Choosing the Right Financial Planner – Questions to Ask Before Hiring One – Paisa Vasool

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In case you are one of those individuals who are facing issues while managing your capital, or wish to know how to grow your wealth, you may want some help from outside in the form of a financial planner. A lot of people may not need one, and often take the do-it-yourself approach and manage their wealth themselves. However, there are several individuals who may want to use the expertise of a professional who can objectively advise them about their financials. If you are considering hiring a financial planner, there are some aspects to think of before you do. Before that, you should know who a financial planner is and assess whether you even require one. 

Who is a Financial Planner? Do You Require a Planner?

A financial planner is a firm or an individual whose responsibility is to guide you in fulfilling your financial goals (long-term and short-term goals), based on your own unique financial health and situation. In this sense, financial planners offer you customised services. In case your financials are simple to grasp, you may not need a planner, but if, say, you are having issues with your current finances, you may hire a planner. A financial planner is a professional who is officially authorised to provide you with expert advice and guidance on how to invest your money, determine your financial priorities, decide about insurance needs, etc. 

Different Types of Financial Planners

Depending on your distinctive financial needs, you can choose planners accordingly. This means that you should know about the different types of financial planners available to you. These are highlighted below:

Investment Advisor

This is a registered financial advisor, an expert who is able to provide investment advice. These advisors are officially registered with SEBI or the Securities and Exchange Board of India. They can give you advice on a range of investment products from stocks and bonds, to mutual funds, debt instruments, and insurance products. 

Certified Financial Planner

A certified financial planner can give you more comprehensive, yet general advice, catering to your special needs, like recommendations on budgeting, retirement planning, debt management, and planning your estate. 

Registered Representative

A registered financial planner is also registered with the Securities and Exchange Board of India but is authorised to sell you a variety of securities. They may be able to provide financial advice, but their main goal is to sell you securities.

Insurance Advisor

As the name suggests, Insurance Advisors can give you advice about a host of insurance products (health insurance, life insurance, vehicle insurance, property insurance, etc.) and advise you on those aligned with your requirements. Insurance Advisors are authorised by the IRDAI or the Insurance Regulatory Development Authority of India. 

Tax Advisor

A tax advisor is able to give you advice related to taxation and how you can lessen your tax liability. Tax advisors are also experts at suggesting ways to reduce your tax burden in the future, helping you to save more of your capital. 

What to Consider in Your Choice of Planners

While opting for the services of a financial planner, there are some considerations to keep in mind: 

Qualifications

Your planner should be qualified in the area of expertise according to the financial advice you require. Say, if you need investment advice, your planner should be registered with SEBI. 

Experience 

You must make sure that your financial planner has adequate experience in their field. In case you are planning for retirement and want advice along those lines, for instance, your planner should have dealt with such an area with clients in similar situations. 

Regulatory/Compliance History

You can always check the background of any financial planner who is registered with SEBI, and find out about any issues or complaints applicable. 

Exit Strategy

If you have to sign a contract to avail the services of a financial planner, then you must consider the terms of the contract regarding the exit strategy. Is there a penalty involved if you exit before the conclusion of the contract? Consider this and other questions that may come to mind. 

Questions to Ask

Since you are availing the services of a financial planner, you should not shy away from asking appropriate questions that will help you in your decision-making in choosing the financial planner you require. Here are some questions you must pose: 

  • Are you a financial advisor or a seller of products?

You should know whether a person can give you authentic and useful advice or whether they wish to merely sell you financial products. This helps you to grasp the expertise and field of knowledge of the planner. Product sellers introduce you to products while advisors manage your finances from top to bottom. 

  • How do you charge? 

The answer to this question will help in understanding the fee structure of the financial planner. Some planners may charge you a flat fee while others may charge you on the basis of your asset value. 

  • What kinds of clients do you usually work with?

The answer to this question will give you information about the range of clients your potential planner has dealt with in the past, and tell you about their experience and expertise areas. 

  • What is your investment philosophy?

This gives you some idea of the planner’s thoughts about finances, and whether they share your own mindset. 

  • How do you handle asset allocation and rebalancing?

The answer to this question will give you clues as to how financial planners will allocate your capital, whether in a diversified way or not, and how your finances will be adapted to changes in the market. 

Planning to Hire a Planner?

Financial planners can give you the benefits of growing your capital, and give you the peace of mind to handle and manage your finances in the best way possible. It is only right that you ask questions before you hire a planner, or it may be too late to get out of contracts after you have hired the services of one. 

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only.

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