Question

What do you believe are some challenges to advising individuals or institutions on investment goals? What strategies would you use to overcome those obstacles?

Answer 1

Some of the challenges to advising individuals or institutions on investment goals are that often individuals as well as institutions set unrealistic goals for themselves. Many individuals have vague goals or have an outlook that is either too broad or is too exaggerated. Secondly many individuals and institutions have no definite timeline with regards to their investment goals. Thirdly and most often the biggest challenge is the lack of financial literacy on the part of individuals. Many individuals wrongly believe that financial success is doing things that they always wanted to do. This combined with impatience makes it very difficult for providing advice to individuals or institutions with regards to their financial goals.

To overcome these obstacles the financial advisor should adopt a systematic strategy in which the advisor should start with assessing the current financial position of the individual and his/her future financial requirements like education of children, marriage of children, retirement planning etc. Once this is done the advisor should then explain the most suitable investment goal to the individual both by giving quantitative examples and giving theoretical but non-numerical examples. This will enable the individual to assess the situation in a more realistic manner. The advisor should then also educate the individual about the need to maintain financial discipline, the need to keep patience and the need to not resist changes taking place in the financial markets. When all this is done then the challenges will be gone and advising individuals or institutions on investment goals will become easier.