How to Choose a Financial Advisor Without Getting Scammed?

Have you ever thought you were making the right investment, only to lose all your savings to a smooth-talking advisor? In India, financial fraud is on the rise. Recently, thousands of people trusted "finfluencers" and lost nearly 95% of their investments. It's not just about bad luck. It's about not asking the right questions.

So, how do you protect yourself? Let’s break it down and understand what makes a trustworthy financial advisor in India, how to avoid scams, and where to start if you want to invest your hard-earned money.

Check Their License Before Anything Else

Many investors fall for tall claims because they skip the most basic check, SEBI registration. Every financial advisor in India who charges for investment advice must register with SEBI as a Registered Investment Advisor (RIA). If they’re not on the list, walk away.

Why SEBI Registration Matters:

RIAs must disclose their earnings, follow a fee-only model, and focus only on client goals, not commissions from third-party sellers.

Example

A retired engineer invested ₹1,00,000 every month for two years. His advisor, unregistered, put the money into risky startups promising triple returns. After 24 months, he was left with just ₹80,000.

Read More – Financial Advice You Should Ignore in 2025

Lesson: If the advisor earns from selling products to you, your financial goals are at risk.

Technique to Use: Always check the SEBI website for the registration number. You can also request a copy of Form A.

Don’t Fall for High Return Promises

Let’s be honest. Who doesn’t want high returns? But when someone promises 50% in 6 months, it's likely fake. There is no shortcut in wealth building. Real growth takes time, planning, and correct allocation.

Most Common Scams Today:

• Stock trading bots that claim to beat the market
• Crypto investments with 2x guarantees
• High-frequency trading clubs
  
  

Technique Name: Risk-Return Crosscheck — If returns sound too good, compare with RBI fixed deposit rates (currently 6.5%). Anything more than 15% must be questioned.

An engineering student invested ₹10,00,000 in a Telegram trading group promising a 7% monthly return. In 4 months, he lost ₹9,50,000.

Simple Rule: Anything more than 1.5x bank returns needs deep checking. Ask for historical data. If they don’t share it, exit immediately.

Look Into Their Past Clients and Experience

Experience matters. Not because older is always better, but because past patterns show future behaviour. Ask your advisor how many clients they serve. How many have stayed longer than 3 years? Do they have testimonials?

How to Evaluate Their Track Record:

• Ask for client stories (not just reviews)
• Check if they follow a process, not tips
• Ask about their financial planning approach

Technique Name: Client Tenure Check — Identify advisors with long-term client retention. At least 3+ years on average.

Let’s say you invest ₹5,00,000 in mutual funds through a trustworthy advisor. They built a plan with a ₹50,000 yearly SIP. 

Over 10 years, at a 12% annual return, your investment grows to approximately ₹12,00,000. Without proper guidance, if you exit early or switch often, you may end up with only ₹8,00,000.

Ask How They Earn Money

This is the part most people skip. You must ask the advisor how they make money. If they get commission from selling insurance or NFOs, your plan is not yours. It's their bonus plan.

How They May Earn:

The Rule:

If you don’t pay directly, you pay indirectly.

Technique to Ask: Fee Clarity Method — "What exactly will I pay you each year, and what do I get for that amount?"

A strong advisor will give you a written quote with details.

Use These Filters Before You Finalise Anyone

Before saying yes to any advisor, run them through these 5 filters. Miss one and it may cost you lakhs.

5-Step Filter:

1. SEBI Registered?
2. Discloses all fees?
3. No commission links?
4. Has long-term clients?
5. Uses a structured planning process?

Example

A family in Mumbai was approached by a "free" planner who gave a glossy report but hid commissions in ULIP policies. After 5 years, their ₹3,00,000 yearly investment yielded less than ₹12,00,000. If they had used an RIA with term + mutual fund combo, they'd have reached ₹18,00,000.

Final Thoughts

Choosing a financial advisor is like choosing a surgeon. One bad cut, and your financial future can bleed. In India, more people are now trusting unregistered advisors and losing lakhs. Don’t be that story.

Also Read - Why You Need a Personal Finance Coach

Look for registration. Ask questions. Track the money flow. Choose logic over emotion. Build your plan, not theirs.

That’s how you invest smartly and sleep peacefully.

FAQs

1. How much should I pay a financial advisor in India?

It depends. Most SEBI-registered RIAs charge ₹10,000 to ₹25,000 annually for a comprehensive plan. If you're paying more, ask for a breakdown of the service.

2. Can I get a financial plan without investments?

Yes. Good advisors offer goal planning, budgeting, retirement strategy even without any investment.

3. How to verify if an advisor is really SEBI registered?

Go to the SEBI website, check their name or registration number. Ask for it directly if they haven't already shown it.

4. Is it safe to hire a financial advisor online?

Yes, if they are SEBI registered and use proper contracts. Ask for client references and a video call before hiring.

5. Should I avoid finfluencers on social media?

Not all are wrong. But never act only on their words. Most are not qualified or registered. Always cross-check advice with an expert.

Apply for Loans Fast and Hassle-Free

Apply Now

About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?