Importance of having a financial adviser

Vijay C Roy

On December 1, 2022, when the National Stock Exchange Nifty registered a high of 18,887, Chandigarh-based Ravi Singh (27) took a colleague’s advice and invested a part of his savings in mutual funds and the stock market. The untested advice proved to be super costly. His stock investment tumbled as the markets receded, and he is yet to recover the losses although the Nifty touched 20,133 last Monday. His mutual fund investment has also not generated returns in sync with the market

Paramjeet Bajwa (35), too, suffered losses through speculative advice. He then sought the help of a financial adviser. Today, Bajwa is successful to a large extent.

Why you need expert help

• Will understand your financial goals and help you achieve them.
• Has the expertise in complex products and can read the fineprint of various instruments.
• Will assist you in paperwork and make you understand complex aspects. Will also assist you in settlement of claims.

Ravi and Paramjeet’s experiences exemplify how the right advice can make all the difference. Like the duo, a significant number of millennials, and even elderly Indians, are turning to financial advisers or planners to get maximum returns.

Gone are the days when reading ‘The Intelligent Investor’ by economist Benjamin Graham, considered the ‘father of value investing’, marked your entry into the stock market. The lure of do-it-yourself options online is also hard to resist, but the risks involved are huge. That is the reason why insurance advisers, mutual fund distributors and registered investment advisers are much in demand.

With a plethora of financial instruments such as stocks, bonds, insurance, mutual funds and Real Estate Investment Trust available these days, it becomes difficult to finalise products that give short-term and long-term gains and are aligned with a customer’s financial goals. The adviser has sound knowledge of finances and can maximise customer returns.

High-potential investment

Not many people are good at financial planning. A financial adviser helps identify high-potential investment opportunities and can manage the overall investment portfolio. Since there is no strategy like ‘one size fits all’, the advisers are expected to put to use their knowledge and experience about the market, trends, rules and regulations, and take into consideration the individual’s personal goals to determine the investment portfolio.

“Financial advisers play a crucial role despite the convenience of online transactions. They offer personalised guidance, expertise in navigating complex financial scenarios, emotional support, long-term planning, risk management, tax optimisation and accountability. Managing money without a qualified financial adviser could amount to putting your money and future at risk,” says Harjeet Singh Arora, managing director, Master Capital Services Ltd.

According to him, in this ever-changing financial landscape, they safeguard the clients’ financial well-being and help them make informed decisions.

Guiding force

In the insurance sector, for example, with easy access to real-time and granular data, Artificial Intelligence (AI) and Machine Learning (ML) are opening newer possibilities for accessing risk pools, underwriting, claim management, risk assessment and providing personalised consumer experiences.

“While digitisation has been very convenient in fast-tracking processes and easing the mechanisms involved in end-to-end insurance process, guiding consumers, building trust and having that human emotional connect have been more favourable through insurance advisers. Chatbots and IVR (interactive voice response system) can address consumer queries to a limited extent,” says Indraneel Chatterjee, co-founder, RenewBuy.

According to him, India’s 35-lakh strong insurance adviser community is the backbone of the sector. “They play a pivotal role in creating awareness, guiding consumers, servicing them and addressing claim settlement issues. The functionality of digital insurance gets enhanced when there is an adviser for procedures and documentation.”

In fact, the industry is now working towards joining the two most powerful forces: digital and insurance advisers. Digitally enabled insurance advisers have already disrupted the category, resulting in a huge growth in sales, better underwriting, smooth claim processing and desired customer service. Similarly, in case of mutual funds, ease of transaction, awareness and robust distribution networks are essential to boost the industry. India has close to 90 crore potential investors and without mutual fund distributors, reaching out to them is not an easy task.

“If you see the data, in Chandigarh, Panchkula and Mohali, the number of distributors has increased four times in the last four years, which clearly suggests the market potential,” says Chandigarh-based Rajeev Kumar Kathuria, a distributor who received his 121st mutual fund award recently for his performance. According to data, India has just 3.5 crore mutual fund investors at a time when there are 75 crore PAN card and 90 crore Aadhaar card holders (potential investors).

These distributors, also known as mutual fund agents, create awareness about the types of schemes available and assist investors in purchasing, trading and redeeming their investments.

To adapt to the increasing digital landscape, the industry is supporting financial advisers with a range of digital tools. These include robo-advisers, data analytics and mobile apps with client portals.

“Online education and training keep advisers up-to-date, while tailored marketing efforts help them reach new clients. Overall, these digital initiatives enhance the advisers’ abilities to offer personalised and informed financial guidance, improving the quality of their services in the digital age,” says Arora.

The challenges

Financial advisers face challenges such as managing customer expectations, keeping in touch with clients, dealing with emotions and making sense of the information overdose. To address these problems, advisers can begin by thoroughly interviewing and risk-assessing their customers. It’s also critical to establish clear expectations right at the start. Regular communication and the inclusion of educational tools are some of the important strategies.

Advisers can assist in multiplying your wealth, but do your homework too. Insurance ombudsman offices across the country are flooded with complaints, most of these pertaining to misselling. Go in for extensive reading. This should be done even if you decide to engage a financial adviser. After all, it is your money.