Why everyone needs a Financial Advisor

Many people feel that managing your own money is quite simple, but is it really the case?

Financial planning is not just making the investments but much more than that. Apart from Investments it includes liability management, risk management, goal-based planning, estate planning, tax planning, etc.

Some of the questions we should ask ourselves...

1.   How many of us can confidently say that we have adequate life insurance and health cover? In India...most would be underinsured and worst; not insured at all.

2.      How much and which loan you should be taking? Easy availability of loans, zero interest EMIs etc attracts us more but does it really make sense to go for it...

3.      How do you know if you have selected the right investment product? Actually, you won’t know till you face the adversity; till then, the highest return-giving option looks the best.

4.      Does your family know how to settle any obligations or property claims after your death? While the number of insured in India is just 5%, only 0.5% in the country has a will.

5.   Do you know which Mediclaim policy suits you based on your age, health, and demographics? While taking a policy is easy, getting the right claims is not so easy, even in cashless claims a significant part falls on the insured.

6.   Do you know what will be the tax implications on specific investments? In some cases, tax is deducted on source (TDS) while in some cases tax is applicable only when you withdraw. Which will suit you best will depend on the person’s needs.

7.      Do you know how much money you will need for your retirement after 25 years, or how much your son’s foreign education will cost you after ten years? Most people are under-invested because they have no idea of how much should they invest for their goals. In the rush to generate better returns, people make investing mistakes and can’t achieve simple possible goals.

 

And the Investment Puzzle makes it more complicated...

In India, we have more than 1,500 mutual fund schemes, over 400 portfolio management services (PMS) providers, 200-plus alternative investment funds (AIFs), more than 500 non-convertible debentures (NCDs) and bonds, over 100 fixed deposit options, dozens of govt saving schemes and thousands of other investment products. How does one decide which one to invest in and which ones to avoid?

Besides that, how many of us understand the right asset allocation to have in accordance with our risk profiles, time to the goal, liquidity needs, and return expectations?

To achieve our financial goals, we not only need to decide the right asset class or product category, but also zero in on specific funds, asset management companies, fund managers etc. Remember, deciding based on past performance is not the best solution...as in many cases last year’s best performer can be in the worst performer’s list next year.

 

Behavioral issues need handholding...

Investment is not just choosing the right products but also keeping emotions under control. Let’s say you know it all, but remember wealth management is less of investment management and more of behavioural management. Will you hold your investments for 25 years? We keep on hearing stories about how someone bought ₹10,000 of stock ‘X’, it would be worth ₹100 crore now, but how many of us have really held on for so long?

Investing is not as simple as it looks.

 

Managing risks requires expertise...

Risk management is a crucial element of financial planning that most investors tend to ignore. Having adequate life insurance cover can ensure that your family’s needs and goals are taken care of after you are not around. An adequate health cover can ensure that you don’t have to take a significant hit on your savings and investments in case of a medical emergency and ensure that it covers even after accounting for medical inflation. Similarly, how much diversification is optimum for your investment portfolio so that it aligns with your risk tolerance?

Understanding tax implications on your investments is also very important where an advisor can guide you based on your customized requirements.

So, you often need a friend, philosopher, and guide to help you through the journey. Here is where a good financial advisor can help you to sail your financial journey smoothly. His expertise and guidance can be invaluable in helping you make informed and strategic financial decisions. 

And finally, remember that even the best Archer Arjun needed the advise of Lord Krishna and Lord Ram asked for advise from Jamvanta and Vibhishana.