Advisor Alpha – Financial advisors can truly add value by managing the behaviour of investors

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Subscribe to enjoy similar stories. On a recent morning walk, a friend asked me: "Mutual funds to sahi hai, but why do I need a financial advisor to guide my investment decisions?" He said he could do his own asset allocation, identify funds to invest in based on the information and ratings available, monitor his portfolio and transact easily across digital platforms. So, why should he go through the trouble of finding a good advisor? He could not see any clear value-addition that the advisor could provide and had not consulted one for several years.

I had to admit that the points my friend made were quite valid. Currently, there are any number of calculators and tools available online to help you assess your risk tolerance, set goals and calculate the SIP amount and tenure that can help you potentially achieve those goals. Data on most funds is also readily available on several digital platforms, along with their performance records, assets under management, and star ratings.

Furthermore, the ease of transacting has improved significantly in recent years. The clear implication is that if an advisor today is only helping investors with these things, their days are numbered. With that in mind, I tried to clearly articulate the value of a good advisor.

It also helped that I was a consultant in a previous life who got paid for his advice. As is the case in most of these things, I started with data. I asked my friend the all-important question: “Are you happy with the returns in your mutual fund investments?" He hemmed and hawed a bit and then somewhat shamefacedly admitted that he was not happy.