Do you need a financial adviser?

I recently had a chat with my relationship manager at the bank, or RM as they are commonly acronymed. When he mentioned a few funds that he believed were good investments, I surprisingly noted the omission of Mirae Asset equity funds. I went on to name Mirae Asset Emerging Bluechip and Mirae Asset India Equity, both rated Silver by Morningstar’s analyst. His ludicrous response: “I have never heard of Mirae Asset”.

This post is not about the efficiency of RMs. But the above incident got me thinking about the importance of financial planning and the immense role financial advisers play.

It is quite astonishing how many individuals adopt a laissez-faire attitude towards their investments. A year ago, The Star interviewed Susan Latremoille, director of wealth management at Richardson GMP and author of The Rich Life – Managing Wealth and Purpose. She expressed complete bafflement at how individuals with sizeable portfolios brag about managing their own investments. Her response is epic: “Do you cut your own hair? Do you fill your own teeth? Do you get underneath the car and change the brakes? You screw up with your money in your earning years, there are no do-overs,” she warns ominously, but is bang on.

I have nothing against bank RMs. But I would never make the mistake of relying solely on them to help build a portfolio. Remember, in most cases they do not have the expertise to deal with holistic financial planning. They focus only on your investment portfolio.

On the other hand, a financial adviser knows investments, but investment selection and portfolio monitoring are not all he does. He also has the expertise to help you set and quantify financial goals, draw up a plan to pay down debt, determine your insurance needs, figure out how much of an emergency fund you need, and provide you a clear understanding of the risk you are capable of incurring.

Neither do I have anything against Do-It-Yourself planning, or DIY (another acronym). But assistance from a professional adviser can be well worth the time and money. The perspective and objectivity they bring to the complete financial picture – investments, insurance, debt, estate planning, while using your savings goals as a frame of reference, cannot be overestimated.

A big problem with individuals who opt for the DIY route, is that they solicit advice from relatives, colleagues and friends. However well meaning all of them are, they would be clueless about the nuances. An investment which may suit them could be disastrous for you. Their needs, their goals and risk appetite would, in all probability, be vastly different from yours. And by creating a portfolio based on their suggestions, you would end up with a haphazard mess.

Whether you are extremely prolific with your investments or a complete ignoramus, here are 8 questions you need to get some amount of clarity on before you approach an adviser.

• Are you seeking help with your entire financial life? Which means you would need help with asset allocation, determining the insurance needed, deciding which investments to opt for and quantifying and putting a time frame to your goals.

• Are you seeking help only with your investment portfolio or a specific issue? You have everything all sorted out but just need to know which specific funds to invest in.

• Are you looking for a one-time consultancy or do you need periodic help and ongoing assistance?

• How hands-on and hands-off do you wish to be? Or is it almost complete delegation?

• Are you comfortable with technology or prefer regular face-to-face interaction?

• What is it that you would like to accomplish with a financial adviser? If you have answered the above questions, you will be able to articulate your answer much more clearly.

• Is there any specific investment philosophy you would like your adviser to employ? Are you open to change if provided with a sound rationale?

• What is your most important financial concern?