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When should you engage a financial adviser?


Shikha has just completed 12 years as a broker. She looks back at her career and achievements with satisfaction. However, her financial situation makes her anxious. She has been saving and investing for a long time, and holds pretty much everything from a PPF account to direct equity and derivatives. She has had no time to organise her finances, despite knowing how important it is. What can she do?

Shikha represents a large segment of wellpaid professionals who do not have the time or the inclination for paperwork and managing their money affairs. Shikha needs a financial adviser who can work for her. Before she engages someone to take care of her finances, she needs to be clear about the mandate she has, and the terms on which she would like to have her money managed.

First of all, she needs to collect all her investments and insurance related information. Her investments may be lying in multiple folios and accounts. She should get her adviser to write to all her mutual funds, banks, registrars, brokers and depository participants, seeking information about her holdings. Quoting her PAN and email details will help even if she does not remember her account numbers and folio numbers. The adviser should be asked to follow up and enable processing her query for information, providing additional data as required to complete the process.

Second, a portfolio consolidation and review should be done. The adviser should then evaluate the portfolio for its current value, compute the return earned and also summarise how each of the investments is doing. This portfolio review should help her decide what to keep, what to close, and what to consolidate.

Third, having estimated the current value of the portfolio and brought all the details together, she should sit with her adviser to decide how the portfolio would be managed going forward. The adviser can take a detailed financial planning approach, based on her financial goals, life stages and her risk profile. Or he may simply choose a wealth creation approach that is based on an agreed return at an acceptable level of risk, for a given time period.

Payment to the adviser should be based on mutually accepted terms and subject to completing the process and reviewing the portfolio.

Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.


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