Role of a Financial Adviser and why it shouldn’t be misunderstood with pushing financial products


In August’ 2012, I had a chance to visit couple of financial planners in the US. I was quite amazed to see that majority of people use the services of a financial adviser, whether a person or an automated service. Whereas, in India, I have often seen people managing their own investments. And more often than not, people make so many mistakes as to not even beat inflation on their investments. I think I cannot compare US with India because the social structures are different. In India, family structure is strong. This adds a bit of complexity and needs to be taken into account when making a financial plan. This makes it even more inevitable to start early and let your personal finance handled by a professional.

Coming to advisory in India, consulting and advice is only limited to one’s health. When it comes to ones finances, everyone thinks that either they can manage it on their own or through free advice from friends and family. And I do not blame the people’s mindset; rather the industry has taken shape that way. Financial planners and advisers have kept on pushing products that were not needed just for the sake of commissions and never thought about fiduciary duties after selling the products. So there seems to be a huge gap in trust and stability when it comes to managing people’s finances.  And amidst that the true value of a professional financial adviser or an investment manager is lost.

To avoid mis-selling or to avoid paying money for financial advice, we invest in what our friends or relatives have invested or we take advice from our uncle or father. When it comes to financial planning and investing, we fail to understand that every individual is different, their needs are different, and their cash flow requirements are different. Your goals are unique and it is extremely important to find the right investment for your needs, a portfolio especially for you. So what you need is a professional unbiased investment manager and what an investment manager need is to establish trust, stability and transparency.

Let’s clear some of the many things that a financial adviser does contrary to what majority of us believes:

  1. Understand your needs and financial goals and help chart long term objectives
  2. Understand your risks and help you develop realistic expectations by educating you about risks and rewards of all investments
  3. Match your goals and aspirations with appropriate financial products depending on your economic profile and financial behavior
  4. Continually monitor your portfolio and help you interpret performance
  5. Regular reviews to make changes in the asset allocation depending on behavioral or situational shifts and to ensure that your strategy continues to provide results

When taking a professional approach to investing, you put a professional’s training, knowledge, expertise and resources to work for you. Few of the benefits of an investment manager (automated or human):

  1. Professional care and advice to bolster your investment results
  2. Best way to use your assets and allocate them optimally. A time regression study over a period of more than 10 years concluded that asset allocation explains more than 90% of variation in a portfolio’s quarterly returns.
  3. An experienced and objective system that hold back your many behavioral biases
  4. Getting important investment news and customized financial awareness correspondences
  5. Helps you with analysis paralysis when it comes to your finances and helps you become decisive

With changing lifestyle and increasing life expectancy, even a mere 1% more of average annual return could do wonder to your wealth and saving time and resources to do what you love peacefully is like icing on the cake!


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