Importance of an advisor in investment planning

How many of you have an annual budget for musical concert tickets or have started an SIP for it? Why not do it, if the concert experience is an important part of your life experiences?

Maybe you’re unsure how much is needed or whether it is even a goal.

My kids just completed their school examinations that lasted three weeks. What do exams and investing have in common? An advisor, for one.

For my children, I am their exam schedule advisor. I help them make a study schedule for their exams and we begin a month beforehand. Of course, the plan keeps getting altered, because, anyone with teenagers knows that life is very dynamic, and there is no such thing as planning to perfection. We adjust as we go along.

Closer to the exam dates the study plan is further sharpened depending on the status of how prepared they are for each subject. The subjects that are highly theoretical do not need too much study time as compared to the application-based subjects where more time spent practising helps bring clarity in the concepts.

I have two boys. This preset schedule also helps to reign in their restless behaviour. Boys cannot sit in one place and study for too long, at least not mine. In the schedule we draw up together, there are brief bursts of study time, interspersed with play time or screen time.

Thanks to the schedule there is also no late-night studying involved and they don’t miss out on recuperation and sleep.

In other words, it helps them maintain a good balance in everyday life, rather than being overburdened, they are well prepared.

The role of an investment advisor

When it comes to money decisions and more specifically, investments, for many of us there is a need to have an advisor too.

Unless your full-time job is investing or capital market-related research, it’s highly unlikely that you will be able to sort through individual shares or even managed fund portfolios to determine the best quality and best fit for your goals.

Even trying to articulate your financial goals without any help from an advisor, is a tough ask. For those who don’t think goals are important, think again. When we set the study schedule there was a broad goal in mind. The goal wasn’t to top the class but to work to the potential for each subject.

When you want to achieve an outcome, setting a goal and writing it down, increases the chances of achieving that outcome.

Getting an advisor to help with identifying measurable goals and then setting an investment plan in accordance with that, will not only help you tap into the most suitable investments but also give you the time needed to focus on your source of active income. Planning and managing investments is a time-consuming activity and the more time and mind space to give to it, the more is taken away from your other source of income, your work. Plus, life is dynamic, right? Goals and jobs keep changing. A trusted advisor can handhold you through these changes in life to ensure that your money keeps working hard.

Having an advisor means they will focus on bettering your passive income,

While you focus on your life, work and profession.

We also overestimate our ability to take risks. At the time of making a transaction, we reason out risk with the estimated return and don’t think about the actual occurrence of risk. But in capital markets, the risk of correction often shows up in real form. We haven’t witnessed any prolonged correction in our domestic equity markets in roughly 7-8 years and hence, the pain of it is forgotten. Nevertheless, the risk is real. When it does happen, your ability to remain calm and composed will be challenged. An advisor can help you through the ordeal in a rational and objective manner, which will help to make the right decisions on any actions that you need to take.

Along with these two very important roles, an advisor doubles up as your accountability partner, keeping your investment journey in check. New products hit the market all the time, and there is a temptation to jump in and buy the next trending investment offer, NFO or IPO or NCD. However, these may not be the best solutions to your personal finances. An advisor can refine this selection and align it with your existing investments to ensure that your portfolio remains unique to your needs.

Plus, there are other aspects like tax efficiency, costs and exit strategies, which is also something a thorough financial advisor can help you with.

Pay to be free

The biggest issue in our minds is, why should we pay for this advice when it’s possible to do it ourselves? It’s a myth that you can do the job as efficiently as a good financial advisor. Yes, technically you can open an online account and start investing on your own.

What’s harder to do is filter through the hundreds of options online to zero into those one or two products that you need and fit your risk-return profile. It’s also hard to manage emotions in times of crisis or euphoria. You don’t want to buy too much in overvalued markets or sell too soon when you get anxious during a correction. Portfolio reviews, monitoring, filtering through new ideas, changing goal landscape, taxes and so on are all things that your financial advisor can help you with.

It's a lot of work and they will not do it for free. Paying a reasonable amount as an annual fee or a per-hour charge or whatever their cost structure is, will only ensure that their remuneration is aligned with the success of your investment strategies. Plus, now you have more time to focus on other things like your job and vacation time.

Advice from an experienced professional is not just about where to invest, it’s about setting the right balance between life and money.