Tuesday, April 11, 2017

Choose your financial adviser wisely


Mr. Deepak is a wealthy person based out of New Delhi. He has been investing in different asset classes for 10 years. In the last 10 years, he had 5 financial advisers including insurance agent, banker, wealth manager, individual financial advisers, and relatives. He has been investing in ULIPs, mutual funds, real estate, and fixed income plans apart from normal FDs and saving bank account.  But now when he needs cash outflow for his requirement, he feels that his money is stuck in every investment.

“Was Mr. Deepak’s approach towards Investment Planning right?”

I may be sounding very conservative in the investment approach but it’s my opinion that one should choose financial adviser first before anything. You have certain financial goals and liabilities to take care of in the future. If your financial adviser doesn’t ask or know about it, then it would be like driving on the highway without knowing your destination. There is a major gap between product adviser and a financial adviser.

Who is product adviser? Product adviser is a person who comes to you with a prefixed mindset with a single product offering to you. He may or may not be interested in your goal. He will be the right candidate to sell the product but does that product full fill your future financial goals, maybe or may not be.

Who is a financial adviser? Financial adviser or you can say financial planning manager is a person who asks three most important questions from you before any product offering, which are:

“Why”: He understands your profile and asks why you need financial planning. With patience, he understands the need for your financial goals. He adds a valuable point of view with the right prospects with you. He makes a profile for you while understanding your goal set.

“When”: His second question comes “when”, to understand your time limit for each financial goal. He designs and draws a plan according to this question. He determines all cash inflows and outflows with a particular time limit. He makes sure that your plan of investment should deliver your desired financial goals in the desired time frame.

"How Much risk”: I maybe at the age of 30 but I am conservative in my approach and I am looking for a limited risk, so my portfolio will be designed accordingly. Equity is a very good tool for investment but it may create volatility in my portfolio. Am I ready for this?  It should be understood by a financial adviser. At above-mentioned age, I am looking for a 12% return for next 20 years then my planning will be different but someone who is looking for 18% return will be having different planning as mine and others risk appetite is different.  A financial adviser should always advise on risk hedging tools like “Insurance” to you. Insurance is not an investment but it is a fantastic tool of hedging the risk if something happens to you in your long term goal planning. 

The differentiation between product adviser and a financial adviser can affect your return in the long term. Knowledge of financial advisers is always the key. He estimates each aspect of your financial goals, risk, and cash outflow requirement before making investments. A financial plan without a certain financial goal is like buying grocery which expires after a specific time and may not fulfill your desired needs in the future. Financial adviser is a relationship that goes for the long term with multi-product advisory. Financial adviser always reviews the portfolio in a specific time frame to evaluate the result after a specific time and helps in the achievement of the desired result.

Plan your financial goals wisely with the help of a financial planning manager who can understand your requirements and can suggest you on different avenues of financial products.

“A need for financial goal is certain but risk planning and assessment of financial goals is also important. Don’t go directionless, plan, implement and execute with a proper financial planning manager”.

(Author is Mr. Rohit Khandelwal; He is a certified Mutual fund and IRDA adviser. He is associated with www.moneymatters.co.in)

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