When investors look for assistance with their investments, they are faced with many options like:
Of these, the first two options are preferred by many since they look to avoid the costs involved and believe that they can save money by not using the services of a financial planner. Many investors also back themselves to do a better job than professional financial advisors. While working on a financial plan without the services of a financial advisor is possible, such planning is usually difficult, intricate and is easier with an expert by your side.
A financial advisor is at the top of his game and understands the intricacies of the market well. Being his/ her profession, an advisor spends a lot of time and effort keeping up with the trends and developments of the market. All this knowledge and information is made available to you for a nominal fee.
Before choosing a financial advisor, it is important to understand the difference between an Independent and a Non-Independent Advisor.
Independent vs. Non-Independent Financial Advisor
When you approach a financial advisor, he/ she usually offers a generic overview of the market and asks you questions to help determine your investment objective. Once this is done, the advisor recommends some investment options to you. This is where the difference between an independent and a non-independent financial advisor comes into play.
A non-independent financial advisor is someone who is associated with one or more financial institutions and offers a restricted view of the market. For example, if you approach a financial advisor associated with two fund houses, then he /she will offer recommendations of schemes available with them. This can limit your options and deprive you of the different financial tools available in the market.
The importance of an Independent Financial Advisor stems from the fact that such advisors are unrestricted in their approach and look at the entire gamut of investment options available before recommending a financial plan. As an investor, one must be wary of following a structured plan as ‘One man’s food can be another’s poison’. During the course of your investment lifecycle, you will need various kinds of products to suit your financial goals. An independent advisor, by the virtue of being unrestricted will be in a position to offer solutions in accordance to your requirements.
The simplest way to understand this is by looking at purchasing a tailor-made outfit as against an off-the-peg one. A non-independent advisor can be likened to a salesman at a readymade garment store offering pre-stitched outfits. He / she will find something in their racks to suit you by convincing you about the features of the outfit.
An independent advisor, on the other hand, can be likened to a tailor, who listens to your requirement, suggests designs, takes your precise measurements and stitches an outfit just for you. He/ she creates an outfit for you as against trying to sell you something that has already been stitched to average measurements.
For anyone looking for assistance with their investments, hiring the services of an independent financial advisor is the best option. While it comes at a nominal cost, the possible returns of a tailor-made financial plan can easily outweigh these costs. You work hard for your money, don’t leave any stone unturned while investing too!