Home >Money >Calculators >When it’s time to call the professionals

If your asset allocation consists only of fixed deposits and insurance policies, you probably don’t know that short-term income funds, which are largely accrual based fixed income mutual funds, on an average gave up to 11% returns in the past one year. Some long-term income funds, in fact, were up 12-13% in the last one year. At the same time, equity assets have had a great run—the average returns from 40 large-cap equity funds has been to the tune of 40% and from 40 mid-cap funds an astonishing 90% during the same period. Knowing this, if you now feel that you missed out, rather than brooding about it, get pro-active.

Recently, Nisreen Mamaji, founder of Mumbai-based Moneyworks Financial Advisors, was pleasantly surprised at being contacted by a prospective investor who got her details through Khyateey Dutt, founder of financial planning company Plantrich Consultancy Inc., also based in Mumbai, has had similar experiences of late, with people getting her contact details through directory search service, JustDial.

This shows that people are seeking professional help for money management. But this is not just so you can catch the high returns; it’s more a comprehensive financial planning exercise that savers are seeking. You may think you don’t need help, but before taking that call, get a better understanding of what all your planner can help you with.

Education and awareness

It’s difficult to start on something unless you understand what you are doing. Mamaji said her job as a financial adviser starts with educating clients. “The kind of people I meet have the desire to invest but very little knowledge. Empowering and educating them about financial products, banking and insurance is almost always the first thing I do," she said.

A good planner or adviser will have the patience to take you through the meaning and objective behind financial planning. Once you have more information and knowledge, you are in a better position to decide how to proceed.

“I tell people right at the beginning that my job is not to sell products but to make a difference to their lives through financial planning," said Deepali Sen, a certified financial planner and founder of Srujan Financial Advisers LLP.

You have to trust your adviser with even the smallest money details; the amount of cash you keep at home every month, your credit card outstanding, your investment in gold and jewellery, how much you spend on eating out, the celebration planned for your 35th birthday, and so on and so forth. Hence, it is important that your adviser spends time to explain various financial goals, securities and assets that you are likely to get involved in. “In the first meeting, we insist that the whole family be present and not just one person. The idea is to understand their expense patterns and past financial life, so that we know how to approach the future," said Dutt.

Goal-setting sounds boring but it is critical. Mamaji explained that the first few meetings are often about considering a person’s financial objectives, comfort and risk tolerance—what do you want to achieve and by when. Only after these questions are answered comes “how".

Goals can be simple—like planning your spouse’s 40th birthday bash—or more complex—like your child’s higher education expense coming up eight years later.

Cleaning up

You may think that you have at least some of the goals covered. But owning 10 insurance policies, three fixed deposits, some gold and an apartment (in which you live and are repaying the loan on) may not quite cut it. One of the things that planners do early in the relationship is a thorough clean-up of existing financial holdings. It’s not just unsuitable securities, but also details such as multiple bank accounts, adding your spouse as a joint holder and naming your children as nominees, which need to be streamlined.

“It’s almost like cleaning your cupboard, re-arranging things and putting them in the right places," said Mamaji. And, it also means throwing out what you don’t need.

Financial goals can be varied so one-size-fits-all type of products, such as fixed deposit or real estate, can’t be the answer to all your objectives. “After signing up a client, the next few months are spent in bridging the gap between what they ought to do and what they have been doing so far," said Sen.

Dutt added, “It’s not just about investments made but also things such as pending Employee Provident Fund (EPF) transfers, misplaced or lost investment documents, overindulgence in fixed deposits and savings bank balances, which need to be addressed."

A fresh start

After all the prodding and learning and cleaning comes the most crucial part of the exercise—discussing investments. Your adviser will have some a framework to help you judge your risk tolerance and identify your financial objectives. Once that’s done, a road map of how investments need to be structured is drawn up. This is the road map you need to stick to without diverting your attention to other more adventurous routes.

“I try to create an entire asset management experience for my clients; after considering a person’s job, income and age profile, among other things, I share a lot of information on returns and expectations from particular assets and products and help them understand how different products work," said Mamaji.

Sen prefers to work with simple asset allocation. Getting into opaque products that promise high returns but are difficult to understand aren’t for the average saver.

But the job doesn’t end with pointing out where to invest. Inculcating the discipline of following this advice in the investor is just as important. “People realize that they have made mistakes in their financial life and don’t want to make any more," said Sen.

Mint Money take

It’s important to remember that money has to be not only earned but also managed productively. At the start of an interaction, advisers try to assess whether they are selling a plan or the client is buying the plan—the difference lies in the client’s willingness to participate and take things forward. Your financial planner or adviser isn’t just going to be there to help you make the appropriate investment decisions but also to help you reset the financial discipline that you need to achieve your goals.

Be it a lack of time or inclination on your behalf, a dedicated financial adviser whom you trust can bring clarity and stability to your money life.

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