If a person falls ill, he won’t risk his life experimenting with ways to cure himself instead ! He’ll consult a doctor, for he knows what’s best for the patient.
But when it comes to Financial Advisory, it’s not so….
Most people shy away from taking help. There can be a plethora of things occupying one’s mind for the same:
- They might think it is a waste of money.
- They may think that they know best how to manage their finances.
- They are reluctant to confide in a third person about financial matters.
- Why to seek expert financial advice when information is available
But it’s very important to understand that a financial advisor’s role is irreplaceable.
Most people are satisfied if they earn a good salary and live within their means. They are happy if they do not have unmanageable debt. They feel they do not need to waste time and money on a financial advisor.
But what if expert advice helped them to manage their finances better? Would that be worth paying for?
Most people make do with what they have. They stumble along and somehow meet goals that may not be clearly defined. Sometimes, they may not even meet these goals.
Yet, it makes sense to plan and budget for the different stages of life. You need to make sure that you are going in the right direction.
Advantages of a Financial Advisor
An advisor examines an individual’s financial situation and health. He may pinpoint weak points that need strengthening. For example, the advisor may alert you about wasteful expenditure. He may identify investments that are not giving optimal returns.
With the help of the advisor, you can chart out your financial goals–even the improbable and ambitious ones. The advisor can then help you create a plan to achieve these targets. He may suggest that you split your goals into short-term, medium-term, and long-term goals. This allows for better financial management.
The advisor can recommend products to help you reach your goals faster. In this, the advisor would assess your risk profile, personality, and financial responsibilities. He would also explain the product features and suggest how to make the investments.
Of late, behavioural psychology has become an important part of investor profiling. So, more financial advisors are factoring this in while engaging with clients. Human emotions vary with circumstances and situations. People act irrationally when they are in panic mode. Reports suggest that investors panicked during the recent demonetisation. They pulled out of the stock markets (even taking losses) because they felt the economy was on a downswing. There are also people who become attached to an investment. They may refuse to part with it even when it is not performing. A financial advisor is an unbiased third party. He can offer the best advice in such cases.
A financial advisor also has the mandate to monitor a client’s investments. Most people may not have the time for monitoring their investments after they are made. The advisor can suggest changes in your portfolio. He may even recommend when to exit or enter a particular asset class. He may foresee if you need to change or realign a particular goal.
The Bottom Line
Managing your personal finances is not rocket science. People have been doing it for eons with success. But it is all a matter of trial and experience. Choosing the right financial advisor is crucial to the success of any financial plan. It is important to shop around for the right advisor. Look for someone who puts your interests first.
A financial advisor can advise; it is eventually your decision to follow the given advice or not; after all, it is about your money!
Inputs from Firstpost