Should I use a financial adviser to manage my portfolio

Should I use a financial adviser to manage my portfolio or should I save money by going it alone? - Sunil Mankotia, Banker,Thane

A: That depends on how comfortable you are doing it yourself. If you are familiar with the basic concept of asset allocation and you’re comfortable choosing investments, you shouldn’t have any trouble building a low-cost diversified portfolio on your own.

Potential access to important investment news when it is most valuable Professional advice that may help improve your investment results Expert help in determining the best way to allocate your assets A trained and objective professional who can help you avoid panic selling.

Understand your needs and help you formulate long-term investment goals and objectives.

Before making specific recommendations, your advisor should try to gain a whole picture of your past experience, lifestyle and goals, as well as your other investments and current financial situation. When are you planning to retire, for example? Do you have life insurance? Do you own real estate? How secure is your job?

Help you develop realistic expectations by discussing the risks and rewards of each investment.

Every investment choice has its strengths and weaknesses, and you should never feel less than fully informed. When you ask questions, or have doubts, you should expect your financial advisor to answer honestly, and help you develop a strategy that is both realistic and comfortable for you.

Match your goals and objectives with appropriate financial product.

You should expect your advisor to make clear and specific recommendations, and explain the reasons behind them in terms you can understand. Of course, the advisor should be confident and well informed about the management and portfolio strategies of any financial product or mutual funds recommended. Continually monitor your portfolio and help you interpret performance.

Your advisor cannot influence or predict a healthiness of financial product or fund's results. However, he or she should discuss results with you and help you judge your progress. You should feel that you can always ask your advisor, "How am I doing?"

Conduct regular reviews to ensure that your strategy continues to provide optimal results for you.

One of the most valuable services your advisor can provide is to help you "stay on course" with your investment program. But "staying on course" long term does not necessarily mean staying put. Expect your financial advisor to work with you to adjust your portfolio in response to any significant change in your lifestyle, priorities, assets or responsibilities.

But you don’t necessarily have to pay an adviser to get help. 

Most people have the bulk of their savings in bank fixed deposits. offer low-cost and target returns and date; the latter is a diversified funds and bond funds portfolio that becomes more conservative as you age. Many web site or online advisor also offer free tools to help you assess your investing options and assemble a portfolio appropriate for your age and risk tolerance. According to me it offer some kind of investment advice. Taking advantage of that advice can pay off. 

In a recent Financial survey done by me at reputed company of full-time workers, people who saved the most for retirement or any long term goal used online financial advice tools and educational materials provided on web site at more than double the rate of the lowest-scoring savers.

But the do-it-yourself approach requires time to monitor your portfolio and the discipline to adjust to different market conditions. You also have to keep your emotions in check when markets are volatile, which investors admit they have a hard time doing. In a survey 65% of investors say they struggle to avoid making emotional decisions about their money during market shocks.

Even more worrisome: 81% of investors say expectations for double digit gains going forward are realistic and 54% believe their portfolios will perform better this year than last year, when Index rose by 13%. according to the survey.

Coming off three consecutive years of market returns that exceed 10%, that kind of enthusiasm is not surprising. But historically, the stock market has averaged 7% annual gains. Having an objective investment adviser can help ground your expectations in reality. And there’s evidence that some investors do better getting some professional advice.

Median annual returns for fixed deposits and holders who got professional help through advisors managed portfolio were 3.32 percentage points higher than returns for people who invested on their own, even after taking fees into account.

If you decide to go the professional route, you have choices. An adviser at a large investment firm typically charges a fee of about 1% directly or indirectly of the assets he or she manages for you. A new type of investment service known as a “robo-adviser” uses computer algorithms to build low-cost portfolios and charges as little as 0.5% a year. but again it is robo.

You should consider enlisting a financial adviser who can do more than manage your investments. A certified financial advisor takes a more holistic approach to your portfolio. They can help you figure out whether you are on track with your savings and how other investment options fit into your planed goals. 

If you decide to go it alone, you’ll need to be vigilant about monitoring your plan, and should take advantage of any free advice available to you through financial website. But as you get nearer to retirement,consulting at least once with a professional and reputable financial adviser is a wise move.

Importance of An Advisor

With the variety of investment options available today, I suggest that you seek guidance from a financial advisor. Nearly every investment entails special risks that should be discussed with an experienced professional. Your investment goals are unique, and an advisor can help you find the right financial product or fund to match your needs.

When taking a full-service approach to investing, you put a professional's training, knowledge, expertise and resources to work for you. Consider these benefits:

You may be thinking that the Internet and financial planning software can cater to all these needs, but although they are convenient tools, they cannot equal the personal attention and experience of a professional. He or she can make that difference in helping you manage your financial future.

What to Expect From a Financial Advisor

The key for investors is to define and recognise the value of professional financial services, and then insist on getting that value. When you pay a sales charge or a fee, what can you expect a professional to do for you? Your advisor should at least:

These are the basic services that investors should expect from their financial advisors. Beyond the basics, many investors could use even more specialised assistance, like advice on retirement plan distribution options, setting up and servicing retirement plans for small businesses and self-employed individuals, developing tax-advantaged strategies for children's college education, insurance, estate, and trust planning; and year-end mutual fund tax advice. If you need specialised services, there are many financial advisors who can help you obtain the help you need.

Ritesh.Sheth CWM^®

CHARTERED WEALTH MANAGER

              Helping you invest better...  

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