How to choose the best mutual fund advisor?

Do concepts like ‘net asset value’ and ‘portfolio allocation’ seem foreign to you? These terms are often thrown around in the world of mutual funds investing. For laypeople new to the world of investing in mutual funds, the technical terminology can seem daunting and push them away from investing. However, that doesn’t mean these concepts are all fluff without substance. In fact, a mutual fund’s NAV is usually a key indicator of its performance, and figuring out how you wish to allocate your portfolio can help you attain financial goals. This is where the role of a mutual fund consultant comes in.

What does a mutual fund consultant do?

A mutual fund consultant or a mutual fund advisor offers tailored financial advice about which funds to invest in and how to allocate one’s mutual fund portfolio after assessing their clients’ investment horizons, risk appetite, and financial goals. For this, the consultant usually tracks a variety of mutual fund schemes that have different investment objectives while also keeping updated with crucial events in the financial market that could impact the performance of these schemes.

Hence, not only are MF advisors incredibly helpful to lay people wanting to dip their toes into mutual funds investing but can also offer seasoned investors guidance regarding their portfolio’s performance. As with any profession, you can find great and not-so-great mutual funds consultants. But what defines a good mutual fund advisor and how do you find one? Keep reading to learn more.

How to pick the best mutual fund advisor?

A few simple principles can help in determining whether or not you have found a good mutual fund consultant. They are as follows:

  • Look at their experience in the field: The more experienced a mutual fund manager, the more likely investors will swarm toward that fund. The same applies to a mutual fund advisor. A mutual fund advisor who has been through at least one market downturn has a lot more to offer than one who hasn’t. Going through one crisis usually enables one to tackle future crises better. Hence, the more seasoned a mutual funds advisor, the more likely they will know what to do with different market scenarios. Some clients seek out a mutual fund advisor online who has been in the field for at least ten years.

  • Assess their approach: The way your advisor approaches your financial planning is key in understanding how seasoned they are. Typically, the best mutual fund advisors opt for a holistic approach towards investment planning. They carry out a detailed risk assessment of their client, carefully consider the client’s financial goals and the timeframe available to achieve those goals, and curate schemes to allocate their clients’ portfolios accordingly. Good mutual fund advisors also acknowledge that clients’ goals change over time, so their portfolio and tolerance for risk change accordingly. Hence, risk profiling and reallocating one’s portfolio is a process that must constantly be revisited at different life stages.

  • Ask for referrals: When evaluating multiple mutual funds advisors online, you have the option of reaching out to investors they have worked with or currently work with. By seeking out referrals from your mutual fund advisor online, you can talk to investors with similar financial goals as you. Hence, you can learn a lot about working with a particular mutual fund consultant.

  • Request transparency regarding compensation: Since direct mutual funds have been introduced in India, different models of commissions exist for MF advisors. A mutual fund investment advisor can earn commissions directly from a fund house or for being a distributor who sells the schemes of the house. Hence, some mutual fund consultants could target selling particular schemes to clients by putting their commissions first, rather than the client’s goals. This is why it is vital to understand your mutual fund advisor’s mode of compensation.

Some key characteristics of the best mutual fund advisors include:

  • They hold a good reputation among peers and industry.

  • They keep their lines of communication open and update clients constantly about financial issues and opportunities.

  • They invoke confidence and trust in their clients by explaining foreign concepts proactively and relaying your financial goals back to you.

  • They have on-field experience and a list of referrals from investors who have similar goals to you.

  • They approach their clients’ finances holistically by investigating your banking, credit, and investment needs, rather than simply focusing on asset classes to invest in.

  • They have a clear strategy for their client’s investments.

  • They put their clients’ interests first by not being pushy about investments or products to invest in so they can earn the biggest commission.

The Bottom Line

The process of mutual fund investing and building a portfolio can become a lot easier through a mutual fund consultant. Knowing how to identify the best mutual fund advisor for yourself is key. Ensure you look for certain characteristics in your advisor like a holistic financial approach, open lines of communication, and proactiveness. You can also seek out referrals about advisors you are comparing to get a third-party investor’s perspective who has worked with them.


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