients and the governing authority namely the Securities and Exchange Board of India.
This means that these financial professionals are expected to work within the framework as laid down to them by the SEBI and cannot deviate otherwise.
Therefore, your interests as an investment holder are protected in a more authentic way when you look for SEBI registered fee only financial advisors on the whole.
