How to select your financial planner?

The financial world you have to navigate today is increasingly complex. You may lack the time, expertise or inclination to go it alone. Working with a financial planner and investment advisers to provide guidance may be what you need. But finding the right one may be as confusing as navigating the financial world on your own.

Many financial professionals call themselves by similar names, including financial planner, financial adviser, or investment counselor. However, they don’t all provide the same services. Some financial professionals will work with you to identify your life goals, develop and implement an investment plan, and provide ongoing advice. Others will assist you with very specific concerns, such as choosing the most advantageous mutual fund investment, purchasing a medical insurance policy, or developing a retirement savings plan for you.

Once you decide exactly what you need help with, you can match your needs to the expertise and experience of a financial professional.

Before you choose a financial planner, ask your friends and colleagues for recommendations. Many banks have also started providing financial planning and wealth management services to their customers. Interview at least three financial planners before you hire any one. A face-to-face meeting is a good way to make sure the chemistry is right. Be sure to at least ask these following questions :

What service or product will I receive from you?

You need to know right off the bat what the financial planner can actually offer you. If you need an investment strategy and the financial planner only offers insurance products, you may find their service does not meet your needs.

Further, the agent might not be suitable to you if he/she is only authorized to sell products of a specified financial institution, unless and until you have already done your research and finalized on that institution as a best fit for your needs.

What professional licenses do you hold?

Financial professionals will most likely hold some license that allows them to perform a particular service, or sell. a particular product. This license will vary according to what service is offered. For example, to perform certain tax services, the financial professional should hold a Chartered Accountant (CA) or a Tax Return Preparer license, while someone selling a mutual fund or  insurance product should be licensed by AMFI (Association of Mutual Funds in India) or IRDA (Insurance Regulatory and Development Authority), respectively. There are other professional certifications too, such as Certified Financial Planner (CFP) who provide full range of integrated financial planning service to you.

Whenever you meet with a financial professional, be sure the license they hold and the service it entitles them to perform meets your needs.

What are your credentials?

Just because someone might say they’re a financial planer doesn’t mean they’re qualified to help you. That’s why it’s important to check a planner’s experience and credentials before you hire them. For example, some financial designations require a financial planner to pass a comprehensive examination, work for a certain number of years, and agree to follow a code of ethics, while others only require a brief multiple choice test.

While credentials set apart the advisers who earned them, you should never judge a financial professional by a designation alone. Instead, use it as just one of the ways to learn more about the professionals you are considering :

  • Ask them what they had to do to earn it.
  • Ask if they have almost or given up a designation.
  • Find out what code of ethics they follow and if they put your profit ahead of their own. This is important as many agents are accused of mis-selling financial products to investors because of high commissions payouts offered by such products.
  • Finally, some authorities, like AMFI, provide a listing of authorized professionals that you can verify before hiring the professional.

How are you paid?

Some financial planners charge a flat fee to help you develop a financial plan. They don’t necessarily manage your money, leaving it to you to carry out their recommendations. Others earn their living from commissions that are based on the amount of money you invest or the products they sell you. Still others charge you both a fee and receive commissions. For instance, after SEBI removed the entry load on mutual funds, many mutual fund agents were agitated as they would have to charge the fee from the investor directly that would be difficult for them. Earlier, they used to receive the commission from the Asset Management Company based on the amount invested by the investor. Still, the agent would get some commission on the investment cuprous in form of trailing commission.

There’s no one best way to pay for financial planning services. You must decide what makes the most sense and makes you the most comfortable. No matter how they are paid, you should completely understand the process.

Can I have the fee schedule in writing?

Before you hire a financial planner, make sure you get a written estimate of the costs involved. This estimate should list the fees you’ll be expected to pay directly or indirectly. Compare this with estimates you receive from other planners. Also, make sure you get in writing an agreement on exactly what you are paying for. It will vary depending upon the product or service offered, but all financial professionals should be able to provide you the documentation you want.

8 thoughts on “How to select your financial planner?”

  1. in the finance book that i am currently reading, they say that you shouldn't get and adviser unless you are at that point in your investing life where you can judge accurately the suggestions that these advisors give. Lets say that an advisor tells you to buy a stock for a myriad of reasons. You as the investor should be in a position to accurately value the business and the stock and to some extent make your own decisions. You must not let others invest for you but rather think for yourself. In other words, when an conservative investor becomes an aggressive investor, get some good advisors with all the characteristics that you mention above.

  2. My views are that Financial Planner should always be a pure fee based One . Somewhere , the biasness comes for sure if there is commision involved . Atleast he should give the choice of buying products from anywhere .. and if he is sharing any commisions , it should be communicated in advance to client .


    • Agreed! Transparency is the key. As a customer you need to be sure that your interests are being served on priority and not the commercial interests of the financial planner. Financial planner deserves the fee for recommending the best suitable solution for the customer and a fee based model as recommended by you works best.

  3. I am also agreed, Financial Planner should be fee based only. The best thing about having a pure Fee based Financial planner is that they are not biased, and at least they do a better job than a commission based Financial Planner.
    I am actually impressed with the Financial planning service providers like PersonalFN although they charge for you for this, but they are not biased.

    @Karan , I think you can purchase shares in other countries, by two way you can do that…
    either if you are NRI residing in that country.
    or else, you have to tie up with a broker there, and then can start trading, by using your brokers account.

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