In today’s growing financial ecosystem, more and more people are looking to invest smartly. Whether it’s tracking the Exide share price or building a diverse stock portfolio, investors seek reliable guidance. But in the rush to make money in the market, many fall into a dangerous trap—taking advice from unverified sources.

This is where the importance of a SEBI registered advisory comes in. SEBI (Securities and Exchange Board of India) regulates who can officially offer investment advice. Still, several investors unknowingly trust unregistered advisors and suffer financial losses.

There are many common mistakes people make while choosing advisors. Let’s look at some of the most frequent pitfalls and how you can avoid them.

1. Ignoring the Importance of SEBI Registration

One of the biggest mistakes is not verifying whether the advisor is registered with SEBI. A SEBI Registered Advisory firm or individual is obligated to follow ethical guidelines and compliance standards. On the other hand, non-registered advisors operate in a grey area. They are not monitored, and if something goes wrong, you have no legal protection or grievance redressal mechanism.

How to avoid this: Always ask for the SEBI registration number and cross-check it on SEBI’s official website. If they can’t provide one, it’s a red flag.

2. Falling for Guaranteed Returns

Another common pitfall is believing in promises of “guaranteed” or “assured” returns. Whether it’s on stocks or any other investment, no advisor, registered or not, can guarantee profits in the stock market. If someone is offering fixed returns from equity investments, chances are it’s a scam.

Genuine advisors will talk about risk-adjusted returns, not guaranteed profits. Be cautious if someone makes it sound “too good to be true.”

3. Following Advice Without Documentation

Non-registered advisors often give verbal tips or informal messages via Telegram or WhatsApp. There’s no documentation or track record of what they suggested. This lack of accountability can lead to serious confusion and financial losses.

What to do instead: A SEBI Registered Advisory provides written recommendations with clear entry, exit, and stop-loss levels, ensuring transparency.

4. Neglecting Fee Structure Transparency

Many non-registered advisors lure investors by offering “free” advice initially, only to ask for money later. Some may even charge based on profits, which is strictly prohibited under SEBI norms.

Best Practice: Understand the fee structure upfront. SEBI-registered advisors must declare their fee model in advance, whether it’s a flat fee, subscription, or performance-based (within SEBI rules).

5. Lack of Client Testimonials or Verifiable Experience

You may come across people who claim to have helped hundreds of investors grow their money. However, without any valid testimonials, reviews, or proof of past performance, you could be trusting someone with no real experience.

What to check: Look for verified client feedback, case studies, or portfolio performance over time. SEBI-registered firms often maintain a track record for compliance audits.

6. Emotional Decision-Making Based on Fear or Greed

Unregistered advisors often play on emotions. They might warn of missing the “next big opportunity” or use fear tactics to push you into investing. Such pressure tactics can cause impulsive decisions.

Smart move: A regulated advisor helps you create a rational, long-term strategy based on your financial goals and risk tolerance.

7. No Exit Strategy Provided

Many unregulated advisors tell you when to buy, but rarely guide you on when to sell. This leaves investors stuck during market downturns with no clear plan to exit.

Right approach: A certified advisory service offers a complete plan—entry, holding, and exit—helping you maximize returns while minimizing risks.

8. Misuse of Client Data

Unregistered advisors may misuse your personal or financial data. Without regulation, there’s no guarantee of data privacy or ethical conduct.

Precaution: Always work with an advisory firm that adheres to SEBI’s data protection guidelines and has a privacy policy in place.

9. No Grievance Redressal Mechanism

If things go wrong with a non-registered advisor, there’s often nowhere to turn. SEBI-registered firms, however, are accountable to SEBI and are required to have a redressal mechanism.

Your safety net: If you face an issue with a SEBI-registered advisor, you can approach SEBI’s SCORES platform to file a complaint.

Conclusion

In the world of investments, trust is crucial—but it must be earned and regulated. Dealing with non-registered advisors can cost you more than just money—it can damage your financial future. Always choose an advisor who offers transparent, ethical, and professional financial guidance.