Kolkata, December 10: Most of us find it difficult to manage our money. We may not know how to approach financial planning or we may not have the time to devote to planning finances. In either case it is recommended that we hire a financial planner. A financial planner is like a doctor. At a very basic level, she understands your financial goals and gives you advice on how to manage your money.
It is important to choose the right financial planner. We tell you how to go about it.
Do a credential check: You would want to make sure that the planner is qualified for the job. See what the planner has in terms of qualification. She could be a certified planner, a CA or even someone with experience in financial planning. Such professionals should be members of financial planning groups and organisations, so that is also a point of reference. Check the validity and authenticity of any institution and group the planner mentions.
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You should also speak to the existing clients and know learn about their experience. Financial planning goes beyond having just fancy qualifications.
Opt for a fee-only model: There is nothing called free lunch. In the same way, you have to pay for good financial advice. If a planner is not charging a fee or charging a very low fee, he or she would be making money from other sources. In all probability, it will be through commissions from products, being sold to you. In some cases these products may not be the ones that suit you.
Fee-only financial planners will charge you an annual fee depending on their experience, the type of services provided, the amount of time they devote to you and so on. The fee may vary from Rs 10,000 and may go up to Rs 50,000 or more a year. Some planners will also charge you a small percentage of the assets being managed. Also, remember that when planners recommend a product they should make it clear to the client if they are earning commission on it. You get what you pay for.
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Understand the approach: Before committing to any planner, make it a point to meet and see the person’s approach to financial planning. It starts with in depth discussion with the client to understand needs and goals. A 'one-size fits all' approach does not work in financial planning. Again, while execution is important, financial planning is certainly not about recommending you stocks and mutual funds. You should be able to have long chats with your planner and open up regarding your goals, beliefs and anxieties. To take the example of a doctor again, a planner will not just prescribe medicines but start with understanding your situation and what will work best for you.
Choose a planner who is willing to engage with you, who gives you enough time and takes a serious interest in your financial planning.
