Why take Investment Advice

Unless you are an investment expert yourself, it is highly likely that you do not know about all the investment opportunities out there. Even if you know about the most popular ones like fixed deposits, mutual funds, bonds, stocks, etc. at a high level, you may not have the knowledge, time, or resources to decide how to/whether to/when to allocate your assets amongst 1000s of those investment opportunities with ever-changing dynamics and risks. Further,

• You may fall prey to distributors/agents - Mutual fund distributors (similarly, distributors of various other financial instruments such as AIFs, PMS, Bonds, Stocks, IPOs, etc.), insurance agents, or your banking relationship officers may pose themselves as financial advisors and suggest funds/products for which they get maximum commission than what's best for you. Many times they may have the best intentions for you but may not have the skill and data required to see through the potential risks involved in complex financial instruments. Further, a distributor/agent being a specialist for a certain financial product, may not know about what else is possible for investing at a similar risk that can deliver better returns.

• You may get low returns/face losses unnecessarily - It is very difficult to reach the level of experts when you are investing on your own on a part-time basis. An advisory company typically uses extensive resources to evaluate various opportunities which are prohibitive for an individual to replicate. This may lead to skipping good opportunities or making losses that could have been avoided. A small 2% loss in potential returns annually translates to over 70% reduction in your net-worth over a 30-year period.

• You can benefit from the dependability factor - Many times, you may also simply benefit from having an expert to speak with when faced with uncertain market conditions or uncertain personal financial situations. Investment advisors in India are mandated to register with SEBI, which in turn makes sure that the company and personnel involved in the advisory function are highly qualified and have the necessary resources to help the client. Further, SEBI enforces fiduciary duty towards the client, meaning, an advisor must act in the best interests of the client and must not accept any fees or commissions from any other source apart from the client.

This is probably why many successful/accomplished people invest using investment advisors. For that matter, it is always advisable to use experts in each field when you want the best results in that field, be it doctors, lawyers, entertainers, chefs, or others.