A Few questions you must ask your financial advisor

There are a few important questions to ask before you accept your relationship manager’s (or advisor’s) suggestion to invest in any investment product - usually a mutual fund or life insurance policy.
Image for representational purpose. (File Photo)
Image for representational purpose. (File Photo)

There are a few important questions to ask before you accept your relationship manager’s (or advisor’s) suggestion to invest in any investment product - usually a mutual fund or life insurance policy. Of course nowadays you are also likely to be offered products like PMS (Portfolio Management Schemes), or AIF (Alternative Investment Funds) too! Here we go:

  •  Is the person qualified, and licensed to sell this product and when was the license first obtained. Even for a minute I am not saying that a licensed person will not sell you a wrong product, but, chances are he/she will be more vigilant assuming that you know what you are doing. Also whether he/she is part of a big group, he will be worried about the rules and regulations of the governing body.
  •  Is the product approved / licensed by some regulator - mutual funds, life insurance, etc. are regulated. Bitcoins are not. Real estate is regulated, but giving loans to a builder - is not regulated. Do visit the website of the regulator - at least prima facie you will know about some common frauds.
  •  Is it possible to convert my current income to capital gains? This is very useful for people in the higher tax brackets. For example in a mutual fund scheme you can convert the dividends to capital gains and pay lesser tax. In debt funds the capital gains get taxed less than the interest income in bank fixed deposits.
  •  How long will it be tied up? — Is there a lock-in and if yes, for how long?
  •  What is the minimum term (number of years) that you will have to pay the amount (usually premium) to keep it valid?
  •  Do I really understand the product? Simple products do a good job too, why complicate.
  •  Why is the seller confusing me with a life insurance product that looks like an investment? Separate the two.
  •  How do the risks compare with the rewards? For example, gold gives returns like debt products with the risk of equity.
  •  If you need help in understanding the product, or if you have a performance issue, where can you turn to for help?

PV subramanyam
writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest C 40 a day’

Related Stories

No stories found.
The New Indian Express
www.newindianexpress.com