The biggest issue one faces in hiring a Financial planner is “Trust”, so you need to build a great level of trust with the Financial planner and for that you need to interact with him, spend time with him, get references from family and friends and once you are satisfied you can then hire him/her. A financial planner at the end is someone who is also interested in educating you and not just making money from you. Just imagine a doctor who gives you medicine, but does not tell you the preventive measures to take, so that you are not ill next time. Would you like to visit him again? He should be interested in educating you up to a level where you can take informed decisions yourself. Only then you can call him a good doctor, the same applies to a financial planner.
There are three ways a Financial Planner in India makes money:
Now in India people will laugh if a Financial Planner asks money in per hour basis, it’s just not what Indians can imagine. We Indians like to pay one time fees or lump sum fees, that’s the model India runs on. A good financial plan takes around at least 10-12 working hours (strongly focused and distributed across several days). From that point of view a price range of 10k – 25k looks reasonable for a Financial plan. Anyone who is charging less than Rs 10,000 is undervaluing it and working more for less money. Other point is, you have to understand that all financial planners differ from each other and the amount of detail and care they take while creating it.
Certifications from Amfi and Irda are essentially a licence to sell a certain financial product, while a certified financial planner, or a CFP, is a qualified adviser. It is important to distinguish the two. Better to pay for good advice then act on free advice that is biased.
Unmask the Poser
Smart questions to ask a financial planner and the answers he should be giving you
Q. What qualifies you to be a financial adviser?
A. I am a certified financial planner (CFP) or I have a certificate from Irda/Amfi/National Institute of Securities Markets. (A CFP is better qualified to manage a portfolio).
Q. Do you have relevant experience?
A. Yes (Make sure you are not the guinea pig. The years do not matter so much as the kind of exposure and profiles he has handled in the past).
Q.Can you give references from current clients?
A. Yes (Speak to at least two existing clients to ensure you get quality service).
Q. Will you draw up a service agreement? Will the advice be given in writing?
A. Yes, and the advice will be recorded in writing. Q. Is my fee your only source of income? Do you get commissions for the products you recommend? A. Client fee is my only source of income. I do not earn commissions on the products I recommend. |
Current Status of Financial Planning Practice in India
There are three ways a Financial Planner in India makes money:
1. By pure consulting and advising (by making the financial plan)
2. Through Commissions (from products sold to clients)
2. Through Commissions (from products sold to clients)
3. Combination of 1 and 2
So what you have to look for while hiring a financial planner is that He/She should be an Independent Financial planner and has no compulsion of executing the plan through him. There should be freedom in Clients hand that he/she can execute the plan from anywhere he/she wants. As an additional service the Financial planner can give an option to have financial plan executed through them, but it should never be compulsory, as otherwise there will always be some level of biased attitude while recommending products to you.
How much to Pay:
This is a debatable topic, still let’s try to understand and find out how much do Financial Planners deserve.
Financial Planners in US and Australia get as much as $150 to $200 per hour. (that’s close to 7.5k – 10k per hour). Financial Planners in India cannot and should not ask for that kind of money for two reasons:
So what you have to look for while hiring a financial planner is that He/She should be an Independent Financial planner and has no compulsion of executing the plan through him. There should be freedom in Clients hand that he/she can execute the plan from anywhere he/she wants. As an additional service the Financial planner can give an option to have financial plan executed through them, but it should never be compulsory, as otherwise there will always be some level of biased attitude while recommending products to you.
How much to Pay:
This is a debatable topic, still let’s try to understand and find out how much do Financial Planners deserve.
Financial Planners in US and Australia get as much as $150 to $200 per hour. (that’s close to 7.5k – 10k per hour). Financial Planners in India cannot and should not ask for that kind of money for two reasons:
- They will not get it
Now in India people will laugh if a Financial Planner asks money in per hour basis, it’s just not what Indians can imagine. We Indians like to pay one time fees or lump sum fees, that’s the model India runs on. A good financial plan takes around at least 10-12 working hours (strongly focused and distributed across several days). From that point of view a price range of 10k – 25k looks reasonable for a Financial plan. Anyone who is charging less than Rs 10,000 is undervaluing it and working more for less money. Other point is, you have to understand that all financial planners differ from each other and the amount of detail and care they take while creating it.
BE SMART
