The number of people offering financial advice is booming. India is expecting the wealth business to double in the next 5 years, or even earlier. Banks are masquerading as financial experts and clients are likely to pay a price for not understanding banker;s double talk.

So do you need to hire a personal finance adviser? In most jobs like fixing a car, or photography, we realize that we can do about 70% of what a professional can do. While going on a picnic we do the photographer’s job ourselves, but while planning a wedding, we prefer outsourcing the photography. Unlike that in case of financial planning, we could take an all or none view.

Let us see who are the people who should try to do their own financial planning, and manage their own money,

1. You enjoy reading about financial planning, taxation, investments, mathematics, markets, behavioral finance, etc. Enjoy means you should really be willing to steal time from your other activities to do this. This should not feel like work, it should feel like leisure. Also do remember that enjoying reading about investments but hating taxation does not qualify. You need to be balanced in your knowledge and love for the subject.

2. You work about 5 hour days, 5 days a week: If you are putting in 70 hour weeks it is extremely unlikely that you will want to find time to do all the paper work! Immaterial of what people tell you, investing, record keeping, taxation – are nice to read at a theory level, but doing it at a practical level is very painful. Once you start doing, you may start substituting luxury called time! Also if you have a nice tenured job with indexed pension, you can find time. However all of us may not have a sinecure. Then what?

3. Your social life is likely to take a hit, because of the time involved – do an objective analysis.

4. Money is not an infinite resource, sure. However energy, enthusiasm, social life – these might be in short supply!!

5. Doing at a tactical level and doing at the ground level are different. Exactly like a Marketing manager making his projections in an airconditioned room, and the Sales Manager implementing that on the ground. Big difference.

6. You have to be unbiased, and be able to systematically analyze your current status, and be able to plan for the future.

7. Check whether you are giving too much credit for your managerial skills. Many of us overestimate our skills, energy levels, and diligence.

8. You have to be confident of making decisions – financial – and with the risk that things like Retirement have very little scope for error, and good professional help is WORTH paying for.

9. You do not need any financial hand holding, can handle volatility, can handle retirement planning, know the difference between an annuity and a pension plan, and have helped a few others do this, albeit as a friend.

10. When in doubt people turn to you for their financial understanding.

11. You have always liked to do things on your own. Even if you have hired a good doctor your main source of medical understanding is Google.

12. You are savvy enough to know that PPF, LiC, annuity, equities, are all an integral part of retirement planning, HOWEVER, they all have their limitations.

I could go on and on.

I know why some of my best friends who are capable of managing their own money (equity portfolio to last a few lifetimes), they realize that financial planning is way beyond just some financial management. In fact financial management is about 40% in proper financial planning !!

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

  1. lakshminarasimman

    தடி எடுத்தவன் எல்லாம் தண்டல்காரன்
    எக்ஸல் வைத்திருப்பவன் எல்லாம் financial advisor

    கைப்புள்ள இன்னும்மா இந்த ஊரு நம்பள நம்பிக்கிட்டு இருக்கு ? அது அவங்க விதிண்ணே

  2. Subra,

    Your post is well written and is detailed one.

    Very few people have attributes you have listed. Therefore, most of the population will need varying amount of advice but they need to acknowledge it.

    There is big push/promotion of DIY on certain forums. Certain individuals would have flair/aptitude/time to do it but that doesn’t mean all the readers on the forum can do it. In fact, if not practiced properly DIY can be very dangerous. Has anyone climbed Mt Everest without training? Or for that matter has anyone run full marathon or developed six packs without training?

    Adviser bashing has become favorite hobby for some. (I am not an adviser by the way). Advisers definitely have a role. Quality of advisers is a question mark but not the need for them.

    In my daily life, I interact with highly educated and successful people from various fields – medicine, law, IT, corporate, etc.. They don’t understand some of the basic concepts in finance. They will definitely be better served by having advisers. In fact, I know some very successful business people with net worth upward of Rs. 20 crs and they find it difficult to understand rate of returns if money doubles in 9 years.

  3. Thank you for sharing great thoughts on financial management.

    I am learning a lot from you. Yesterday I bought your book and just gone through first chapter. It is awesome book..

    I agree that financial planning difficult for everyone and people need expert advice. At same time it is difficult to find honest and unbiased financial planner near your area. Also their fees is not standard. You don’t know how much benefit you are going to reap from financial planner.

    SEBI did its job by certifying financial planner but it would be great if you could review 10-15 financial planner in your article.

    I was learning finance and economy from years. I just started writing my thoughts and experiences on my blog CashOverflow but it will take me years to write quality stuff like you.

    Kindly leave your reply on this comment.

  4. There is as usual no simple answer like the elephant and six blind men story, everyone sees it in parts, depending on their experience good or bad with an advisor. A portfolio manager for a wealthy individual once told me that the job of an advisor is to stop the client from making big money mistakes.

    (Disc: Im a financial advisor)

  5. If point 1 weren’t applicable, most readers wouldn’t be here! In my opinion, one person who CANNOT do it on his own is the one who continues asking for that ‘hot’ stock/fund recommendation and keeps seeking validation for his decisions.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>