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Financial Planning


The market is full of people calling themselves 'financial advisors', however, they might be dishing out just a part of the overall financial planning. Hence, it becomes necessary for you to understand your requirements and then choose a financial advisor who will offer you complete financial solution.

Harsh Gahlaut 
CEO, Finedge 

Spoilt For Choice? Here’s How To Choose A Great Financial Advisor

The financial advisory landscape has undergone tectonic shifts over the past decade. In the aftermath of the brutal bear market of 2008, vast swathes of the advisory industry vanished without a trace. The plucky ones who stood their ground were forced to remodel their businesses to adapt to an increasingly demanding, and often sceptical, customer base. Additionally, the far-reaching impact of multi-layered digital disruption resulted in the distinct evolution of customer preferences – from personal relationships with advisors to process efficiency, from jargon-laden investment analyses to transactional ease through seamless online platforms, and from a ‘trust-based’ model of engagement to a ‘knowledgebased’ one.

Today, the motley crew of financial advisors in India comprises of Pure Transaction Platforms (“Robo Advisors”), Wealth Managers, Private& Retail Bankers, Stock Brokers, Insurance Agents, Mutual Fund IFA’s, Registered Investment Advisors (RIA’s) and oftentimes, even your friendly neighbourhood Chartered Accountant! This smorgasbord of available options has resulted in a peculiar problem for clients – that is, how do they choose the best Financial Advisor from the available lot?

To make your decision easier, here are three things to look for in a great Financial Advisor.

Financial Planning-Led & Goal Based Investments

Investments can either be made in an ad-hoc manner or as part of a well-structured Financial Plan. The former approach is essentially “product-sales” motivated, and isn’t really ‘advice’ in the true sense of the word. The latter approach is time consuming, requires more hard work and will invariably yield better long-term results. Great Financial Advisors show unwavering commitment to following correct investing practices. They do not take the process of making a recommendation lightly; but rather equate their role in making money recommendations with the role of a doctor in writing medical prescriptions. The hallmarks of a Financial Planning led approach are: a robust process for analysing your risk profile, an asset allocation-based approach to investing with a disciplined rebalancing strategy, a (sometimes obsessive!) focus on your unique life goals and objectives, and a deep consideration of your existing investments, assets and liabilities. A financial planning-led approach will not blindly cough up new and exotic “products” for you to buy – sometimes, the end outcome might entail staying put and doing nothing at all.

Holistic Approach

The last thing you want as your Financial Advisor is a “one trick pony” who offers a single kind of financial instrument – for instance, life insurance agents. The internet is replete with horror stories of unsuspecting investors who bore the brunt of insurance agents masquerading as Financial Advisors in the early 2000s. Such advisors are incapable of offering conflictfree, comprehensive financial solutions, as their advice will invariably be coloured by what is housed on their own shelves. Sure, it is critical to cover your bases in terms of adequate medical and term coverage – but is it wise to lock your funds into a 5% IRR product that will mature a couple of decades later? Of course, not. And yet, these are precisely the solutions that these purported “Advisors” recklessly tout. Quite similarly, a number of new age Robo Advisory platforms are not really ‘Advisors’ at all, but merely tools to buy and sell mutual fund schemes conveniently. Just how these fancy platforms will address the pernicious behaviour gap that erodes billions in investors’ wealth each year is anybody’s guess!

Conversely, great Financial Advisors genuinely believe that interests must be aligned, and that their success lies in the enduring success of their clients. To that effect, holistic Advisors harbour zero product biases and base their conflictfree recommendations purely based on what fits best with their client’s financial objectives. Freed of the crippling myopia of seeing customers as “revenue generators” for their business, they seek instead to nurture long term relationships with them.

"Great Financial Advisors show unwavering commitment to following correct investing practices. They do not take the process of making a recommendation lightly; but rather equate their role in making money recommendations with the role of a doctor in writing medical prescriptions."

They engage with their clients regularly, keep them up-to-date on their investments, make portfolio changes where necessary and counsel their clients sincerely and objectively to dampen the impact of behavioural biases. In other words, they really do hand-hold their clients on their journey to Wealth Creation!

Robust Tech Platform

Even the best laid plans fail in the absence of a robust technology platform that is built on the back of rock-solid processes and internal systems. Far from being a ‘one-time event’, the financial advisory proposition in itself is evolutionary and incremental in nature. What is an optimal financial solution for a client today may well not be tomorrow. Life stage changes, professional changes, financial crises,addition of new family members into the mix, windfall inheritances or sudden cash influxes from the sale of legacy assets – these are just a few events which could throw a customer’s current financial plan completely out of whack. The invariable undulations that characterise market cycles throw in another layer of complexity in the mix. In such a dynamic environment, it becomes imperative that a high level of process automation and ‘intelligence’ is built into an advisor’s systems in order to ensure that all their customers are regularly reviewed and the review outcomes are seamlessly implemented. Other instances where technology comes in handy would be in managing information flows and ensuring that they immediately metamorphose into tangible actions. For instance – a mundane bit of information regarding a bounced mutual fund SIP due to a technical issue must immediately translate into remedial measures that put the recurring investment back on track, or it may end up impacting a client’s goal achievement. Lastly, a top-class transaction platform that allows for paperless execution of investment transactions is key to the customer experience. In these ways and many more, great Financial Advisors ensure that their technology backbone is always improving and evolving to reflect changing realities and subsequent actionables.

The bottom-line:
A great advisory firm will follow the entire chain of Financial Planning–led investing; starting with a risk profiler, customised financial plan, financial goal analysis, asset allocation, portfolio review and rebalancing. Missing out on even one of the links of the financial planning process can lead to catastrophic results. The key to finding a great financial advisor is to ensure that the above process is followed in its entirety and ensuring that the technology is used not just to make investing easy, but also as a powerful tool to ensure that the financial process is being followed the right way. The journey to creating wealth is long and tough; and only with the help of the right people, processes, products and technology can the same be achieved.

Of course, without investing discipline and patience, even the best processes will never be successful. Investing is easy - but wealth creation will test you at every stage of the journey!

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