There is a flurry of activity in the financial planning and advisory space. The practice of earning a commission from the producer is on its way out and several advisers are designing value propositions to earn a fee from the customer.
Most financial advisers like the idea of financial goals, their estimation, and investment products designed to get there. Advisory is quickly getting equated to planning. This is a valuable thing to do and charge customers for, but financial advice should ideally cover a much larger ground.
There is no denying that the clientele for personal financial services is growing. While most open a bank account as soon as they begin to earn, they do not get dependable advice on how to manage their finances after that. Even opening a bank account has now become a matter of advice, with free pricing of deposits and services.
Customers need advice on taking loans, managing their liquidity, making and monitoring their investments and ensuring that their wealth is taken good care of. The demand for advisory services may be more nuanced. Let me spell out some simple advisory services that customers may be looking for.
First, investors may need help with management of investible surplus. Several people tend to leave unused balance in bank accounts. While it makes perfect sense to deploy the surplus, the activities associated with its deployment take time, energy and paperwork, which many of us shun. Advisers working with banks, who have access to investors' balances, can help in routinely investing this surplus.
However, they tend to not do so since it helps their bank to have these low-cost funds lying around unused. Non-bank advisers can step in to see if they can put a process in place, converting routine surpluses to deposits, bonds, or investments in saving schemes. I know of a large number of people who will heave a sigh of relief at this possibility.
Second, while motor vehicle insurance is easily done, other forms of insurance are not seen as tools to managing expenses better. Insurance sale is skewed towards products that customers have begun to see as rip-offs. Low wage earners, such as drivers and maids, may need health insurance, and there may be generous employers willing to pay the premium, only if an adviser arranges the process and paperwork.
Several need general insurance to protect their assets, but may not have the time to complete the tasks that lead to the purchase of an appropriate policy. The unexpected expenses that have to be incurred when an asset is lost, stolen, or destroyed, can be avoided with inexpensive insurance.
Then there are people who change their jobs so often, but don't care to check how well they are covered by health insurance. There are others who do not work for employers who provide such a cover. Several may need health plans that protect them and their families adequately.
Beyond the greed for Ulip and the plain vanilla term policy, the possibilities in insurance remain mostly untapped. Third, there is the general view that financial advisory services are for the high net worth individuals (HNIs).
Great financial advice
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