Before we understand the importance of financial
advisor, answer this one simple question.
Did you take the help of a CA or a tax consultant
to file your ITR returns this year? While it can be done for free on the
income tax department, we still consult our tax consultant so that we don`t go
wrong anywhere.
However, when it comes to managing money, most
people do not want to take any help from financial planners or advisors. There
are many reasons for this attitude. Some think it is a waste of money, while
others believe that they can handle their money.
Financial advisors can provide immense value to any
individual’s portfolio.
Here’s why you need a financial advisor:
Assess your financial health:
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 expenditures. He may identify
investments that are not giving optimal returns and accordingly suggest you the
right way forward.
Teach you the basics of investing:
There are many resources on Google through which
you can learn the basics of investing and personal finance. However, there is a
high probability that you get lost in this maze. Some articles will suggest
plan A, while others will tell you to follow plan B. This can increase the
confusion. And as a result, you may postpone starting your investment at a
later date.
When you have a financial advisor, he or she will
make sure that you understand the basics of investing. The world of finance is
vast. Hence, it is always better to know and understand the parts that are
important to you.
Choosing the right products to invest and aligning
your investments with your goals
Even if you know the basics of investing, choosing
the right products to invest may be uphill for many. It is because there are
different types of products in a particular category. Also, the companies keep
on coming up with products, some of which are too complicated to understand.
A financial advisor will suggest the right
financial products for you and ignore the noise. Financial advisors regularly
meet the investment teams of the financial products to understand their
investment rationale. For example, in case of mutual funds, financial advisors
use a lot of ratios and parameters that help them to collate the list of top
funds under the different categories. In addition, they regularly compare the
various financial products with its peers to suggest you the right product.
Selecting the investment product will not mean much
if it is not aligned with your financial goals. Not just your financial goals,
the investment product should also go with your risk-taking capacity and time
horizon. E.g., the best small-cap fund may not be the right choice if your
investment horizon is just three years.
Help you to stay focused on your goals
While we may like to believe that personal finance
and investing is all about numbers and selecting the product that has given the
highest returns in the recent past, it is mostly about habits. It has more to
do with behaviour and discipline than returns. In this journey, many investors
tend to make avoidable mistakes.
Investors are likely to be carried away by
discussions with their colleagues and friends. They become tempted to follow
the footsteps of their friends, even without knowing if that will be the right
approach for them or not.
In this scenario, the financial advisor will
handhold you and suggest you the right steps and make you stay on the course to
reach your financial goals. Also, financial advisors carry out portfolio
review at regular intervals to make sure that you are on the right track to
achieve your financial goals.
These were the four main reasons why having a
financial advisor is the best that you can do for your financial health.
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