Today if you ask any one, “From
whom do you take investment advice?” Most people will reply, “ I seek
investment advice from my agent, friends, relatives, newspapers, magazines or
some TV shows.” Rarely do you get to hear someone seeking investment advice
from ‘Financial Planner’. Today you have switched from ‘vada pav’ to ‘Mc.
Alu Tikki’, ‘laptop’ to ‘tablet / I-pad’. Similarly since the SEBI,
Investment Adviser Regulations, 2013, are in place now; you should soon shift
from ‘Agent’ to ‘Financial Planner’. But you don’t know who is a good Financial
Planner? How to choose a good Financial Planner? To sum it up in one line - A Financial Planner puts client’s interest first, before
his own interest; since he is getting paid for giving financial advice.
While choosing a Financial
Planner you should consider some of the points below:
Licenses, credentials or other certifications:
Anyone who charges fees for giving investment advice needs to be
registered with SEBI under Investment Adviser Regulations,
2013. Already few financial planners have got their registration certificate
from SEBI. So, if your financial planner is charging fees, he should be
registered as Investment Adviser with SEBI. You should also ask if the planner
has additional certification like CFP (Certified Financial Planner), or any
other similar certification or degree relating to this field.
Services offered:
You should know
what kind of services the planner offers. Services can be goal based financial
planning, estate planning, mutual fund distribution, insurance agency and PMS,
etc. If the planner provides distribution services, then it is easy for you to
implement the financial plan. But, on the other hand there can be bias in the
recommendation given by the planner since he earns commission on the investment
/ insurance product you implement through him. So the planner must disclose the
commission that he will earn if you implement the plan through him.
Fees:
Financial Planner
charges fees for preparing a goal based financial plan for your financial
future. Average fees for a financial plan ranges from Rs.15,000 – 25,000. The
planner may charge additional fees for estate planning (preparing a will or incorporating
Trust). You should also check that the planner does not have differential fee
structure if you implement plan with him and if implement by yourself from a
third party. The fees paid usually covers planning and review of the financial
plan for a period of one year; so you should also ask about it before entering
into a contract with the planner.
Basis of recommendation and research:
You should know on what basis the financial planner is recommending
particular investment or insurance instrument. You should ask if the planner
has a research team or he outsources research. This is important because the
planner cannot recommend any investment / insurance without studying or knowing
the investment / insurance product. Also, you should ask whether your risk
profile would be assessed and considered for recommending investment.
Client-Planner interaction:
During the initial stage of data
gathering and analyzing the financial situation, there is a lot of interaction
between you and the planner. Apart from that, in the later stage after the plan
presentation and implementation; the planner should review your portfolio and
your goals periodically. You should ask how often your portfolio and the
financial plan would be reviewed. Review is the most important part of the
financial planning process.
These are the some of the points,
which you should consider and know about the Financial Planner before choosing
one for you. Some of you may not be aware that what is there in a Financial
Plan and how does it look, so you can ask for a sample financial plan from the
planner. Looking at the sample financial plan, you can get an overview and
brief idea of what are the components of a financial plan. Since, now all
Investment Advisers are under SEBI’s eye; and thus they are obligated to comply
with the regulations.
Now it’s time to change, plan for
your finances and find a good Financial Planner for yourself.
Published in: Moneycontrol.com, The Tribune
