Today your financial future begins with financial planning and typically financial planning begins by contacting your financial advisor. That brings us to a basic question, are financial advisors necessary? Should I use a financial advisor or do it myself. Are there genuine benefits of a financial advisor? If you are looking at specialist help, which you must, then it makes a lot of sense to seek expert support from a financial advisor. Let us understand the importance of a financial advisor in your financial planning process through an iterative process of 7 arguments that people normally make against the need for financial advisors..
1. Financial planning is not rocket science
That is what most people believe. After financial planning is all about financial products and financial products are just about risk and returns. That is nothing as complex as atoms and molecules and hence people should be able to manage the process themselves. Most people who think so are missing an important point. Financial planning is not just about the complexity of the subject but more about the discipline and the process involved. Financial planning is about mountains of data, various possibilities and sticking to your long term plan with tenacity, rigor and discipline. That is something that is best left to the convincing powers of your financial advisor. Try as you may, you will never be able to drive yourself to the financial planning discipline if you try to do it on your own.
2. There is enough wisdom floating around on the net and on TV
Yes, there are a lot of programs on TV and guidance sites on the net that can help you with tips on financial planning. Believe me, all that is not enough. These are largely generalized tips for casual reading. What you require is a customized solution from your financial advisor which is exactly suited to your unique requirements. After all, each of us has unique needs and the solutions need to be fully customised. That is something a professional financial advisor is best equipped to do.
3. I know that I need to get more into debt as I grow older
We all know that the basic equation applicable for your equity/debt mix is (100-age). That means if your age is 40, then you need to allocate 60% to equities and if your age is 60 then you need to allocate only 40% to equities. However, this is just a thumb rule and there is no scientific basis for this. You debt / equity mix is contingent on a variety of factors including the potential returns on equity and debt, your risk tolerance, your wealth creation targets etc. Just applying an off-the-shelf formula is not going to work for you. Your debt/equity mix has to be structured based on your unique situations and market realities. This is again a very rigorous and lateral task that a professional advisor is best equipped to do.
4. Fees payable to the advisor is an additional cost
Yes there are fees payable to a financial advisor, but look at in two ways. Firstly, when you consult any expert; be it a doctor, engineer or a lawyer you do pay professional fees. Then why grudge this payment when it comes to a financial advisor. You have to pay for expertise to get the best solutions in the market. Secondly, the advantage of the financial advisor is that you are the centrepiece of the solution not the principal who is originating the products. That puts you at an advantage. At the end of the day, we are talking about a long time frame and a life time of savings towards your life goals. What you will eventually pay to your advisor is just a fraction of the quantum of benefits that you will get.
5. My auditor tells me which policies to buy and which mutual funds to buy..
That is best avoided. If you are an individual tax-filer or a businessman then an auditor is best equipped to file your tax returns, audit your accounts, manage your direct and indirect tax payments, handle refunds etc. That is the specialization of your auditor. Remember, financial advisory is a specialized job and for getting the right answer to your questions you need to approach the right person. Only a professional financial advisor will be equipped to handle your actual long term goals and create the plan to work towards these goals.
6. I do not have the time for such a long process
Frankly, there is nothing more important than the financial security of your family and planning for your long term financial future. The process is long, it is rigorous and calls for discipline. But that is the only way you are going to get anywhere close to your long term financial goals. Achieving your goals is not just about product knowledge and risk taking. It is a lot more about discipline and rigor. That is what your financial advisor brings to the table. You really will have to go through the elaborate process of financial planning if you want to give yourself and your family and secure and prosperous future.
7. I know my financial needs and my financial health the best
Yes you do but it is the financial advisor who helps you to articulate these goals into tangible monetary targets. You surely know your financial needs but you may not know how the power of compounding can help you achieve that. Above all, when you look at your own finances and goals, your individual bias and preferences may come in. The financial advisor is an independent person and takes an objective view of the situation.
The bottom-line is not to think too exert yourself too much. Get a financial advisor; it is worth it!