With interest rates falling, dropping incomes due to pay cuts and layoffs, it seems more and more DIY (do it yourself) investors—one who builds and manages his own portfolio without any professional help—are turning to financial planners to get a hold of their money life. Compared with the previous years, most financial planners we spoke with said they’ve seen a spike of 25-30% in terms of new clients. Investors in the age group of 30-50 have been most active in terms of consulting an expert. Mint spoke with DIY investors to understand what pushed them to consult a financial planner and the changes they are seeing.
STOCKS CRASH A TRIGGER
Bengaluru-based Shuju Thomas had been a DIY investor for two years and invested directly in stocks, but he found that his investments weren’t doing well. “I’d been planning to work with a full-time advisor for a while but the market crash was the trigger. My portfolio was down by 20%. I immediately connected with an advisor and the first thing I was asked to do was to switch to mutual funds," said Thomas, 41, an IT professional. The fact that he can reach out to the planner in case of any doubt regarding his portfolio is an advantage, he added.
Shweta Jain, CEO and founder, Investography, said individuals in the age group of 40-50 worry about retirement and want to ensure financial security even in the event of pay cuts or job loss.
Melvin Joseph, founder, Finvin Financial Planners said he is discussing with clients the need for creating sufficient emergency fund and sticking to asset allocation. “This year is not for experimenting with your money. Rather, this year is for survival and it is better to stick to the basics," he said.
For Bengaluru-based Krishna Bandaru, investing meant focusing on a few financial products with no goal in mind. Between February and March, when interest rates began falling and the market experienced volatility, he got no time to revisit his investments due to personal and professional commitments. “The pandemic caught me by surprise completely and that’s when I realized I needed help," said Bandaru, 40, managing director and partner with a management consultancy. His biggest fear was not being diversified enough and not altering his portfolio as and when required. “I was confident about managing my money. But covid-19 pushed me to seek help," he added.
The financial planner helped him prioritize among the various goals and pick a bunch of financial instruments to realize his goals. His mutual fund portfolio was rejigged in line with his goals and savings in fixed deposits (FDs) were moved to liquid funds. “I have also restructured my salary to allocate more to provident fund (PF) and 50% of my investments now are in line with what the planner has suggested," said Bandaru.
Experts say this period is a good opportunity to invest for the long term. A disciplined approach while managing emotional behavior can provide windfall gains, said Renu Maheshwari, CEO and principal advisor, Finzscholarz Wealth Managers LLP.
UNCERTAINTY A PUSH
With each passing year, Bengaluru-based Ashish Bajaj, 32, was paying more taxes as he progressed in his career. He realized that he needed help as his investments in tax-saving funds were not aligned with his goals. “Picking a planner was a huge task. It included attending virtual seminars of multiple planners. I also looked at Google reviews, details on the websites of these planners and had telephonic conversations," said Bajaj, a manager with a pharmaceutical company.
Finally, about a month ago he was able to find a planner that suited him. Like many others, Bajaj feared loss of savings due to market volatility. “The planner recommended options such as Public Provident Fund (PPF). I’ve opted for some safer investment tools in line with my long and short-term goals," said Bajaj.
Saurabh Bansal, founder, Finatwork Wealth Services, a financial planning firm, said younger investors (30-35) were shocked by the fall in their portfolios because they hadn’t experienced something like this before and were unsure if they did the right things. The covid-19 crisis has brought the importance of asset allocation and diversification to the forefront. “Banking and PSU debt funds, dynamic bond funds and gold have done fairly well during this period to provide the much-needed stability to clients’ portfolios," said Bansal.
Bengaluru-based Sumeet Sharma believes that covid-19 had a role in pushing him to seek help. “Though I knew about mutual funds, it was not something I kept track of regularly. I wanted someone who is unbiased unlike bank representatives and agents who earn a commission," said Sharma, 33, a manager with an e-commerce firm. He met his financial planner via personal finance groups on Facebook.
“I didn’t know much about insurance cover and how the sub-limits and super top-up plans work. I was explained why I shouldn’t rely on health policy provided by the employer because I could be left uninsured if the policy is withdrawn or if I leave the company. Also, health insurance gets expensive as you grow older," he said. Diversification was another area where Sharma needed help. Before meeting the planner, he was heavily invested in debt instruments such as FDs. Almost 70% of Sharma’s investments are in equities now.
Jain said calling the covid-19 crisis as unprecedented is cliché but it is true that these are tough and uncertain times, and fear could result in wrong decisions. This adds to why planners are seeing a spike in renewals more than ever.
If you feel bogged down and are dealing with confusion in terms of making the right money decisions, working with a financial planner can actually come to your rescue.