Economics Times

Is your mutual fund advisor worth the money?

Mutual fund advisors are not winning any popularity contest these days. If possible, most investors would love to invest directly in mutual funds. Those who are forced to seek the help of advisors seem to be suspicious of them. These days, investors are busy comparing the returns earned by them with their friends or colleagues to make sure that their advisors are worth the fee. They don’t think twice before leaving an advisor if his advice is not helping them to make more returns than their friends.

“An investor recently came to me complaining about how I am not recommending schemes giving higher returns like other mutual fund advisors. He wanted to switch to the other advisor,” says Puneet Oberoi, a Certified Financial Planner and Founder of Excellent Investment Advisorz.

According to Mutual fund advisors, it is becoming extremely difficult to make some investors understand that focusing on returns without accounting for the risk profile is a very bad idea. “If your advisor is recommending schemes that are not giving superior returns, you need to ask questions,” says Harish Barke, ‎Head, Financial Planning Services at Way2Wealth Securities. He adds that when an advisor picks schemes for an investor, he/she keeps in mind the risk profile and goals.

Puneet Oberoi says that most of these investors focus only on returns as they have started investing in equity mutual funds very recently and they have little idea about their risk profile. Keeping a tab on the performance of your schemes is a good strategy but looking at returns in isolation is not a good idea, he says.

“For a conservative investor, I will suggest a largecap or a balanced scheme that will give modest returns compared to mid and smallcap schemes. But these investors will keep speaking about how their friend is earning 30 per cent returns in a midcap scheme,” says Oberoi.

Dropping your mutual fund advisor just on such tenuous comparisons could backfire. Barke believes that this trend is seen generally among investors who are very new to mutual fund investing and who started investing only for returns. “These investors don’t invest for goals. All they are concerned about is high returns. If you select a mutual fund advisor with the same investment approach, you might be putting your money at risk,” says Harish Barke.

Finally, focus more on your goals, investment horizons and risk profile than returns. Sure, you should track the performance of the schemes and check with your advisor if any scheme is underperforming for a year or more. However, do not focus only on returns and don’t let it blind your judgment.