A financial planner brings in the required expertise to guide an individual on his/her wealth management path, and help them manage their finances.
While most of us understand the importance of saving and investing for the future, more so since the onset of the pandemic, experts say some may not have the time or aptitude to keep up with a long-term plan.
Financial planners/ advisors then come into play. Anup Bansal, Chief Investment Officer, Scripbox, says, “A financial planner brings in the required expertise to guide an individual on his/her wealth management path, and help them manage their finances.”
Here are some of the instances when you should take the help of a professional;
1. When you want to get on track for wealth creation
Hiring a financial planner is an ideal decision when you’re ready to take control of your present and future financial situation.
Bansal says, “A good financial planner is akin to a money doctor – who first makes the effort to understand your current situation, future goals and emotional biases concerning wealth, and then spends considerable time charting out a comprehensive plan customised to you.”
2. To get a personalised direction and clarity on portfolio objectives
Industry experts say many starts investing in an ad-hoc manner, trying to replicate the success of friends and peers based on suggestions or hearsay. Keep in mind that everyone’s risk appetite and investment outlook is different and what works for someone else may not work for another.
Bansal says, “A cluttered, directionless portfolio or inadequate performance are reasons enough to get professional help. A financial planner can assist in evaluating current investments in the context of one’s risk profile while suggesting corrective actions for a smoother ride going forward.”
3. Facing major life-altering event
“Whenever you’re facing a major life-altering event, your finances are bound to get affected as well. You could be getting married, having a baby or looking to buy a new house. You will have to plan and align your finances with the event as well as the impact it could have on you and your family’s future,” says Bansal.
Hence, with the knowledge of having dealt with many of these situations before, a financial advisor can offer sound advice and help navigate the event with a prudent, long-term approach.
4. Sudden windfall gains
There could be many streams, starting with gains from an inheritance, insurance pay-out, sale of assets, IPO, company stake exit or unexpected winnings from lotteries or contests that can turn anyone’s fortunes. That said, it is fairly common for people to start overspending or get overwhelmed with the situation, thereby making poor personal and financial decisions.
Experts say a financial consultant can guide on various legal, financial, and tax implications surrounding different types of windfall gains with the right investment plan to protect and grow such wealth.
5. When heading closer to retirement
The approach to money management changes from wealth maximisation to capital preservation and income generation as one gets closer to retirement. This may necessitate a complete overhaul of the portfolio to low-risk assets that can generate a steady source of income.
Bansal says, “While heading close to retirement, one requires a complete reassessment of their financial needs to ensure that their corpus outlasts them and they do not have inflation and longevity risk. A good financial advisor can help create a “sleep-well” portfolio with adequate safeguards built-in.”
6. Adjusting sails
Experts say changes in financial plans along the way are inevitable. Some may be brought on by personal factors like wanting to start a new business or losing an earning member of the family, while others may be dictated by external forces like the pandemic we are currently dealing with. A financial planner understands such risks and the market situation on a deeper level and can help plan accordingly.
“For instance, having adequate life and health insurance cover so that there are minimal disruptions. Even if one’s personal and financial goals change, having a financial planner ensures that one is on track for success with their finances, despite the market uncertainty,” says Bansal.
7. When optimising tax liability
A significant rise in income, change in tax regime or the general need to make the best of various tax breaks, experts say is another opportunity to hire a financial planner. Bansal says, “While you may be aware of the key deductions, say under Section 80C or 80D, a financial expert can help maximise the benefits available for your tax slab and even convert potential losses into opportunities to save tax.”
Similarly, experts say people who are hesitant regarding their investments, be it due to a lack of understanding of financial products, investment processes, or a general aversion to stomach volatility, especially from equity or alternate assets, should opt for a financial planner.
Bansal adds, “A financial planner employs a holistic and integrated approach to guide an individual on the potential of different investments while bringing an objective perspective to the investor’s financial plan. They do not pitch products based on commissions or sales targets – instead, they always have the investor’s best interest in mind.