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The way to identify a good financial advisor

An advisor should get back to you not only with an answer but also with an explanation to your query, says Dhirendra Kumar

How can we find a really good and honest financial advisor? How would we identify them like we identify doctors and lawyers?
- Malhotra

It's a difficult thing. There are many financial advisors who are good but there are many who are not so good. And unfortunately, unlike many other things where the outcome can be derived in a small time frame, the outcome of a financial advisor is derived many years after you have opted for the service.

One way to do this is by keep looking for good advisors in the sense that if you can get any reference from someone reliable. Look for an advisor who is thoughtful, sensible, thorough with his job and gets back to you not only with an answer but also with an explanation to your query. There is a possibility that all advisors may not have all the answers. It is not possible. But they should get back with an answer.

Many times, the kind of questions that investors have, there is a possibility that there are multiple answers to the same question. For example, if you ask me where to invest now for five years, I will have three kinds of answers depending on whether you are a taxpayer, a first-time investor without being a taxpayer or someone who has experienced ups and downs of the market. All the three recommendations are right, just that it is suited for different people with different experiences and scales.

But I think the most important thing is to have some basic frameworks for yourself, like why you are doing and what you are doing. Yes, you may not have all the answers but you don't need all the answers. In fact, finding an answer to factual questions (not conceptual) is only a click away. You can search for it and read about it on the internet. And understand that everything comes with a risk. Follow the basic rules. If something is too good, it is unlikely to be true. So, I would say that having a basic framework is more important.