Financial Planning can mean different things to different people. Some would say, “Save more and spend less”, a few would say “creating wealth which means buying property, gold etc., and some firmly believe that financial planning is to have a secure and financially independent retired life. So here we go… All of it or some of it may or may not be right. That’s simply because financial planning is not one or all of the above. It is planning your finances well –enough to enjoy the full benefits of your income in the present day and in the future with the help of an expert in the arena. A Certified Financial Planner.
A certified who?…. And that reaction from the average Indian is expected. The very word ‘Financial Planner’ can have many of us thinking that the person would be after our savings, or it would that smart sales executive who would convince us to sign up a Mutual Fund or Investment plan. Personal Bankers, Stock Brokers, Wealth Management Executives, Chartered Accountants and Relationship Managers in Banks and NBFC’s are the different personalities or professionals who come to our mind. These professionals do not provide financial planning as a service. They sell different financial instruments or investment plans. Investment is a part or subset of financial planning. With that said, let’s come back to the critical question.
Who is a Certified Financial Planner?
A financial Planner is someone who helps his customers by providing advice to solve their financial issues or financial mess. A person with an accredited certification for the same can be called as a Certified Financial Planner. Just because we know about the stock market or which Mutual Fund is performing best, it does not mean that we can do our own financial planning. It is also wrong to think that the services of a financial planner are of no use or value to us.
A certified financial planner is someone who thoroughly understands an individual’s earning potential and spending patterns and tailor-makes a strategy that will offer stability on solid financial ground in the present and in the future. Financial Planners are experts in transforming the financial situation of the common man for the better by following a planned route to alleviate financial commitments, increase saving potential, put the individual’s life on the road to prosperity, and enable the development of financially secure future.
A certified financial planner is an individual who has a certification from the Financial Planning Standards Board (FPSB). This board was established to provide certification as an independent body by the CFP and the International CFP Council. The certification is internationally valid. Now that is a lot of work going on in the making of a Certified Financial Planner.
So what must you look for when it comes to choosing your Financial Planner?
Stating facts on the table: Your financial planner must call a spade a spade. If he thinks that you are spendthrift he must state so. If he thinks that you were hasty in buying mid-cap stocks he must say so. If he thinks that you took up a home loan that you cannot repay or repay only at the cost of giving up your lifestyle in some way, well then he must say so too. In other words, he must help you understand the real picture of your current financial status
There can be no magic: Hiring a financial planner is the first step you take to get out of your financial mess. It takes a lot of time and some painful decisions and actions from your end to see the transformation in your financial status. There is definitely no magic.
Competence is the key: A certification is alright. But is the financial planner competent? Go with financial planners who come to you through a reference or if you know that he/she has a proven track record.
Patience is Prudence: Wait to see the results of the strategy. Most of the time the Financial Planner will have to undo years of mishap. Then deploy the devised strategy to see if it delivers the desired results. Now this process does take time.
Returns: A financial planner should not promise returns. Returns are promises made by Wealth Managers, Stock brokers or investment managers. Definitely not a financial planner. The best thing that you can expect from a financial planner is financial stability and a way out of your current financial mess.
How much to pay a Financial Planner?
When Financial Planners are less known in India, although their talents are now attracting a lot of recognition especially among the affluent and the urban new age professionals. In the US a certified financial planner charges anywhere between $120 – 240 an hour. And Indians would laugh at an hourly rate for the Financial Planner.
However, Financial Planners who know their jobs charge anywhere between INR 10,000 -15000/- as a flat fee. Some high profile and experienced planners charge close to a lakh or as a percentage of the total value of the portfolio they have to restructure.
So take a good look at your finances and see if you would want to hire a Certified Financial Planner.
This article has been contributed by Right Horizons