FinAtoZ Blog

Advantages of working with a Financial Advisor

Advantages of working with a Financial Advisor

Making long-term decisions about money can be difficult and even scary. Many people turn to financial advisors to seek help on their financial decisions. There are many advisors that offer good advice but deciding whether or not they are worth the price, effort and time can be confusing. Using the help of an financial advisor is a smart move as they often have a broader and deeper knowledge of money management than most of us. They can also, help us figure out our savings strategies, investment options and overall retirement plan, which takes a big burden off our heads.

Let us go through the four key benefits of working with a Financial Advisor.

I) Getting Expert Advice: You save money

If you are a “Do It Yourself” person and manage investments on your own, then you have to go through a lot of hassle as you have to track the investments on a regular basis, monitor the markets and watch out for all possible risks. So, if you enjoy doing it then you can continue to do so. But if you find it too much of a work then outsourcing your personal finance management to advisory companies makes a lot of sense. You can then concentrate on your daily schedule without having to worry about the fluctuation of the markets. 

Let us see this further with an ex:- Suppose you earn 1 lakh a month and you make investments on your own. You have to spend at least 2-3 hours a day to work on these investments. This amounts to a total of 156hrs in a year, which is equivalent to nearly your one month pay (156/8 = 19.5 working days). 

So, doing it yourself is also costing you money. And if you decide to hire a financial advisor, the freed-up time can be utilised by you in studies or growing your career while your financial advisor looks after your investments. Hence, you would end up saving a lot of your time as well as money by hiring an financial advisor to manage your investments.

II) Professional review of Goals & Investments: Gives Clarity about your Financial Journey 

A financial advisor will spend the time to understand your needs and aspirations and prepare a financial plan to achieve them. Based on your risk profiling and requirements of goals, proper asset allocation is done. There is a possibility that initially, you might not be comfortable with taking risks in investment, but with a financial advisor, you will gradually get confident to invest in risky investments like equity market. They are typically very experienced in hand-holding you throughout your investment journey.

For example, you might have a 70,000/- monthly surplus with you, but when you are making the investments on your own, you might end up investing only 20k per month in SIP. Such a behaviour is typically shown when one lacks clarity and hence, would hesitate to take an adequate risk.

You may want to view a related video on this topic  How to achieve your Financial Goals using Mutual Funds

III) Proper Asset Allocation: Gives more bang for your buck

During our lifetime we continue to amass various assets. But most of are not even aware of what is the proper asset allocation that one must follow while acquiring assets. Many among us invest most of our funds(close to 70-80%) into Real Estate. Investing in real estate has become popular and is a common investment vehicle as most people assume that the money won’t be lost if invested in the real estate and this eventually messes up the asset allocation.

In one of the case studies, it was shown that in a 20year period of investment, one has the potential to earn additional 30crores, if proper asset allocation is followed.

Further reads:

IV) Continuous Tracking & Re-balancing: Reduces overall risk in the portfolio

Starting your investment journey as per plan is just that, a start. The real benefit of having a financial advisor comes from ongoing reviews, periodic rebalancing of the portfolio and taking corrective actions on the portfolio based on life changes, goals modifications of the performance of funds.

For example, Let's assume someone has 10k to be invested in the market. He or she would be fully prepared to take even 100% risk of the same. Now, suppose it is your annual salary of Rs 20 lakhs that is to be invested, immediately that fear of risk arises and suddenly he or she drops down to losing just 5-10% or less.

Such is the analysis done by our experienced advisors for you. Based on this analysis, they select appropriate funds, and yearly re-balancing is done which results in almost 2% additional returns per annum.

Re-balancing, tracking and fund selection is an ongoing process which our certified financial advisors will assist you with and in the long-term you are bound to gain higher returns.

Further Reads:

Controlling your money is the first step to financial peace. An individual or a family needs to plan and manage their finances by saving and spending monetary resources over time, taking into account various financial risks and future life events. An advisor will not only tell you what “to do” in a given situation, but will also advise you about what “not to do”. Value of financial advice extends far beyond just a focus on investment returns.

blog comments powered by Disqus