How to choose the Right Financial Planner

Mint, 14/1/2011

Don’t get confused between an agent and a financial planner. Even among planners, some may work for you better than others. Here’s what to look for to choose the one who suits you best

This new year, Deepa Bhatia, a 36-year-old marketing professional with a multinational cosmetics company, wants to get her financial life in order. Though she saves regularly, she wants a professional to look into her investments and tell her whether she is on the right track.

To start with, she approached a few advisers attached to some prominent banks. But in the first meeting itself, she figured out they would be unable to cater to her specific needs. “They were either hooked on a particular product or a product from a particular company. But I wanted a comprehensive look into my profile and suggestions about rebalancing my existing investments,” says Bhatia, based in Mumbai.

It was then that she decided to write to us. In fact, Bhatia is not the only one. Recently, various readers have asked us how to choose an adviser.

The market today throws many options in the financial advisory space—there are mutual fund agents, insurance agents, relationship managers and financial planners. So which one is really meant for you?

Pick a planner

The first step is to pick up an independent financial adviser or a financial planner because they will give you a holistic picture of your finances and the direction they should head towards.

“A good adviser would give you a 360-degree advice,” says Ranjit Mudholkar, CEO, Financial Planning Standards Board India (FPSB), an institute for development and promotion of standards for financial planning professionals in India.

There is a difference between a financial planner and an adviser or an agent for a company or a bank. An adviser can be someone who is attached to a bank or a mutual fund company and will be more interested in selling products that will fetch him commissions.

Says Mudholkar, “It is important to ascertain whether he is just an agent for a company or an independent planner. More important is the fact that whether the agent is disclosing his exact identity or not.”

Look at the product suite: A good planner should have various products from different companies in his armoury and should offer you the ones which suit your specific needs.

“Ideally one should go to a fee-only adviser. He will only charge you for his services and won’t have interest in selling you a particular product,” says Veer Sardesai, a Pune-based financial planner.

A fee-based planner would declare his fees and the commission that he would receive from various products that he offers you. The payment can be made by deducting the commission amount from the fee in such cases.

Once you know what you are looking for, the next step would be to choose a genuine solution provider.

Qualities to Look for…

Knowledge and qualification: Not everybody understands the various products available in the market. Says Mudholkar, “The competency of an adviser can be gauged through academic qualification and professional degrees held. You must verify whether one is a self-proclaimed planner or possesses degrees such as certified financial planner (CFP) or chartered accountant.”

Entrusting your hard-earned money with a third person is not easy. Good credentials would assure you that the planner understands the subject well and inspire confidence in you in terms of trusting his judgement.

Experience and stability: Experience matters is an old proverb and still holds relevance. With experience comes knowledge as well. “If someone is in the profession for quite a number of years, then you know that he knows about the field. Also this proves that he is not a fly-by-night operator,” says Sardesai.

Beware of one-man-shop or part-time advisers; they switch professions given a better opportunity. “We often encounter clients whose planners vanished from the profession when they got an opportunity elsewhere,” says Ranjit Dani, a partner with Nagpur-based financial planning firm, Think Consultants.

Track record and accolades: Another way to go about selecting a planner is to see his past record—whether he has won any awards or how popular he is among peers. Meeting the clients of a planner would give you an idea on his mode of work. A transparent planner wouldn’t have a problem letting you meet his clients. “It is important whether the planner lets you meet his clients or not,” says Mudholkar.

It is possible that you may find somebody who was in a similar situation as you are at present and assess the growth by sharing his story. Do remember that financial planners, according to their code of conduct, cannot share financial information of their clients.

Comfort quotient: It is important to have a comfortable communication level with the planner. “If the planner can’t communicate with you in a language you are comfortable with, then I think you should look for another planner,” says Sardesai.

Unless you are able to share your issues with the planner, it will not really help. Moreover, the planner needs to consider your point of view before taking any decision on your money, while giving his professional touch.

But here’s a word of caution. Says Surya Bhatia, founder consultant, Asset Mangers, a New-Delhi based planning firm: “Maybe you are an aggressive investor but you find that the planner is conservative or moderate. But do remember that his work is to take a balanced approach. Don’t reject his plans at the outset. You need to give some time to the plan to materialize and it does not happen overnight. It may take anything between two years and four years for results to show up.”

Where to find one?

Though there is no parameter to assess the worth of a planner as of now, FPSB plans to come up with ratings for planners soon. These ratings would be based on the level of planners’ competency. “There is going to be a rating mechanism established. It will rate and differentiate the planners on their level of competency and would be available on FPSB website (,” says Mudholkar.

At present, the website has a list of CFPs across the country and gives you the option to search for a planner through various filters—name of the planner or the company, city you are looking for or the nature of employment of the planner.

Reference may work: Choosing a planner is like choosing a doctor, a lawyer or an architect. While reference assures you that the planner is reliable, it doesn’t guarantee that it will work for you. “It is very difficult to know whether someone is a good planner or not. A planner who has been referred to you may work for you,” says Mudholkar.

How much to pay?

Like any other professional or service provider, financial planners too charge a fee. “One must appreciate the work a planner does for you and should be willing to pay adequate compensation,” says Mudholkar.

So what is an ideal fee to be paid? It varies from city to city and the level of service you are looking for. It could be anywhere between Rs. 5,000 and Rs. 1 lakh per annum. “It depends on the time the planner spends on your portfolio. Ideally, the fee for a person who has Rs. 5 lakh to be planned and another with Rs. 5 crore should not be different. However, a huge corpus needs more time for planning and detailing. Also people with a bigger corpus are able to pay more,” says Bhatia.

Also, if you ask the planner to churn your portfolio regularly, it may cost you a bit extra.

If you go to an agent, you may not have to pay an upfront fee. However, the advice that an agent gives may not be customized to your needs. There is a need to realize that a few thousands spent today may help secure your financial future for your family and kids for a lifetime. “When you go to buy a television set, a refrigerator or an apartment, entire family goes along to select the best product and you pay an appropriate price. What you spend now will impact your next 30-40 years of your life,” says Mudholkar.

So to make sure your investments work for you, make another long-term investment, and a small one at that, on a financial planner.

Our Comment:

We at VRIDHI provide a 360 degree to our clients approaching us for Financial Planning. We deal in all kinds of financial products. VRIDHI is an one stop solution for all products. There may be agents who may try to sell only Mutual Funds or only Insurance or any other product for every need of yours which is absolutely against your interests, one only has to be beware!

You can Experience our Service only if you give us an Opportunity to Serve You.

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