Buying insurance or mutual funds, don't go blindly with the recommendations of your neighbour-turned-insurance-advisor. Take professional advice, says Gaurav Suri, marketing director of MetLife Insurance

"Well they are not for me… only for the rich"
"Is there a person who truly has my interests at heart?"

I hear these two statements all the time, now that I have shifted to the financial services markets. Outlined here are a few suggestions on how consumers can empower themselves to choose responsibly the insurance policy that best meets their needs, without being overwhelmed by insurance agents and investment advisors.

In the bargain they would be doing the insurance industry a big favour by helping it to mature faster, to make the insurance and financial planning profession a more responsible and respectable one.

Achieving financial goals can be easier with the help of a good insurance advisor. But finding the right advisor is a job in itself. Carefully evaluating your potential advisor can be a time-consuming process, but it may end up being time well spent.

Don't make the mistake of choosing just any product pusher or financial planner who comes calling on you. Be especially careful of the neighbour or acquaintance who has recently become a financial / insurance advisor as a part-time job, and is looking at people (s)he knows - like you - as potential clients.

Your goal is to find a capable person in the financial world who shares and respects your ideas for handling your money; it's a financial relationship you're forming. Just remember that you're the party in control; this person is working for you.

The liberalisation of the industry brought along the confusing jargon of planners, advisors, etc, which ended up confusing, rather than educating, the consumer. The role of a good advisor is to show the consumer ways to make the right choice, letting the decision itself rest with the consumer.

I find the concept of financial planners analogous to the advent of supermarkets in South India. Initially, people were sceptical, thinking these places were meant only for the rich. It is only with time and the experience of convenience and service that has drawn traffic into these places; now there's a mad rush for them.

Financial planners and insurance advisors (the same person can play both roles) have a similar task ahead. They must convince people about the role they can play; their very first task being to demonstrate that they are for everyone, not only for the rich.

A good advisor / planner will explain the relevance of different financial products available, and the role of insurance in investment. Begin by asking yourself just what you want the financial advisor or planner to do for you. You may primarily want to draw up a comprehensive financial plan. Then you can choose whether to implement the plan yourself or ask your financial planner to help you put the plan into action. Your financial planner can help you select qualified professionals who can assist you in selecting mutual funds or annuities, buying stocks and bonds, or implementing other savings and investment choices.

Ask for referrals from people you trust: family members and friends, an accountant, lawyer, banker or insurance advisor. Today, there are very few practicing professionals who are genuine financial planners; they are specialists in a particular field (say insurance, or mutual funds) and want to milk the customer for that product.

Here is a list of credentials you may want to look for in a financial advisor:

Education: Don't be overly concerned if a financial advisor has a degree in something other than finance or accounting, as long as the candidate has additional training in financial planning.

IRDA registration: IRDA requires that financial planners be registered and pass exams.

Certified financial planner (CFP): The Certified Financial Planner Board of Standards awards this designation is to people with at least three years of work experience in the financial planning field. They must have completed an approved course of study, passed a rigorous exam on financial planning and met certain other educational and ethical requirements.

AMFI: A certification awarded by the mutual funds industry association.

Chartered life underwriter (CLU): People with CLU certification have completed course work and taken exams regarding life insurance. They do not necessarily have training in investments.

Internal / industry achievements: MDRT, conference qualifications, number of customers, etc

Focusing on a few
Looking for appropriate professional credentials is a good starting point, but you'll also want to know particulars about the person's experience. Narrow your list to several top candidates and set up an interview / meeting with each. Be sure to ask in advance if there will be a charge for this meeting. Prevent any misunderstandings by stating up front that you just want to find out more about the advisor's knowledge of investments and insurance when you meet.

Ask every candidate the same basic set of questions so you'll have comparable information to evaluate each. Here are some core questions you should cover.

Which company are you working for? What is the company philosophy for sales?
Everyone claims to be doing a customised sale based on the consumer's need but, given half a second, a product is recommended in a few minutes. Here you know the slip between the cup and the lip.

Are you licensed to sell any other financial products?
Today, most of the players in the space also want to sell complementary products. However, if they are working for an organisation or industry, they get a license for only those products.

Do you sell financial products for a specific company?

If the professional manages assets:
What is your investment style?
Conservative, moderate or high risk? You'll probably feel more comfortable working with someone whose basic approach to money mirrors your own.

How long have you been in practice?

Can you provide references?
This helps give some reassurance on how many people have benefited from the advise and trust the person.

How are you compensated?
Most financial advisors are compensated in one of the following ways:

• Fee only: These professionals charge either an hourly or fixed rate.
  
• Percentage of assets: A money manager who is in charge of your total investment and insurance portfolio may charge a certain percentage of your assets for his or her services.
  
• Commission*: These professionals receive commissions on the financial products you buy from them. Such products may include insurance, stocks, bonds, mutual funds, etc.
  
• Fee / commission or fee-based*: These professionals charge you a fee for planning and also receive a commission.

*When collecting a commission an advisor may be acting as a registered representative or an insurance agent.

During your interview, ask for references and a copy of the financial advisor's resume, listing education and professional training, along with any professional designations earned. You can call the accrediting organisation later to check whether the person is a member in good standing.

A less tangible but significant consideration is the more subjective issue of whether you hit it off with a prospective financial advisor. Does the person seem to have time for you, regardless of how much money you have to invest? Does (s)he really listen to you and respect your opinions? Does the person use difficult-to-grasp financial jargon, or explain investments and insurance to you in clear terms?

Do a little investigative work regarding the advisor's firm. Some companies rotate personnel. If you choose a firm because of the qualifications of a particular financial professional, keep in mind that a new person may be put in charge of your file at some future time.

Working with your secret keeper
In India, this is sometimes the toughest part. A lot of people under-declare their assets or do not want to reveal all the details of their assets. This practice is harmful when you are working with a financial advisor, because he advises you on the basis of what you have shared with him. Therefore, it is in your own interest to share all the details with the advisor, as the advise for your problems will only then become completely relevant.

Once you've asked all your questions and chosen a competent financial advisor, expect to have the tables turned. It will be your turn to answer lots of questions. Your financial advisor will need to know what stage of life you're in and what your financial goals are - whether you are saving for a child's education or planning for retirement.

You will also need to be clear about your tolerance for risk. If you have chosen an advisor who is also an investment sales representative and can buy and sell stocks and bonds, you will need to indicate whether you want to be personally involved in each financial decision. Generally, you should give over such authority to your advisor only for very limited circumstances, and after you have worked him / her long enough to feel comfortable with this arrangement and know their policies.

Remember, it's your financial plan, and it's always your right to know where your funds are and their accessibility. You also have the right to withdraw your money for any reason. Just be aware that you may incur fees and / or tax liabilities if you do this.

Do a financial health check regularly
Like you do a health check periodically, according to changing lifestyle and age, it is prudent to meet with your financial advisor regularly. Plan a comprehensive appraisal of your insurance and investments with your financial advisor at least once each year. This should include a review of the market and any changes in your financial goals. If you have had a major life change during the year -such as the birth of a child or the death of a parent, sibling or spouse - arrange for a special meeting with your financial advisor. That way you'll be sure your money is invested wisely every step of the way.