What does a financial advisor do?
Building an investment portfolio - which stocks to buy and which to sell is the main task of a Financial Advisor.
They are financial experts and take into account a wide range of information, economic trends, regulatory changes, and the client’s comfort to invest their funds.
They hold a respectable position in society and earn huge money while making their clients rich. Tempting, isn’t it?
Now with this brief introduction, let me ask you a question?
How many of you really want to be a successful financial adviser?
I’ve good news for you.
No. I’m not offering you any job. In fact, once you learn this secret, you will be in high demand in the market.
What’s the secret?
Before I tell you the secret to becoming a good and successful financial advisor, let me tell you a story.
This happened a few weeks back.
I got a call from Ritesh, Mumbai, India (Name and City changed). He was interested in learning fundamental analysis and stock valuation.
He said he was a technical analyst and sometimes used financial ratios like P/E (Price to Earnings ratio) and P/B (Price to Book Value ratio) to give stock recommendations.
He also said some of the stocks that he recommended doubled in 6 months.
I was surprised. I was curious as why someone like him, who gave stock recommendations that doubled investment in 6 months, would like to learn fundamental analysis and stock valuation after such a grand success?
Then I asked him—“Whether you only recommend stocks or also invest your own money in these stocks?”
His answer stunned me. He said, “ No. I haven’t invested a single rupee in these stocks. This is my job and I only recommend stocks based on my analysis.”
Then I asked him—“ How many stocks you recommended in last 1 year and how are they doing now?”
He said, “ I recommended total 20 stocks, 3 stocks doubled its value in 6 months, 3 stocks went up by 10%, 10 stocks reduced in value by 40%, and 4 stocks are almost at the same level.”
I said okay. Here’s my calculation sheet of his stock recommendation performance.
Now I had got the first-hand experience about misselling that happens in financial services industry.
But... what’s the secret?
Well, did you notice that in the above story, the analyst didn’t invest single rupee out of his pocket.
Did you realize the carelessness of stock market analysts when they recommend stocks to you?
Why would they worry if your stocks become dud after a few months or years as they get their salary and incentives. After all, they’re not investing a single rupee in the stocks they recommended to you.
So, think from investor’s point of view.
Be an investor first and if you succeed, then you can become a successful financial advisor.
So, the secret is—first manage your own finances, gain experience and then you can become a first class financial advisor.
Initially, you might need to invest time and attention to do this on your own, but believe me, the whole exercise of managing your own finances is worth it.
So, take a minute to think and ask yourself—“ Am I managing my own finances well?”
If not, complete that task first. You will be glad and feel empowered.
According to Warren Buffet, hyperactive trading is not a good way to make money in the Stock Market. It is not as easy as some Companies make it look. To convey this, he quoted –
We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’
Good financial advisors aid you to make correct investment decisions with their hands-on experience and advise you on which stocks can reap long-term benefits and which will on a short-term basis.
Before I discuss it further, it’s important for you to know that I think everyone should have a professional help them with their money. However, that doesn’t mean that everyone needs a financial advisor. Most people simply need personal finance help. Sure, they tell you to invest in index funds and things like that, but their primary goal is to help you get into the position to be a saver and/or investor. So basically, you only need a financial advisor if you are going to invest.
Have I scared you off yet? I hope not. A good financial advisor will be important to your future. Price and time in the industry aren’t the qualities you are looking for, however, those are the major selling points for many advisors.
A Great Financial Advisor has the 3 following traits -
1. Good Knowledge
A majority of financial industry people have no idea what they are doing. No one knows what the market is going to do. They might have a theory as to why it might go up or down, but they don’t actually know. So a knowledgeable finance advisor is always in high demand. You attain more expertise by managing your own finances. A knowledgeable financial advisor positions you in the best possible manner so that you can do well in good markets, and survive in bad markets.
2. Effective Communication
When money is involved especially, all the money you have ever saved, things can get extra stressful when a phone call isn’t returned. A good financial advisor always makes a proper and timely communication to its clients to keep them informed.
3. Ability to teach
If you work with a good advisor long enough, you will learn great stuff from him/her. Have you been with a financial advisor for 2 years, yet you haven’t learned anything? That’s bad! Make sure that you are a better investor for having known the advisor you are working with.
Let us summarize the traits of a Financial Advisor:
Most financial advisors look pretty much the same. However, being a recognized authority for your expertise, for your knowledge and insights with respect to a particular market niche, is a very potent way to meaningfully grow your financial advisory business and you gain more expertise when you manage your own finances. Since you will be in a better position to understand your clients pain thereby adding more value to them while advising.
To conclude, a good financial advisor is always in high demand, but the most important of all is that the advisor should actually have a good experience before advising their clients.
I'm sure now you got an answer to the question - What does a financial advisor do?
Now tell me, how do you manage your own finances?
View All BIWS Courses –Free $97 Bonus for FinanceWalk Readers