When do you need a financial planner?

Highlights

Do you have a family physician and if so, could you recollect your last visit? The interaction would be similar to talking to one of your family members.

Having a personal financial advisor helps you to take stock of your financial health at convenience. Moreover, the advisor would know your preferences and priorities, thus suggesting you the best suited options
Do you have a family physician and if so, could you recollect your last visit? The interaction would be similar to talking to one of your family members. The doctor would start with asking on how things are going at your end, the profession/ job/ business, the kids/parents, etc. and then would be inquiring on why you’ve visited him. And as you explain him of your ailment; he not only diagnoses the ailment but lists out a prescription considering your allergies and history.

This is exactly what a financial advisor could do to you. Having a personal advisor also helps you to take stock of your financial health at convenience. Moreover, he/she would know your preferences and priorities thus suggesting you the best suited options.

Most individuals have pre-conceived notions on why and when to seek help from a professional financial advisor. They consider themselves as small in terms of the quantum of investment and hence deem services of an advisor as unnecessary. Also most believe that only the rich and ‘uber-wealthy’ require assistance of a financial advisor, which is simply wrong. However, the professional advisors see no magic number or asset-size that requires an investor to seek advice. Most often, it would be an event like tax notice or an unplanned access to large sum of money, etc. the investors rush for an advice.

The critical factor in opting for a professional help shouldn’t involve what the current status/sums of investment but the larger life goals. For instance, it’s easy to comprehend that a comfortable retirement comes at a higher cost and that couldn’t be exactly dealt with the current knowledge and expertise of an individual. A goal of such proportion not only need external expertise but greater amounts of time to plan, guide, monitor and review; which sure is beyond the ordinary set of skills. This is exactly where and when one needs to pursue a qualified and experienced financial planner/advisor.

The other important benefit is an ability of a qualified third person’s perspective of looking at your finances. This is vital because most of the money and financial decisions are emotional. This could hence veil the rationality behind an investment decision. Employing a professional, thus would aid in deducting the noise out of the sound.

Unfortunately, for Indians, the default setting is distrust. Of course, our past experiences don’t help the cause. Our psyche is filled with scams and cheats by various financial institutions, agents and chits; so each time we talk of financial advice, these instances flare up from the memory. In an established client-advisor relationship, the advisor takes liberty of even proactively recommend changes that help better the overall financial wellbeing.

A new study in the US found that 44 per cent of the ‘do-it-myself’ retirement investors not currently working with an advisor wanted to work with one in future. A whopping 70 per cent of the surveyed investors said they extremely or somewhat valued the inputs on to determine how much was needed to save in order to reach a retirement goal, to figure out how to convert savings into income during retirement and to evaluate overall financial wellness. This survey was conducted in the first half of this year and the markets turned volatile since August. The trend is that investors want advice even more during volatile markets.

The need for a financial planner could be arrived by judging oneself. If one has a fair knowledge on investments, enjoy reading investments, doing research, have expertise in investments and more decisively has the time to monitor, evaluate and make periodic changes to the portfolio, then the role of advisor is void. In all the other cases, it’s an emphatic yes!

(The author is a practising financial planner and could be reached at k.naresh.k@gmail.com)

K Naresh Kumar
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