I am asked this question a million times, and I have always given a sub optimal answer!
Frankly I do not know whether a person needs a financial planner or not. A financial planner has so much of responsibility and work to do that he/she does not do it! In fact I do not know any financial planner who does all that which I think a client needs to do. Worse is when the client does not know what is crucial work and what is clerical work.
Many clients will go to a financial planner – and do what they want to do. If you appoint a coach you should listen to him. However many financial planners are nowhere near capable to do all the onerous tasks that they are supposed to do. So what does a client do?
Many financial planners are biased – the money in selling is still much much higher than in consulting. The odds are against the small investor who makes no attempt to learn many of these simple steps.
If you expect your planner to monitor your portfolio frequently, monitor markets, understand the political situation, anticipate changes in the market – and therefore realign your portfolio, track world markets, commodities, track interest rates, be able to help you in your loans taking, pricing, choosing the car (oops!), give advice on whether you should change your job, decide whether your kid should study in an International School ,etc. you could be in a rude shock.
If the planner is not from the same class as you are – or has no ability to understand your aspirations, he could suggest inappropriate products. If he is biased towards ANY product (many of them are tied life insurance agents), the chances are you should look hard. It is virtually impossible to be able to sell all insurance and pension products – so the sales will be of a product that he represents, right.
How is this a problem, you ask? Well last week one kid in our office bought a term plan from Aviva – because it was the cheapest for a 27 year old buying a 28 year policy. Now 6 months later if a 35 year old wants to buy a term plan for 22 years, – and if the cheapest plan is by Religare she would buy it from there. If both of them had actually gone to a ‘planner cum agent’ – they may have ended up buying a Max New York life term (or worse, ULIP) because that is the AGENCY he had. Also it is (today) not possible to buy a policy ONLINE through an agent – that nixes many good intention in the bud!
A good set of questions to ask your potential financial planner is:
– Do you yourself have a planner?
– why not?
– where are your written goals? show it to me NOW…
– which plans have YOU invested in?
—can give you a dozen more after you have asked these basic questions…:-)
also read this:
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