Mr. Suraj Sethia, an IT professional with a working spouse (also an IT Professional) was approached by a financial planner who offered to provide advice on his financial planning requirements. Mr. Sethia categorically mentioned that he did not want any advice since that advice would carry a charge/s. His answer was that he was getting enough tips and information from the financial websites and hence did not need any paid service of a financial planner.
The IT sector is usually considered progressive and more acquainted with the global trends. The financial websites can help in getting an idea of the amount of SIP one should do or the retirement corpus one should roughly accumulate to meet their post retirement needs. The life insurance websites also quotes premiums that are needed to cover a particular coverage but can hardly provide anything more than numbers.
Financial planning is much more than playing with numbers charted out by clients in the data sheet. It needs a thorough understanding of the client’s needs and goals and his ability to fulfill them. It encompasses an understanding of the client’s mindset as well as an idea of the client’s background with regard to his relation with money.
The preparation of the budget enables the client to have an idea about where his hard earned money is being spent and this often unearths some strange questions which are hard to be answered by the family members. The plan helps in segmenting the needs and wants of the client and thereby priorities are set accordingly. In some cases splurging is cut short and the same gets diverted to more justifiable expenses. This can only happen when a family sits down to discuss financial matters with a competent professional.
Most persons dealing in financial products have a mindset of somehow justifying pushing their products to the client who is ignorant of the various pros and cons of the product he/she is bulldozed with. The financial planner helps their clients in analyzing each and every product they have purchased and whether it will be wise to continue with them or not. Most often people are saddled with life insurance policies which are covering the clients for a meager sum assured and yielding returns that cannot even match inflation. The policies are needed to be understood keeping in mind the future needs of the client and may be advised to be made paid up or surrendered based on the policy conditions. These decisions often free up investible surplus for the client if his pockets were tied due to prior commitments.
Many clients consider equity oriented investments as risky and are hell bent on investing only in fixed income instruments. For them guarantee is the last word and volatility in returns is forbidden. For them time horizon of the concerned goal is immaterial and asset allocation sounds absurd. These clients need hand-holding and regular updation of concepts which no website can provide. Learning theory and putting the same into practice are two different aspects and these cannot be mechanized or scheduled as every relation even if financial, needs a human touch to be properly nurtured and developed.
Websites analyzing mutual funds and insurance policies are very important tools for the purpose of comparison and data crunching but to apply the true implications in a person’s financial life needs a lot of introspection and in-depth analysis. The financial plan of one person can never be superimposed on another individual as they are 2 separate individual entities and their financial positions, needs, goals and priorities in life will be vastly distinct – where they can be similar is that they might be holding similar positions in the company where they are employed – beyond that their lives both personal as well as financial can be poles apart – so following the same opinion as advised on a website can be counter-productive in many circumstances.
Asset allocation is a term which is very often discussed in most websites but which is very tough to be adhered to by a layman. It needs a lot of effort and discussion between the financial planner and his client to make him understand the true implications of this activity.
Review of financial plans also is needed to understand the progress of the investments towards the achievement of the goals and if subtle changes are needed to be made to address a specific problem which has arisen unexpectedly. These situations warrant a human intervention and cannot be solved through customer care queries or email.
Financial websites do help in getting the basic concepts clear and getting access to data and rates and can act as chemists which can provide cheaper online term policies or the portfolio of a mutual fund along with the risk return trade-offs but the dosage of each has to be prescribed necessarily by a doctor as self-medication can often be extremely harmful. So both the planner and the financial websites should coexist but their roles have to be clear to the client.