The Importance of a Financial Advisor

Choosing the right financial advisor is crucial to the success of any financial plan.

Partnered April 20, 2017 10:13:37 IST
The Importance of a Financial Advisor

If a person falls ill for a day, they usually head to a chemist and buy an over-the-counter medicine. This medicine in most cases does the trick. What if the problem persists for long? They should then visit a doctor.

This is because people realise that doctors know best when it comes to health.

It is the same with legal matters. Lawyers are the experts. There are no second thoughts when engaging their services.

Similarly, the Income Tax Department allows the filing of tax returns on its website for free. There are instructions given to how to go about it as well. Still, many people take the help of chartered accountants and tax advisors. They know that these professionals are experts when it comes to tax issues. They feel it is better to get an expert help than risk making a mistake.

But when it comes to the management of finances, most people shy away from taking help. There can be a plethora of things occupying one’s mind for the same:

  • They might think it is a waste of money.
  • They may think that they know best how to manage their finances.
  • They are reluctant to confide in a third person about financial matters.

Why should you seek expert financial advice

The Importance of a Financial Advisor


Most people are satisfied if they earn a good salary and live within their means. They are happy if they do not have unmanageable debt. They feel they do not need to waste time and money on a financial advisor.

But what if expert advice helped them to manage their finances better? Would that be worth paying for?

Most people make do with what they have. They stumble along and somehow meet goals that may not be clearly defined. Sometimes, they may not even meet these goals.

Yet, it makes sense to plan and budget for the different stages of life. You need to make sure that you are going in the right direction.

The Advantages of a Financial Advisor

  1. 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 expenditure. He may identify investments that are not giving optimal returns.
  2. With the help of the advisor, you can chart out your financial goals–even the improbable and ambitious ones. The advisor can then help you create a plan to achieve these targets. He may suggest that you split your goals into short-term, medium-term, and long-term goals. This allows for better financial management.
  3. The advisor can recommend products to help you reach your goals faster. In this, the advisor would assess your risk profile, personality, and financial responsibilities. He would also explain the product features and suggest how to make the investments.

Of late, behavioural psychology has become an important part of investor profiling. So, more financial advisors are factoring this in while engaging with clients. Human emotions vary with circumstances and situations. People act irrationally when they are in panic mode. Reports suggest that investors panicked during the recent demonetisation. They pulled out of the stock markets (even taking losses) because they felt the economy was on a downswing. There are also people who become attached to an investment. They may refuse to part with it even when it is not performing. A financial advisor is an unbiased third party. He can offer the best advice in such cases.

  1. A financial advisor also has the mandate to monitor a client’s investments. Most people may not have the time for monitoring their investments after they are made. The advisor can suggest changes in your portfolio. He may even recommend when to exit or enter a particular asset class. He may foresee if you need to change or realign a particular goal.

The Bottom Line

Managing your personal finances is not rocket science. People have been doing it for eons with success. But it is all a matter of trial and experience. Choosing the right financial advisor is crucial to the success of any financial plan. It is important to shop around for the right advisor. Look for someone who puts your interests first.  A financial advisor can advise; it is eventually your decision to follow the given advice or not; after all, it is about your money!

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

This is a partnered post.

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