The end of a calendar year is always a time for reflection, an opportunity to think about the year gone by and plan for the story that is yet to be written. Like every year, markets in 2017 – both debt and equity – took us by surprise, leaving some investors exhilarated, some disappointed, and most surprised. Every year also brings a constant set of news, sometimes noise and sometimes reality, about changing competitive landscape, reducing margins, and what the future holds for advisors.
The truth though, is that world that we live in today, for an investor, the role of a financial advisor has never been more important. We enter 2018 in the background of a year that has seen equity markets hitting and setting new highs, and in the process often setting unrealistic expectations for the year to come. While seasoned investors are confused and thinking what to do, new investors are worried about how to start. An advisor’s experience will be critical in answering these questions.
Over the last few years, the Indian investor has also become more savvy and in-tune with his needs. He demands excellence in all aspects of his life and wants his money and investments to work harder. As we enter 2018, we share a few thoughts on what the Indian investor of today expects from his advisor.
Trust forms the bedrock of any strong and enduring relationship. It becomes even more pertinent in an investment environment, which is framed by high expectations and ongoing volatility. Unfortunately, trust and confidence are fragile in the financial industry and are often just another Ponzi scheme away from implosion. The relationship between a client and his financial advisor is almost sacred and is purely fiduciary in nature. Consequently, a good financial advisor should be able to inspire trust in his client. A client and his advisor will often spend hours together, talking about finances, future requirements and needs, worries and risks. The advisor will then spend many more hours drawing out a financial plan, which can best meet the client’s goals in a controlled risk environment. The advisor will also look at this market environment, and help ask difficult questions, both from his investors and for product manufacturers. Asking difficult questions will prevent mistakes being made, and cement the trust between clients and advisors. Finally, a good advisor will set realistic expectations for his client.
Educate and deliver objective and independent advice
At the heart of effective financial planning lies independent and objective advice. Today, there is a plethora of new innovative investments products, to name a few, the Dynamic Asset Allocation Funds & Equity Savings Fund. It is the role of the financial planner to sift through these product offerings and recommend investments that are best suited to the client, given his risk/return profile.
Customised asset allocation
Clients are now shying away from cookie cutter solutions. The age-old thumb rule of “100-age” for asset allocation is now becoming obsolete. A recent conversation with a financial advisor about a 70-year old client, who had invested a majority of his portfolio in equities, highlighted the new philosophy of customised asset allocation. The financial advisor felt that a high allocation to equity was warranted since the client’s income was nearly 3-times his expenses. Clearly, his age was not the sole determinant of his risk taking capacity and the financial advisor had judiciously customised the investment strategy for the client. Each client has unique needs and risk profile, following his current financial situation and future goals. A good investment advisor is expected to provide customised recommendations rather than generic solutions.
Facilitate ease of transaction
We live in a world fuelled by technology, where consumption has migrated to the digital world. From buying our groceries to planning our entertainment, many aspects of our lives are now conducted in the digital realm. Naturally, clients expect to carry out their financial transactions with ease and in a seamless manner. Technology, being a great enabler, can help create an ecosystem where clients can invest and grow their wealth in an efficient manner. Financial advisors who can leverage the benefits of technology and extend the same to their clients would be the preferred choice for many investors in 2018.
As we stand at the cusp of 2018, we prepare ourselves for the unknown. While we can never really know what the future holds for us, we as investors should trust the armour of knowledge and confidence that our Financial Advisors bring to us.
Radhika Gupta is the Chief Executive Officer of Edelweiss Mutual Funds and the views expressed above are her own.