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Financial Resolutions to Reduce Risk and Strengthen Community

Lovaii Navlakhi CFP IndiaBy Lovaii Navlakhi, CFP

As you can see, I spent quite some time thinking through what my New Year resolutions should be. My mind wandered to the many roles that I play as a financial advisor. I am a custodian, I am a coach, I am an analyst, I am a crystal ball-gazer, I am a punching bag. While some of these may be distractions, I have to keep my eye on the goal post — on which are imprinted my clients’ financial objectives. Some of these goals are a distance away, but if I lose sight of them, I may need to backtrack to get on course; at a substantial loss of time and money for my client.

However, I thought that I should focus my attention to the one New Year resolution that I should make as a financial advisor. I will come to that in a bit.

So what do I do for a living? — not really much different from what other financial advisors do. I meet prospects and share with them the advantages of financial planning. I take them through the data gathering process. Along the way, I guide them, coach them; sometimes resolve family differences on what the path forward ought to be. While creating and presenting the financial plan, the long term goals are not ignored; the short term goals are not lost sight of. There could be detailing in the next 12 month cash flow. Current market overview and tactics required to be followed are shared. But at the heart of the financial plan is the strategy that will be followed to help all goals to be met. That gives us the rate of return required and thereby the asset allocation.

Reduce Risk with Asset Allocation

What is the objective of asset allocation? Simply, it is to not put all eggs in one basket and as a result, reduce risks. (We are often distracted by our clients to focus on returns, but I very clearly see our job as to ensure that we reduce risks for our clients — returns are just a by-product.)

I want to make a resolution that I suggest the most appropriate asset allocation for my clients.

 And before we get to the split between risk (equity) and non-risk (fixed income) assets (and the allocation to gold and cash); and even between physical (real estate being a major part) and financial assets; we can make a meaningful difference to the risk of our clients’ assets by ensuring a suitable allocation to different countries and currencies.

Now, I can boost my ego and even convince my client that I am the expert at all this, but you and I know that it is virtually impossible to be an expert in investment options in all parts of the globe. This New Year then I would like to ensure that I interact with advisors in other parts of the globe on an on-going basis, so that I can understand global markets better. This will do two things:

  1. Ensure that (country-wise) asset allocation does for my clients what it is supposed to (reduce risks first)
  2. Sharing experiences can only make the financial advisor community stronger

I look forward to being a proud member of this community when I make my next New Year resolution!

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