Trust your doctor, check your broker: The overlooked risk in financial advice

livemint.com:

Read this | Where are India’s missing investment advisers? In a hospital, you trust that doctors are professionally qualified and experienced enough to prescribe medications or perform surgeries. Similarly, in legal matters, you know that your lawyer holds at least a Graduate degree with an LLB, the minimum qualification for practicing law. However, when it comes to financial advice, you often overlook the qualifications or certifications of the advisors you rely on.

Rarely do you inquire about their regulatory registrations. You tend to assume that if someone is associated with a reputable bank or brokerage house, they must be certified. If a person writes popular blogs, has a significant follower base, or appears on television, you believe they must be verified professionals.

This trust extends to social media, where you act on general recommendations without questioning the source. You might find yourself willing to take advice from anyone promising high returns, especially if it's offered at "low" or "no cost." Even if not for high returns, the allure of free advice can be irresistible. Accept that cost is a major factor deterring you from consulting registered advisors.

The second factor is the free flow of information, which you often mistake for knowledge. New-age platforms exploit these factors by providing free information and investment portals. They engage you, gradually shifting your mindset towards borrowing, futures and options (F&O) trading, and stock trading, where they make money irrespective of your gains or losses.