Let
us now have an overview of the
value
that a financial advisor can add in
your life by looking at the roles he/she
plays:
Introducing
you to financial management:
For
many, your financial advisor was probably
the first person who acquainted
you with the basics of finances.
He was the one to make you realize
that there is a pressing need to save
and invest in right asset classes.Your
financial advisor would have also
helped you in identifying your goals/investment
objectives and then provided
the direction to actualize those
goals.
Knowledge
Sharing:
Your
financial advisor is often your one
stop access to all financial and industry
know-how you probably need.
Your advisor educates and guides
you and will keep you abreast with
the new products, industry updates,
etc., which are relevant for you.
Last but not the least, he will give you
the right portfolio advice, which products
to invest in and when, which sectors
to choose, advise on asset
allocation,
and advise on taking the back
seat when needed.
Risk
Management:
Your
advisor was probably the one who
familiarized you with your own risk
appetite and tolerance. Most investors
either underestimate their risk appetite because
of their own aggressive or conservative
nature. However, the risk they should ideally assume must be in line
with their goals, their financial position, family factors like
number of dependents, income stability, and investment horizons. With
a neutral mindset, the advisor attempts to assess your risk profile
and then advise you accordingly.
Encouraging
good money habits:
A
financial advisor plays yet another very important but often
overlooked role and that is of a consistent motivator. He/she can
show us the right path of money management, ideas on how we can spend
less and
save
more, so that we save to our full potential. He is the one who will
constantly push you for inculcating
good
money habits.
Not
just Mutual Funds:
Quite
often, a financial advisor's horizon is not just limited to mutual
funds. He can also be an expert of
other
investment products, including insurance, loans & liabilities,
personal taxation and estate management. In
terms
of investment products, an advisor may have on offer PMS portfolios,
debt products like bonds, ETFs and provide access to products like
NPS, direct equity, etc. An investor should explore other offerings
as well
from
the advisor, he can get solutions to all his needs at one place.
Emotional
hand holding:
Your
financial advisor is like an all weather friend to you. As already
discussed, the most important role played by an advisor is to support
you and enable you take the right decision without any emotional
prejudice. Managing emotions is not as easy as said, and it requires
great amount of conviction, communication and trust on part of the
advisor to not let investor's emotions dictate his financial
decisions. For example, when you are loosing money and fear loosing
more, you may be tempted to take a decision with the intent to cut
losses. An advisor at this moment will attempt to calm you down,
explain reasons for the fall and to not book notional losses. He will
not let you take a decision for your fear or excitement. Various
studies have also shown that investors guided by financial advisors
are more successful, have longer holding periods, have better
understanding of their portfolios and are more satisfied with their
investments. More often than not, emotions is the most critical
element that defines investors' returns or success in investments.
To
conclude, the Value that the advisor adds to the investors' life, or
the advisor's alpha as the industry calls it,
can
never be quantified. It goes beyond delivering superior returns, it
is about basic things like encouraging you to save for the first time
itself. The value lies in the assurance and the trust you place in
your advisor. The list of roles played by the advisor is just a
precursor or a trailer to what a good advisor can contribute to your
life.
As investors, it should be our responsibility too to share
appropriate information and seek intervention of
our
advisors, as and when needed, for our own financial well-being.
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