What You Need to Ask Your Financial Planner?

“No one is dumb who is curious. The people who don’t ask questions remain clueless throughout their lives.” Neil deGrasse Tyson.

Knowing the competency and independence of the professionals we work with is important. Usually, we go to doctors or chartered accountants referred to us by someone known to us.

With the opening up of the financial sector in India, we have plenty of investment options available for the investors. Investors used to consult their insurance agents or chartered accountants, for their investment consulting needs.

However, wealth building and investment management have emerged as independent areas of professional competency. The emergence of Financial Planners is the result of this development.

Certified Financial Planners are the professionals, who are experts in financial planning, and wealth management. They understand the financial goals of the clients and help them in achieving their short-term and long-term goals.

Today investment options in the market are plenty. From pure bank fixed deposits to Govt. bonds, private company fixed deposits, debentures, equity shares, various mutual funds schemes, plenty of life insurance products, derivatives, forex, chit funds, multi-level investment schemes, real estate, art, and many more.

Return on investments, long-term vs short-term tenure, risk vs safety elements, tax angle, and planning. There are a lot of issues which are required to be considered before investing. On top of these there are rules, regulations, and market everything changes which make already confusing situation chaotic for a layman.

Financial Planners bring their expertise to simplify the jungle of complex financial word for their clients.  They have become valuable for in this complex and fast-changing markets.

However, before engaging with a financial planner, investors need to be ready. They need to be ready with some basic question to understand the competency and background of the person. Here are four questions you need to ask before you engage with them.

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1)   Previous Experience

This is the obvious thing to ask. Knowing her clients’ list, education, experience, references, basic knowledge about financial products is the required first step.

Reasonable due diligence is necessary as you are not only going to entrust your money to her but she is going to know everything about your family and your assets.

She should be able to win your trust not at an emotional level but at the professional level.

2)   Fees or Commission?

Knowing how your financial planner earns her fees is important.

Is she going to charge you or she is earring by way of a commission from the products she recommends?

It is better to pay fees than making your financial planner earns from a commission from the products she recommends.

In India paying fees to professionals for advice seems surprising to many individuals. If your doctor gives you only advice about healthy living you don’t think she has done anything worth earning his fees from you. If she gives you medicines you don’t mind paying.

Paying your financial planner is better because if she is earning from commission there are chances she may recommend the products which give her more commission. This may not be in your interest.

To get independent advice which is best in your interest, pay your financial planner fees. Free is not always good.

Negotiate fees and decide the scope of work, the frequency of review meetings/asking queries. Don’t assume anything. Ask and clarify. Transparent working helps in the long run.

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3)   Methodology:

This is the next important thing. Does she recommend the products of her choice without understanding your goals?

She needs to understand your short-term and long-term goals; she needs to understand your risk appetite, she needs to understand your family tree and your existing investments.

Without the complete picture of the above aspects neither she will be able to provide you with a well thought-out plan nor you get an ideal solution for your requirements.

Like a good doctor and a patent relationship, understanding your present financial health is necessary to help you to achieve your financial health goals.

This requires trust, transparency, and competency.

4)   Control of Your Money:

You need to invest as per the advice of your financial planner. Your money should directly go the instruments suggested by her. The control of your money should always remain with you.

You should be able to directly deal with a stock brokerage house, insurance company, or wherever your money is invested. Trust your financial planner but keep control of money with you.

There is a beautiful quote in the little book Life’s Little Instruction Book, Volume II

“Trust in God but lock your car.”

 Be dependent on your financial advisor for his advice not for your money.

Financial Planners are a welcome addition to the Indian Financial Market. Most people are good at earning money but what they lack is adequate knowledge to manage their money. Financial Planners fill this vacuum.

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“Most people don’t plan to fail, they fail to plan.”  John Beckley.

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