Behavioural Financial Advice & its Importance

The main task of a financial advisor is to
assist an investor to achieve their financial goals through asset allocation,
portfolio management and market analysis. But more than often the traditional investment
and financial management advice falls short to impress or encourage the
investors to make a fruitful investment. The main reason for such failuresis
partial and half-baked outlook towards investment; investors are often guided
by their own set of bias and confusions. This is why it becomes crucial for
advisors to play a behavioural role often to help investors make effective and
bias-free investment decisions.

Behavioural financial advice doesn’t try to
replace the traditional form of financial planning; in fact, it aims at
utilising both traditional investment advice and behavioural components to motivate
themselves to offer bias-free and objective investment advice that will guide
investors towards making better investment decisions. Typically, behavioural
financial advice comprises of four components, namely, traditional finance,
economics, psychology and behavioural patterns. An amalgamation of these
components is utilised by the financial advisors to encourage investors to seek
the opportunities that are best for them in terms of sustainable returns and
risk factor.

Role of Behavioural Finance Advisor

With
further analysis, one can safely say that the job description for financial
management is evolving with time and will continue to do so in future as well;
since investors’ behaviour is so crucial for investments one might as well ask
about the behavioural role advisors often play.Besides having a good reputation
and the expertise to help maximize returns, the behavioural financial role of
an advisor includes a variety of tasks and the following are some of the many
roles they play:

  1. To help clients to be in control of their
    emotions
  2. To be approachable and easy to talk to
  3. To help clients reach their financial goals
  4. To be responsible and in sync with the client’s
    portfolio while making market-oriented suggestions
  5. To be transparent about their fee structure and
    charging pattern
  6. To have a keen sense of understanding of both the
    market and the client’s need
  7. To be updated about the latest technology,
    investment trends and theories
  8. To offer selfless and unbiased financial solutions
    and advice
  9. To communicate with the client in a transparent and
    easy to understand manner
  10. To keep the client in the loop with the market and
    its movement that may seem like a good opportunity for them
  11. To keep the client on the right track in order to
    help them reach their financial goal

An investor’s savings,
behaviour and investment decisions tend to have a deep effect on their
finances. An effective combination of traditional investment advice and
behavioural financial advice is the need of the hour to make a focused and
objective decision towards investment. Make your investment decisions free of
bias and emotional blur by availing the best financial advice from our
behavioural financial advisors and focus your entire energy towards maximising
your returns.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 85350

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