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…:-)

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  1. Excellent.Learning to Plan is important than Planning to find A magician ,AKA Financial Planner who will helps us to reach our Goals …is the take home ?

  2. FP is not a 5 year degree course like Medicine. Pick up books and websites AND LEARN…then you can get the best out of a FP. Also you will appreciate the planners limitations and not get cheated if he is a crooked guy. ……

  3. Some more questions:

    1. Do you believe in the short term, and do you use market timing? (A “yes” response to either of the last two questions is a “no” signal to you.)
    2. How do your education and experience qualify you to give advice in those areas?
    3. How do you choose investments? What investing approach do you believe is most successful?
    4. What’s your interest in recommending this investment to me?
    5. Have you bought this investment in your personal account? If not, why are you recommending it to me?
    6. Can you offer some proof of your investing success for your clients?
    7. What do you do when an investment performs poorly for an entire year? (Any advisor who answers “Sell” is not worth hiring.)
    8. Do you, when recommending investments, accept any compensation from any third party? If yes, under which circumstances?
    9. Do you consider yourself financially successful? Why? How do you define financial success?
    10. How high an average annual return do you think is feasible on my investments? (Anything more than 10-15% is unrealistic.)
    11. Will you provide me with your resume, and at least three references?

    It’s almost impossible to ask a dumb question about how you are investing your money.

    Don’t feel intimidated. Remember, it’s your money at stake.

  4. I think there is nothing like best financial planner in the world. The one whom you trust and meets your expectations should suffice.This is like JV, it may succeed or fail.

  5. I just met a very good financial adivisor,
    Hi quote : Initally Rs. 10,000 and than 15 % of the returns than i get on my investments…
    Now as mentioned by Vishal in the post above above 10-15 % returns is unrealistic, so lets assume the planner manages to give 12.5 % (midway)…
    After earning 12.5% on my investment of say 1 lakh i get 12500 as profits of which i will have to give the planner Rs. 1875….
    Lets not forget 10,000 upfront fees….
    FD’s to me at this rate look attractive…

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