The consensus says that only the wealthiest have the money to hire a financial advisor. Actually, a financial adviser can assist in accelerating wealth creation and safeguard the wealth that is created. Everyone, from every level of wealth, benefits by having a financial advisor. What is the ultimate goal of wealth? Does it not fund your dreams and goals and make you feel content? Who wouldn’t love the safety of money, the life of luxury, and be happy?
“But you’re wondering why I need advice when I could complete the task by myself? What’s the rationale behind why I should hire someone to handle this? “This is a common answer because most people are familiar with the following situations:
- A financial advisor is not available, in accordance with an RBI survey, which found that 77 % of Indians don’t have plans for saving or investing money for retirement.
- A free consultation from a trusted acquaintance. It doesn’t matter if that person is a certified professional or not.
- They believe that they can obtain the services of a free advisor, for example, an agent or a banker. This is the way that a lot of people are ripped off by insurance policies, or costly Mutual Funds/PMS that leak brokerages and commissions.
Can it be referred to as a Financial Advisor?
Based on the person you are asking regarding, your answer could differ from a local expert who hands advice on stocks and also advice towards Warren Buffett. Most people think that one of these individuals is certified.
- Certified Accountants are professionals who handle money. Most of the practicing CAs may not be the best financial advisors because the area of accounting and taxation is extremely specialized and different from the requirements to manage wealth. Most people believe that the recommendations Chartered Accountants advise are geared towards tax savings. This is great, but not the most efficient among other alternatives.
- CFPs are Certified Financial Planners who are certified in financial planning. CFPs are a great option to fill an advisory function like RIAs.
- SEBI-registered Investment advisors – this is known as the Gold Standard, as it guarantees the experience of the advisor and ensures that the advisor won’t suffer any losses that are not obvious from your hard-earned money.
What are the reasons we need the services of a Financial Advisor?
So, what is the reason that we need the services of a Financial or Investment Advisor? The same is the reason why we look for any other professional who is specialized, for example, an attorney, doctor, or plumber. Expertise in the field is essential.
It is essential to think about the hiring of a financial advisor
- As you might not have a plan and sticking to a financial plan is more challenging than establishing one.
- You could earn more money with your investment.
- Critical decisions require a large amount of knowledge and an educated mind.
- Because you may not have the time or may not be able to locate an alternative solution
- It allows you to immediately take action.
1. There is a chance that you don’t have a plan, and sticking to a financial plan is a lot more difficult than setting one.
Financial advisors can help you develop plans and keep them on the right track. (S)He assists you through the maze of market instruments, financial products, and markets. He is then able to adapt it to your particular situation. The context can be different for every person. Let’s consider a few examples:
- Young: A person who is younger (less than 30 years old) may not realize the importance of starting in the early years. Inability to make the most of compounding could delay them for several years, ranging from 10 years or even more, which can make it hard to meet the goals they have set for themselves in the future.
- The middle-aged population might be burdened with huge monthly EMIs. You may be worried about the cost of paying for children’s school and college years, while struggling to earn enough money to afford living expenses.
- Nearing Retirement: Someone who is nearing retirement may be concerned about how they will live comfortably once they’ve stopped working. It could be because of the size of their savings account or the increasing cost of living as a result of an increased life expectancy in the absence of a pension plan in place.
- The aspirant to be wealthy, or who is aspiring to be wealthy, may be looking for ways to make it happen faster while meeting different financial goals. She may be able to examine ideas that are generally not suitable for those “not rich enough”.
- Rich: Someone who is wealthy could be interested in finding out how to safeguard their money and make investments tax-efficient, and make the most of opportunities to grow.
A financial advisor designs an individualized plan in line with the context.
2. You will earn more money using your money
A professional advisor will make sure that your earnings go into the best investment opportunities and are tax-efficient. Most people don’t know how capital gains that are long-term and short-term capital gains affect their tax consequences. They may be liable for significant tax on dividends. But it’s not only about reducing taxes. It’s about increasing the tax return post-tax, while not needing to sacrifice the risk associated with it.
One of the main benefits is the possibility of reducing the risk for your portfolio with the process of rebalancing. Although it may seem easy but an advisor can help people make the best decision about when to dispose of an investment that is performing well or get rid of an investment with a low yield. An advisor in finance who knows about the pitfalls and dangers of investing could prove helpful.
3. Since crucial decisions require a great deal of knowledge and a lucid mind.
We must admit that. Making decisions can be stressful. Making financial decisions is more challenging. This is why many financial vessels end up in a turbulent ocean.
If you believe you already have the expertise and abilities, then great. However, this is dependent on your investment level and the risk you’re willing to accept in relation to your income and wealth.
It’s possible to make use of an over-the-counter medication for headaches; however, would you perform surgery on yourself? There’s a reason doctors consult with another doctor or another perspective on their personal health. We’re not always aware of our blind spots.
An outsider (ie, an advisor to your finances) who can look at your situation objectively and with a relaxed mind can provide new ideas about your situation. Therefore, the need for an expert advisor competent to evaluate your situation and make choices each day with a calm and lucid mind is helpful.
4. You may not have time to do it, or you might have a different method of
Today, Time is the most useful resource. Once time has passed, then the time has passed for good. The demands of modern-day life constantly put pressure on time. It’s possible that you do not have the time to finish the financial plan on your own as you’re engaged in your work.
It is possible to learn new techniques, the main issue is: will you be able to be proficient in flying your own personal plane, or even build your own house? In addition, is your time better spent with friends or family,y, or doing something that pleases your soul?
If you’re earning money, you should do things that can increase the amount you earn. When you’ve retired, you might decide to use your time to engage in things you’ve always wanted ted do but never had enough time for.
5. Because it lets you immediately take action
In our busy lives, we are often unable to take action in time. If you are just starting, the likelihood is that they will miss the chance to begin early and make regular investments and fail to reap the amazing benefits of compounding.
A person may be left out in regards to shifting the allocation of investment at the moment. Anyone who cuts their exposure to high equity during the peak of the market is less impacted by market corrections.
This is the reason the value of advice doesn’t serve as an indicator of the time. The benefits aren’t as seamless as gains from investments. Even though an advisor is present to assist you throughout the year, the advantages are maximized when critical decisions are taken. The accumulation of security or wealth, which results from prompt intervention or changing the asset allocation of your mutual fund, can be huge. For example, you may be advised to stay active during times of uncertainty or leave during times when markets are on the rise.
Conclusion
A reliable Financial Advisor knows your situation thoroughly. The person you choose to consult with should not be a fraudulent source of incentives or payments, since it could impact how they provide recommendations.
There’s a chance you’ll lose money from the “industry” because the advice may not be sincere. If you’re operating under an ‘everything’s a free’ model that you’re the product. There’s no free lunch.
A modest cost to receive the truthful advice on what’s best for YOU instead of the adviser is the most profitable decision you’ll ever make.
