4 Mins

What is the difference between an investment advisor and a financial advisor?

A Financial advisor has broader duties and responsibilities in comparison to an Investment advisor. A financial advisor looks into every financial aspect associated with the client, which includes investment as well. However, an investment advisor is concerned only with the value invested and targets for overall investment growth. 

A financial advisor is one who plays multiple roles from planning and constructing a portfolio to monitoring it continuously. They also use their market knowledge to device a proper portfolio that fits as per their client’s needs and goals. They help in strategising their investments by managing and minimising the risk and building wealth in the long term. Hence, they curate a personalised financial plan for their clients. In simple words, a financial advisor does financial planning. And financial planning includes everything from budgeting, investing, and saving for retirement. 

An investment advisor is a person who is capable of managing clients investments. Usually, they provide investment suggestions on any financial instruments. It is essential that they get registered with the Securities and Exchange Board of  India(SEBI). These investment advisors charge a flat fee or an annual fee based on the portfolio size. 

investment advisor
investment advisor

Is an investment advisor worth it?

Yes, an investment advisor is worth it, especially when investors do not know about financial products. They assure the best investment practices to be followed. Generally, an investment advisor charges around 0.5% to 1% of the portfolio value.  For investors who want to invest and do not have understanding of financial products, opting for an investment advisor is the best option. 

Furthermore, there are investors who do not have time to manage their portfolio but have financial knowledge on products. Such investors can opt for appointing an investment advisor. They help in periodic monitoring and portfolio revisions to keep up with the changing market scenarios

A good investment advisor will help investors to create a diversified portfolio for their long term plans. They provide guidance to avoid common investment mistakes. Also, they help investors to cope with daily market fluctuations. 

Can I talk to a financial advisor for free?

There is no financial advice for free in this world. All the financial advisors have specific fees which they charge for their advice. The types of fees which the financial advisors charge are

  • Fee-only: This means that the financial advisors charge a agreed amount irrespective of the returns on investment suggested by them
  • Fee-based: This means that the financial advisors charge a specific fee as well as accept commissions on investment. 
  • Commission-only: This means that the financial advisors only take commissions on investments. 

Generally, a fee-only financial advisor is better as they charge a flat fee. Also, they devote themselves towards developing a financial strategy for investors. 

If an individual is looking for free advice then a personal banker is available. However, a personal banker has narrow financial knowledge where professional financial advice is not given. They suggest products for which they receive commissions. This might harm the investors long term investment goals

How do I choose an investment advisor?

Many of them call themselves as financial advisors or investment advisors with the minimum qualifications they have. However, it is important for an investor to be careful while selecting a professional. Finding a right financial advisor will help an individual in all financial aspects of life. 

There are few things that one should consider while choosing a financial advisor. Firstly, checking the financial advisor’s educational background and experience. Secondly, checking how the financial advisor has taken steps to continuously increase knowledge in personal finance. Specifically, steps taken for ongoing requirements for maintaining their designation in the market. Thirdly, identifying how the financial advisor looks for compensation and conflict of interest. Lastly, making sure they have the required fiduciaries which means that  they must look for best interest for clients. 

Above all, a relationship with the financial advisor is equally important. Sometimes, a bad financial advisor may charge high fees and lose the client’s money. Therefore, individuals must take time and do their research who can efficiently and effectively help them plan.