ET Wealth Wisdom: Why you need financial advice – Economic Times


Guess what I just got?

Please tell me you got momos!

No re, not momos. A new personal yoga trainer… she comes to my house and all…

Dear God Jaleel! Why! Why don’t you just go for a run, you live right next to Jahapanah! Instead, why don’t you get some help with your finances… which is a mess!

That is painful ya!

What painful, it will help you only in the long run… haven’t you read all those stories of people who took free advice or even the wrong advice and ended up losing a heck of a lot of money?

I know… but not everyone is the same no…

Famous last words my dear!

Hi everyone I am Shambhavi Mehrotra and with me is Tania Jaleel who is in dire need of financial advise.

Ok… so why are you so keen on me getting financial advice?

It is young people like us and those with low incomes who need proper financial advice the most. Getting the right guidance at the very beginning of your working life, means that you can take the right steps that will have a lasting influence on your finances.

All that is nice, but am I just a handful of young people who don’t take the help of a financial adviser? Or are there more like me…

Sadly, you are in the majority. An online survey by ET Wealth shows that only 12% of investors in India have financial advisers. A large majority prefers to take DIY route. The survey shows that younger people are less likely to take financial advice. The percentage of people seeking advice increases with age and income.

Also, while high income earners have very high investible surpluses, they can easily manage their money and need only investment advice. It is the middle class person with a low surplus who needs financial guidance on every aspect, including saving, goal planning, investing and insurance.

Hey, it is not like I haven’t tried. I have been turned away by a lot of these advisers because I don’t have that much to invest… and you know how I am with rejection!

That is sadly true… Many professional advisers are reluctant to serve small-ticket clients who can invest just Rs 5,000-10,000 a month. If the portfolio size is Rs 1 lakh, even a 1% charge on the portfolio will fetch only Rs 1,000, which is not sufficient for a professional adviser.

So, if they don’t need me… why do I need them… like come on!

See, there are people who manage their money on their own and do it well. But to actually do a good job, you need to know the nitty gritty of investing and the products. Do you think you are that good.

Ummm…. I mean I can read up… how hard can it be!

You know the main reason why young people need an adviser… the fact that they postpone their savings… I am looking at you Your Highness the Queen of Procrastination.

Ufffff… this is character assassination I tell you!

OK… now… With nobody to nudge them, people tend to postpone savings on one pretext or the other. Ideally, you should be able to save at least 20% of your income. But the ET Wealth survey found that one out of three respondents was unable to do this. In fact, 4% are not able to save anything, and 11% save less than 10%, which is very low. Such people need structured financial planning and external assistance. Many people, especially young earners, are not able to put away enough.

Fine… but how exactly will a planner help me?

Financial advice becomes critical when it comes to investing. Most people who take the DIY approach end up making mistakes. They will either take too little risk and go for low yield traditional products such as bank deposits, post office schemes and insurance policies. Or they take too much risk by investing in stocks with a short-term view.

The real need of professional financial advice is felt when the markets are doing very badly-or very well. Left on his own, an investor is very likely to react in a knee-jerk manner if the Sensex moves by 600-700 points in any direction on a single day.

A financial planner is able to temper the emotions of the client.

But be careful, there advisers who might try to mislead you especially when it comes to insurance.

What.. now you are telling me that these very advisers can fool me!

Not everyone ya…

An important thing that everyone needs is insurance. Unfortunately, the so-called financial advisers in this space are only salesmen who want you to buy high-cost plans that fetch them fat commissions but give you low returns and inadequate cover. Adequate cover is a basic necessity. Else a family could go back 50 years if something bad happens

That is grim… so tell me one thing… if I get an adviser.. then I don’t have to bother with my investments right… since they are the professionals..

Wrong!

You need to know what you are investing in… dot blindly sign on the dotted line.. read up.. read books, magazines and personal finance portals to improve your skills. Keep the reins of your finances with yourself. After all, it is your money.

That is all from us for this week. Catch us next week for more wisdom.



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