How to Select a Great Financial Planner
Choosing a financial planner can be quite a daunting task especially if:
- Personal finance isn't a subject taught to you in school or college
- It appears to be a complicated, intricate world!
- Stock market going up and down!
- Look at the number of investment options!
- With so many retirement vehicles!
- Over 23 insurance companies offering so many types of insurance
- Estate planning and making a WILL is often forgotten!
- Top of all, tax implications of every kind of investment!
Well, given these implications and choices to make, are you now working on a scale or a grid to create and then select your ideal financial planner? If so, then this blog is for you.
Looking at these intricate, complex issues which are all interwoven, I decided to make a checklist. A checklist in which you may just mark present or absent qualifications, qualities and other essentials before shortlisting your financial planner.
- The firm registered: Today every one wants to call themselves financial advisor or investment advisor! Well, there is a regulation in place today wherein only a person/ firm registered with Government of India's watchdog authority- SEBI (Securities Exchange Board of India), can call themselves as Investment Advisor or a Financial Planner. Rest, all are illegal!
- Professional Qualifications: Worldwide, in most of the developed countries, there is a "board". Originating from the USA, the Financial Standard Board of India gives a certification called as "CERTIFIED FINANCIAL PLANNER" or in short- CFP. This certification is a hallmark of excellence and is considered as the highest qualification in the world in personal finance.Then, based on 4 E- Ethics, Examination, Education and Experience, a candidate is offered the Certification. This certificate is valid for one year and then is renewed subject to continued learning and confirmation of all 4 E. Given the stringent process, this is a rigorous certification in personal finance. To get this certification, one has to undertake education on five elements of personal finance:
- Introduction to Financial Planning
- Risk Analysis & Insurance Planning
- Retirement Planning & Employees Benefits
- Investment Planning
- Tax Planning & Estate Planning
- Experience: One can get the qualification and mandatory registration to start financial planning practice, but check if your prospective planner has adequate experience. Experience is one important criterion to consider as what will work or not work for you, can come only from experience. If your planner has experienced various stages of the ups and downs of the market, has got valuable feedback from his clients. Hence, he knows the best workable solutions for all your issues beforehand. He doesn't need to try!
- Services offered: Check if your financial planner provides all the services that you may need. Depending on the certifications and registrations, the firm or person may be able to offer the relevant services.
- Office & Infrastructure: check out for proper office and appropriate facilities. This would indicate stability and long-term sustenance of the planner.
- Agreement and scope of work: Once you have met the planner, ask for a formal agreement copy and a listed range of work. This would indicate that all work he would do for you. This would give you confidence and satisfaction that everything is documented and there is no room for doubts. Also, check our "out of scope" works and his associates who can help you further in allied areas. Areas like CA, Advocate etc. for your income tax returns and WILL.
- Fiduciary Capacity/ Conflict of Interest: Check out if your planner works actually as a "fiduciary". A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. (Source: Wikipedia).This will reflect any conflict of interest. Like he may be a mutual fund advisor and would naturally propagate some fund where perhaps he earns more commission. This would not be in your greater interest!.
- Implementation and Execution Assistance: If your planner has worked earlier as an advisor or an associate or has associates or can refer to someone he trusts, then proper implementation and execution of your plan would be smoother. Also, if your planner can make investments in direct mutual funds online and through his links, he would be much better equipped to monitor and execute all your investments (if certain investments need to be done in mutual funds). Also, he would be better able to re-balance your portfolio or stop or start a particular fund if it is not performing as per defined standards like the benchmark index in that category.
- Monitoring and Review Systems: as explained above, both monitoring and reviews become part of the long-term financial planning process. Ensure that you and your planner have systems in place to remind and actually conduct periodic reviews. This will ensure continuity of your thoughts and his investment strategies.
- Planners Views: During your interaction(s), evaluate the thoughts and personality of your prospective planner. Qualities like being compassionate, empathy, relator,
- Client Testimonials
- Social Credentials
- Someone who can empathise with you: People exceptionally talented in the Empathy theme can sense other people’s feelings by imagining themselves in others’’ lives or situations.
- Someone who can give your strategies: Strategic theme planner can create alternative ways to proceed. Faced with any given scenario, they can quickly spot the relevant patterns and issues.
- Someone who can deliberate with you over review meetings: People exceptionally talented in the Deliberative theme is best described by the serious care they take in making decisions or choices. They anticipate obstacles.
- Someone who can be a Relator: People exceptionally talented in the Relator theme enjoys close relationships with others.They find deep satisfaction in working hard with friends to achieve a goal.
- Responsible: People exceptionally talented in the Responsibility theme take psychological ownership of what they say they will do. They are committed to stable values such as honesty and loyalty.
Thus, your planner is now: someone who can educate you on matters of financial importance and continuously be your guide and mentor. Someone you can bank on to take any advice in faith. Someone you can bank on to receive any information on personal finance matters with confidence. Someone who can correlate all your issues and bring synergy and make it simple.
After you have gone through this list, now get prepared yourself with the following list:
- Make a list of your goals
- Prepare your self: educate
- Ask Fee Structure
- Clarify Ethics and Competence
- Perform Due Diligence
- Get a written proposal
- Review working relationship
- Check if your financial planner can help you reach your goals
- Can you trust him/her?
- Can he/ she "relate" to your issues well.
With such due diligence and shortlisting, you are now equipped to hiring a financial planner of your choice.
Enjoy the journey!
Trust Your Financial Planner for life now!
Ask any fundamental or weird questions now!
Make him your trusted friend.
Have a great well planned financially balanced life ahead.