Do I really need a personal finance planner?

You do not need a personal finance planner if you have complete control over managing and growing your wealth. But, if that is something you are struggling with, then ‘Yes’ a personal finance planner or advisor can be a boon.

These days, DIY quick fixes are a trending subject. Consider this, you watch a DIY video of a carpenter turning pieces of scrap wood into a dainty chair. It looks simple and all you need are the right tools. You get some recommendations from friends online for a power saw, your brother-in-law lends you his best hammer, and you find some nails in the toolbox and borrow protective gear. All ready to craft a new chair, you begin to work on it, realising that cutting wood to precision even with a power saw can be extremely difficult. In all possibility the recommended tools end up not matching the requirement for this specific job, leaving you with a half-done or unfinished product. Realization strikes! It is better to leave some jobs to the experts.

A similar casual DIY attitude in personal financial management could leave you with a half-baked plan, misfit investments and eroding capital. These are signs you need professional help from an expert. Situations where people must seek a financial advisor’s help are when:

• You have set goals but are unable to chalk out the right financial plan to achieve it
• Your expenses exceed your income in spite of a periodical increase in earnings
• You have built a corpus, but lack the knowledge of where to invest it
• Stuck in a deb-trap where your outstanding loans exceed income
• You struck it rich (inheritance or winning) and are unable to manage this large sum
• You are an NRI working in a foreign land and need to plan ahead for the future

Financial management requires a level of financial awareness, due-diligence in case of complex financial situations and the right behaviour towards handling money. Mere haphazard investments in a random combination of stocks, bonds, mutual funds and commodities cannot be termed as a robust financial plan. Like the DIY project anecdote, we often look for investment recommendations online or from friends and family, we depend on employer coverage for life or health insurance, we depend on traditional tools like FDs for exponential growth in investments and depend on family to bail us out of an emergency. These are pitfalls that lead to poor money management which affect your future financial status.

Unfortunately, one-size cannot fit-all.

Whether you are a newbie joining the workforce with a plan to start saving from day 1 or if you are an affluent individual, no matter what your income, it is not about how much you earn, but rather about how you invest your earning. Only a robust financial plan can ensure your financial goals are achieved. This is precisely where the expertise of a finance planner comes into play. With an understanding of your financial situation, your goals and your relationship with money an advisor can create a sound, tailor-made investment strategy to overcome your unique challenges and meet your long and short-term goals.

Expectations from a financial advisor?

There are a variety of investment planners (or product distributors) in India to choose from. You should look for a financial advisor who:

• Is a SEBI registered fiduciary, transparent in dealings and someone who you can trust with your wealth
• Offers holistic financial advice, focussing on real-life plans and leveraging your income to meet them
• Identifies right asset mix to prudently allocate and diversify your investments across asset classes
• Keeps a keen eye on your portfolio of investments, periodically rebalances it and proactively follows up with insight and advice
• Understands your money habits and behavioural biases
• Is well aware of your risk appetite and tolerance
• Helps you minimize tax consequences

Above all, look for an advisor who shares insights, is willing to impart his financial knowledge to you and does not expect you to blindly follow his lead. Experience plays a vital role in any field of work and more so in money management decisions. No matter how much knowledge you gain about investing the possibility of irrational decision making will always exist based on your personal biases. The job of a financial advisor is to keep your biases in check and save you from any irrational knee-jerk reactions that could dilute your investments and gains.

Choosing the right advisor to journey with you on your route to wealth creation will ensure you and your investments stay the course to achieve the goals you set.