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Role of Advisor in your financial planning

May 28, 2018 / Advisorkhoj Research Team | 177 Downloaded | 7519 Viewed | |
Role of Advisor in your financial planning
Picture courtesy - PIXABAY

Financial Planning is a comprehensive process of deciding the allocation of one’s finances into spending, savings, investment and other categories. Going a little deeper into this statement, it would also mean deciding on where and how to invest suiting risk appetite and reaching financial goals within a specified time period. Financial Planning plays a key role in laying the firm ground for various money decisions in a systematic way. It may sound complicated but the assistance of a financial advisor can help one immensely in taking the right decisions and here are a few reasons why:

Define your goals

- The first step to chalking a financial plan is to decide where one is heading to with the plan, in order to give it direction and a motive. Generally, people are unable to do so due to a lack of knowledge and ideas on the same which leads to a faltering in the first step of the process itself. At times, young people do not have an idea about how to go about with drawing up a plan. This is where the expertise of a financial advisor comes in who can help one in defining goals across the savings and investment lifestyle, determine the specific numbers to reach definite goals. An important note one needs to keep in mind is that a financial plan is not working towards a single goal but multiple goals across different stages of life. Of course, each goal has a different priority depending on the investor where a financial advisor can assist them as to how that can be achieved during the stipulated period. The financial status, income, lifestyle and other things of a person changes over a lifetime which is why financial planning should be an ongoing process, not a one-time activity.

Data Collection

- In order to have a sound plan and execute the same, one needs data for all sorts of activities, like investor’s income, expenses, assets (both physical and financial like property, gold, bank deposits, stocks, bonds, mutual funds etc.), liabilities like home loan or car loan or personal loan etc., life, general and health insurance and other important factors. Data is imperative to start chalking up plans as without that, there is no numerical information to work on. This is why a financial advisor will employ methods like surveys or questionnaires in order to get an idea about the investor’s assets, liabilities, income, property, whether he/she has insurance or not, spending habits, lifestyle and other aspects in order to have an idea about how to plan his/her finances for yielding the best results.

Since the collection of this data is very important, a financial advisor suggests a face to face meeting with the investor in order to gain knowledge about the points, that otherwise would not be possible with surveys. It will also helps an investor to have a one to one interaction with his/her financial planner, share additional details, clarify doubts, expectations as there is subjectivity involved in finance. Sometimes, due to geographical boundaries, one to one meeting is not always possible but one should try making the conversations with their planner personalized even over emails or phone so that they can work accordingly.

As spoken above, people prioritize their goals according to various personal reasons and dimensions. Now, suppose, a man wants to take up a home loan as well as plan for his retirement, maybe 20 years down the line, he has to prioritize between them due to the income constraints. He can take up a home loan but on the contrary, there is no loan that pays for one’s retirement needs. On an emotional basis, he might prioritize the purchase of a home and keep the retirement planning on a secondary platform. This decision, might affect the corpus he would have wanted to achieve on his retirement after a period of time. The home loan, however, can be repaid. The point of this example is that, emotions are involved in financial planning since we are talking about personal finances here, but a good financial advisor will help his/her to remain objective and take similar decisions. Hence, there is a need to have a sound interaction with them.

Data Analysis

- After the collection of data which pertains to all aspects of the financial planning process, an advisor starts to review it. Since he/she knows about the investor’s goals with this plan and the expected time period to achieve the same, it becomes easier to review this data. This is why each step should be chalked out carefully as it is interrelated with the next ones. The investor, at this step should be actively involved with the advisor in order to give his/her own inputs, ideas, changes or share opinions about it.This makes the process of review better and smoother for the advisor as well. According to this analysis itself, the decisions of allocation of funds to pre-defined goals begins.

Plan recommendations

- At this step, the financial advisor is done with the careful analysis of the client’s assets, liabilities, insurance, other financial aspects and according to his/her expertise, will recommend plans to go about for reaching financial goals. Now, sometimes, it so happens that, advisors jump to this point and straight away give recommendations without having a sound background check on the client. This leads to incomprehensive advices and wrong decisions. If the process is not done carefully, this point has no meaning. After the three steps are accomplished, the advisor suggests on the allocation of assets of the client, alternate investment options like mutual funds, traditional debt products, life and health insurance needs, etc. A one to one meeting should be set up for successful implementation of the same.

Implementation/ execution of the plan

- This step brings us to the point where action takes place with regards to the points chalked out earlier. It was all happening on pen and paper until this step but a plan gains life only when it is executed and recognized when it is successful. One needs to be careful with this step as it requires following of a couple of instructions, adherence to legal formalities for completion. Expertise of the advisor should be taken by the client here, even for the smallest of things so that one does not go wrong anywhere. For example, in the purchase of Mutual Funds in any category, one needs to complete the process of KYC or ‘Know your Customer’ formalities. This requires submission of documents, physical presence in places as instructed and various other formalities to be completed. Such things should be done in the hindsight of the financial advisor.

Monitoring and tracking - This step is similar to follow up done by customer service after you buy a product/service in order to know whether the product is working fine, if any after sale service is needed. In general, your feedback on the activity.

On a similar scale, once your financial plan is executed, you need to monitor it again and again to know if it is working out according to the plan made, if any changes are required and so on. One should review the financial plan periodically, to evaluate the effect of changes in income levels on the financial situation, tax situation, new tax rules, the performance of investments, and suitability of new products with respect to changes in market conditions.Normally, your financial planner or adviser will schedule meetings with you at a regular frequency, to review your portfolio and discuss if any changes are to be made in the financial plan, asset allocation strategy and product strategy.

But even if your financial planner or adviser does not schedule regular meetings, you should insist on having these meetings at some regular frequency, e.g. quarterly, semi-annually,annually etc.


Financial planning and successful implementation with satisfactory results for the same are elements which can be combined and executed in a systematic way with the expertise of a financial advisor. He/she will give you the best recommendations according to your personal expectations and will be a friend or guide throughout the process of financial planning and implementation of it. One needs that in order to have a secure financial future.

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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