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Should You Consult A Financial Advisor Or Not?

There is a personal finance expert in (almost) every house.

That explains why most people manage their personal finance matters on their own. They have never felt the need to talk to a "professional" financial advisor. Only a minority seek such expert guidance.

That's fine! Absolutely fine!

As long as you can do a good job yourself, why take outside help? If you can cure yourself, why go to a doctor? If you are good at repairing things, why call an electrician; or a mechanic; or a plumber? Why hire a painter when you can paint your house yourself? So on and so forth.

The important question, however, is... Are you "good" enough?

Well, going by the facts, it doesn’t appear so:

Because...
... the majority continue to mix insurance with investment. Consequently, they earn pathetic returns (sadly without even realizing that they are losing tons of money on such products)

... the majority continue to flock to bank fixed deposits. Consequently, they are paying much higher taxes (which they could have otherwise saved, had they been a bit more knowledgeable)

... the majority continue to invest in gold jewellery. Consequently, they ignore the better alternatives, and end up paying extra on the gold prices and the making charges (which takes away a substantial part of their returns)

... the majority continue to have blind trust and faith in property. Consequently, many have had bad experiences of broken promises by the builders, and their unfinished dream homes.

So, coming to the crux of the matter... Should you consult a "professional" financial advisor?

1. No, if you understand the personal finances
Beware: Reading a few books / magazines on the subject of personal finance; following a few business channels; or talking to some (financially amateur) friends and colleagues are simply not enough. Of course, they are important to raise your awareness levels. But they won't make you an expert.

The universe of personal finance is massive... and expanding day-by-day. Credit cards, health insurance, life insurance, home loans, vehicle loans, mutual funds, fixed-income products, stocks, tax, post-office schemes, the list is almost endless.

The very fact that even the professional financial advisors specialize in a few areas only, should warn you that it is not possible for one person to know everything.

So, unless you are super(finance)man, you may have to (at least occasionally) reach out to a financial advisor.

consult-a-financial-advisor
Talk to a Financial Advisor if your money matters are driving you bananas.

2. No, if you are into it on a day-to-day basis
Beware: Managing one's personal finances is no longer an occasional 'once in a blue moon' kind of an affair.

With frequent changes in the economy, interest rates, business fundamentals, international outlook, etc., you have to be on your toes. You should be (ever)ready to act fast. Else your finances could be under considerable risk and suffer immense damage.

So, unless you have ample time on hand — which is rare given the deadlines, business tours, targets, presentations, meetings, 24*7 messages — you might need someone to take care of the urgent matters, while you are busy with your job.

Moreover, it is human nature to delay the unpleasant tasks. And, managing money is often one of them. I am sure there are a few unpaid bills, delayed premiums, idle money in savings accounts, unopened letters from banks, etc. that need your immediate attention. You can avoid such costly delays, by having a financial advisor on board.

3. No, if you are an objective person
Beware: Human beings may think that they are the most rational and intelligent species on this planet earth. But they aren't!

More often than not, they are guided by emotions such as Temptation, Fear or Greed. More often than not, they don't think and reason

Many are paying high interest on loans, while earning low returns on their Fixed Deposits. Panic selling during market crashes or buying at unreasonable valuations during boom periods is common. Buying luxuries is so tempting that you never know when you slip into serious debt problems.

So, unless you can take control of your emotions, it is always good to seek an objective viewpoint. By virtue of being a detached observer, a financial advisor can look at the big picture dispassionately and put you onto the right path. Besides, s/he can keep you disciplined with your investments and focused on your financial goals.

4. No, if your answers are 'yes' to various money-related questions
- You have a detailed financial roadmap?
- You maintain a monthly budget?
- You are up-to-date with the developments in the world of finance?
- You can calculate IRR, YTM and CAGR?
- You have a fair understanding of taxation?

But if your answers are 'no', it would be prudent to consult an expert.

In short, a professional financial advisor can do a lot for you.

Whether you seek his/her assistance on a need-basis or as full-time consultant, the choice is yours. But ignoring them completely, could prove fatal for your finances.

[By the way, you can ignore this advice if you believe that, as a Financial Mentor myself, I have written this post as an interested party. 😉]

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