Finding the Best Mutual Fund Advisor in Hyderabad

Over the long term, even a 2% difference in returns can significantly impact your portfolio’s growth. For instance, if you refer to the table above, you’ll see a potential loss of ₹14,89,032 in profits over 15 years—an amount that’s greater than the investment you make in 10 years.

Having worked with NJ, SBI Mutual Funds, and ICICI Direct, I’ve witnessed firsthand how distributors often recommend funds that ultimately underperform against the index. Each time, the advisor earns a commission, but it’s the client who suffers lower returns due to suboptimal fund choices.

While the table compares direct versus regular funds, this principle holds true for active versus index funds as well. Historically, many actively managed funds have underperformed their index by around 2%, causing investors to miss out on potential gains.

So you need to find an advisors who is able to deliver your higher returns than index but nit lower returns

2. The Myth of Active Mutual Funds

Active Funds vs. Index Funds – A Reality Check

Many investors believe that active funds, which are actively managed by fund managers, have the potential to deliver better returns the index. However, studies have shown that, in reality, index funds tend to outperform active funds over time. Here’s why:

Lack of Consistency: While some active funds may show impressive performance over a 1-3 year period, they often struggle to maintain that success over time. This lack of consistency makes it challenging for investors to rely on them for long-term growth.

Commissions Over Performance: Active funds consistently generate commissions for advisors, but not necessarily profits for investors. Because many investors may not have in-depth knowledge about mutual funds, they often trust advisors who promote these funds.

However, a simple one-hour research into mutual funds can reveal a surprising truth: the top-performing funds change year after year. The “best” funds in 2024 differ from those in 2023, 2022, and so on. Investors are frequently shown past performance to convince them of an active fund’s quality, but in reality, many of these funds tend to underperform the index over a five-year period.

Market Trends: Over the past few decades, index funds have consistently outperformed many active funds, especially over periods of five years or more. In fact, up to 90% of active funds have delivered lower returns than the index. This statistic highlights the reliability of index funds in providing steady, long-term growth compared to their actively managed counterparts.

So, to achieve higher returns than the index, your advisor needs to be able to identify that top 10% of funds that consistently outperform—a task that is challenging without data analysis. Simply relying on past performance data often leads to underperformance, as it doesn’t capture the reasons behind a fund’s success or failure.

So you should have an advisor with both expertise and data analysis . He should be able to understand not only how a fund performed in the past but also its potential for future performance based on deeper insights.

At INVESTT, we’ve built a data-driven platform that uses an algorithm specifically designed to analyze mutual funds. By studying 30 years of historical data from 1991 onward, we’ve identified patterns that distinguish the top-performing funds from the underperformers. We understand why 90% of funds fail and what drives the success of the remaining 10%. To dive deeper into these historical patterns, read our ebook and expand your knowledge on this important topic.

3. Qualifications Required for Regular Fund Advisors & Direct Fund Advisors

According to SEBI rules, an advisor cannot recommend both regular and direct funds; they must choose one path.

• Regular Fund Advisors: Selling regular funds requires a minimum education of 12th standard and passing the NISM VA exam, which has no negative marking and a passing score of 50/100.
• Direct Fund Advisors: To qualify as a direct fund advisor, candidates need to complete an MBA, have at least three years of industry experience, and pass the NISM XA, XB, or XV exam, which includes negative marking and requires a minimum of 60%. Candidates may also need to pass a SEBI interview.

The qualifications to become a direct mutual fund advisor are much more stringent, while the requirements to become a regular fund advisor are relatively minimal.

Qualified Advisors: Regular vs. Direct

Though many CFA-certified professionals also sell regular funds and deliver good performance to clients, they are in very small number across india finding them is difficult. Out of over 1.5 lakh regular fund advisors, less than 100 are highly skilled.

And only around 1,300 advisors recommend direct funds on a fee basis, free of commission conflicts.

It’s important to note that even direct funds can underperform . The primary goal of a fund manager is to outperform index returns, and they charge a fee for this effort in the form of an expense ratio. However, statistics show that up to 90% of active mutual funds—including direct funds—deliver lower returns than index funds.

As a SEBI-registered research analyst, INVESTT exclusively recommends direct funds, focused solely on optimizing client returns without the burden of hidden commissions.

4. How to Select the Best Mutual Fund Advisor in Hyderabad

Essential Qualities and Qualifications

Selecting the best mutual fund advisor in hyderabad is more than just choosing someone with a finance background. The best advisors are knowledgeable, transparent, and unbiased.

• Check SEBI Registration or CFP or CFA: A SEBI-registered advisor is obligated to prioritize the best interests of their clients and usually charges fees instead of earning commissions from funds, minimizing conflicts of interest.

Commission-based models often prioritize the advisor’s benefit over the client’s. While a CFP or CFA may claim to recommend superior regular funds, I’ve reviewed numerous CFP-managed portfolios containing 3-4 infrastructure funds and 2-3 NFOs, resulting in portfolios with around 12 funds that ultimately underperformed.

Notably, one such CFP also appears on the SUMAN TV channel.

It’s wise to ask a few key questions before entrusting your money to an advisor. Check out the recommended questions at the end of this article to ensure you’re making an informed decision.

• Understand Their Fee Structure: Look for advisors who prioritize direct mutual funds and have a transparent fee structure, as this shows they’re not reliant on commission income or selling any Smallcase or PMS promising high income to earn commissions by cross selling.
• Experience and Track Record: Look into their historical performance, especially during market downturns, and ask them how do they select mutual funds. If they check average returns for selecting mutual funds skip the advisors irrespective of qualification.

Always ask questions to your advisor on mutual funds before handling him your money. Earning commissions is not bad unless you make decent profits. Adbisors who are good at financial planning shpuld not be good at mutuak funds

iNVESTT is the first SEBI-registered research firm in Visakhapatnam, dedicated to recommending research-driven direct mutual funds with the goal of outperforming index returns. Our mission is to consistently deliver returns that meet or exceed index performance, never falling short.

5. How Much Do Mutual Fund Advisors Make?

Understanding the Earnings of Advisors and Potential Conflicts of Interest

Mutual fund advisors make money in two ways: commissions or fees. Here’s how they differ:

• • • Commission-Based Advisors: Earn a percentage of the investments made in regular mutual funds. This could range from 0.5% to 2% of the investment which is recurring and is charge every year from your both investment + profit, encouraging them to sell regular funds regardless of performance.

The numbers in RED are commissions paid to advisor if invested in Regular fund with an expected returns of 17% in Direct fund.

• Fee-Based Advisors: Fee-based advisors typically charge a flat fee or a percentage of the assets they manage, with SEBI regulations capping these fees at 2.5% of the investment amount. Without the incentive of commissions, they often recommend direct mutual funds, a choice that generally provides better value for investors.

Always ask your advisor questions about mutual funds before entrusting them with your money. Earning commissions isn’t necessarily a problem—provided you’re also seeing solid returns.