A financial advisor (FA) is a qualified professional who can help you to manage your money. This person will provide you with advice and guidance on investments, insurance, tax-related matters, and even on taking a loan for, say, buying a house or paying for your child’s college education.
But a financial advisor’s role does not stop there. A good advisor will also help you with emotional or behavioural management. What does that mean? If you have a large amount invested in stocks and the market crashes, your immediate reaction may be to sell your holdings before your losses increase. However, that could be the wrong approach to follow.
You will receive input on the investment strategy that you should adopt from your financial advisor. Your advisor will guide you through the market cycles and make recommendations that will hopefully lead to building your wealth over the long-term.
Here are some of the areas where you can expect to receive guidance:
Your advisor will seek information from you about the level of risk that you are willing to take. You will also need to tell your advisor about your investment horizon.
You will receive guidance on the most appropriate asset mix for your portfolio based on the answers that you provide to these questions. This will help you to decide on the amounts that you should deploy in stocks, bonds, real estate, and commodities.
Long-Term Financial Plan
One way to measure the success of your investment strategy is to monitor the returns that your portfolio is making every quarter or every year. For example, are these gains taking you any closer to meeting your long-term financial goals?
The advice that you receive from your financial advisor will help you to implement a plan that does this. You will also get input on how to make mid-course corrections based on changes in the market situation.
Budget For Future Needs
You might have plans for the future such as raising a family, or putting your children through university. Based on these projections and needs, you can calculate the monthly sum that will be available to you when that time comes. A good financial advisor will not only help you with these issues, you will also receive guidance on the questions that you should be asking.
Another key role that an advisor plays is to act as a sounding board for your investment ideas. Of course, you will also receive recommendations about the most suitable ways to deploy your funds.
Identify what matters most so that you can find an advisor who is able to meet your needs.
The Bottom Line
A financial advisor’s role should not only be restricted to managing your investments. Although that’s definitely important, a good advisor should be able to help you to understand and address other areas too. Insurance, Tax and retirement planning are key issues for many individuals.
For others, maximising returns may be the main objective. Identify what matters most so that you can find an advisor who is able to meet your needs.