Do You Really Need a Financial Advisor?

Let’s first understand who is a financial advisor. A financial advisor helps us save or invest in our financial goals. Financial advisors can also assist us with tax planning, estate planning or insurance coverage. There are people who help us to put our funds through the best way possible in order to minimize our costs of funds and maximize are gains on investments.

Thus, a financial advisor offers assistance or complete management of — our finances. The financial advisors in this digital era could also be Robo advisors that manage and assist our investments.

But everything comes at a cost. If we know and understand financial markets, even at the basic level should we still go for financial advisors?

The answer is no. The more we put our skin into the game the more we learn. At the start, we might be conservative and put our money into investments that provide decent returns at low risk. But slowly, our risk appetite will increase with more financial investments we do overtime.

Indian financial markets are very transparent concerning the information shared regarding the financial performance of the underlying asset. Like we get annual reports, quarterly reports for the company we want or have invested in. For debt instruments, various charts are available online.

For a mutual fund, which is one of the growing financial vehicles where most of the people have started parking their investments, the information is available all over the internet. There are various graphs shown, return shown over various time periods indicating both past performances as well as how the fund can perform in the future incorporating market volatilities. This information is just a click away, one just has to know what type of mutual fund investment he/she has to go with and the plethora of options gets listed for comparison purpose. Even knowing the type of mutual fund suitable is not difficult, there are various information sites, tutorials and asset management companies available on the internet for beginners to get a good head start with abundant information.

How should one then decide whether he or she should hire a financial advisor? Some following checks would help us to know whether we require a financial advisor or not

• Do we understand the investments we want to make? Like what is a mutual fund or equity shares or bond?
• Do we understand the investment’s broad type category?
• Do we understand how the underlying value changes? For e.g. for mutual funds what drives the Net Asset Value of the fund scheme.
• Do we understand the concept of market volatility?
• Do we understand the difference between our short term and long term goals?
• Do we understand our risk profile?

After seeing these questions one might think of resorting to a professional financial advisor, but let me tell you one thing. All the above questions will get answered instantly if we try investing ourselves or planning for ourselves.

If we are too busy in other schedules of work, we can opt for a financial advisor but as said by the oracle of Omaha, Warren Buffet “If You’re Not Investing You’re Doing it Wrong”. To get the skin in the game is the art behind winning the game is a well-known fact. Also, there is a cost associated with a financial advisor, which is recurring in nature.

Thus, it is advisable to try ourselves for financial investments or financial planning. This is because we will learn markets better, financial instruments better and most importantly it’s we who best understand ourselves, we can make our risk profile. Nevertheless, if we still can’t afford time we can opt for financial advisors, who will invest on behalf of us.