Due to macroeconomic changes you’re exceptionally thinking to hire a professional for legitimate guidance. In the rapid economic changing scenario, hardly you get guaranteed rate of return on your investments. Simultaneously, interest rates are deteriorating by the day. You can hardly offset inflation if you pursue traditional investments. The financial products are too complex to understand its merits, demerits & suitability. Due to your lack of financial and numerical illiteracy (financial management), you choose unsuitable financial products & services offered by salesman. There will be a financial catastrophe and hardly you can come-out. A Financial Planner highlights you both pros and cons. You get relief from uncertainty and earn peace of mind, you arrive at perpetual solution.
You may hear about Financial Planner but you may have limited information about a Certified Financial Planner.
Who is your Financial Planner & why do you need to engage a Financial Planner?
A Financial Planner is like your financial coach. He accords hand-holding supports till you reach your goals. Never confuse a Financial Planner with an Insurance Agent, Mutual Fund Adviser/Distributor or Stock Broker, Bank Relationship Manager etc. They are not advisers but product distributors/sellers. They earn commission from manufacturers. Nothing is free of cost and you indirectly bear the cost (hidden cost), like commission or brokerage. A Certified Financial Planner is also different from Chartered Accountants. A Certified Financial Planner works with you in fiduciary capacity standard. The fiduciary standard of care needs that a Financial Planner acts exclusively in the client’s best interest when offering unique financial advice. He (SEBI RIA) charges fees (upfront) in consideration of his advice and services. He does’t get any commission from product manufacturers. So, he will be unbiased at all times.
It’s your legitimate concern about your financial freedom. But hardly many of you first approach to a Financial Planner and then implement your Action Plans. Lack of Financial Plan means you’re a rudderless boat. Consequences are bad investments, buying of bad insurance products, inefficient tax planning, costly loans etc.
You can certainly do it yourself (DIY) without engaging a Financial Planner. But sometimes you may commit damaging blunders. You mostly never get any opportunity to nullify. Why it happen repeatedly? You don’t go through a structured processes, which are personalized.
“Self-medication is danger to your health; similarly, Do-It-Yourself (DIY) is dangerous for your wealth creation and wealth distribution.”
You may ask yourself the following questions. The questions are self-evolutionary (self judgmental) to understand you better:
- Do you have fare knowledge about investment vehicles?
- Do you know about your risk profile & risk taking capacity to determine your asset allocation?
- Are you expert enough to monitor & have time to evaluate your own investments as per your risk tolerance, investment time horizon & investment objectives?
- Can you manage your & others’ expectations and emotions?
- Do you maintain cash flow?
- Apart from traditional Financial Planning, do you have any idea about Scenario Planning?
- Do you have Estate Planning & Income Tax Planning?
- Do you have Debt Management Plan?
- Have you analyzed your Insurance Needs?
- Have you ever evaluated your existing insurance costs?
- Do you have Contingency Planning?
If all your answers are “Yes” to the above questions, you don’t require an adviser/planner. But if most of the answers are “No” without much thinking you may hire a Certified Financial Planner or a Financial Adviser.
Be honest to yourself as your money and time both are limited, you need planning.
How to choose your Financial Planner?
It’s quintessential to engage a CFPCM (CERTIFIED FINANCIAL PLANNERCM ). CERTIFIED FINANCIAL PLANNERCM Certification is a mark of excellence granted to individuals who meet the stringent standards of education, examination, experience and ethics. FPSB India is the principal licensing body that awards CFPCM Certification in India through an agreement with FPSB Ltd. A CFPCM met the global benchmark for competency, ethics & professional practice standards to provide comprehensive Financial Planning services. A CFPCM is recognized in more than 26 countries across the world.
Apart from his qualifications a Financial Advisor must be a SEBI RIA.
What is Financial Planning?
If you want to reach your destination, you must have a road-map. If you fail to do so, you may reach anywhere, where you were not supposed to reach. Financial Plan is like a road-map. How can you start Investments, Insurance, Tax and Estate Planning without Financial Plan?
You’re so unique person, your requirements are unique too, isn’t it true? You must be aware of what you need, how much you need, when you need and why you need. You may know when and why. But you may not know how much. A Financial Planner considers the ever changing macroeconomic factors and personal factors. You should have clear a vision and unbiased solution. Unbiased solution will never come from Insurance Agent, Mutual Fund Adviser/Distributor or Stock Broker, Bank Relationship Manager, etc.
You have your aspirations or goals, which are observable and measurable (quantitatively). You’re obsessed about your genuine aspirations/goals. Unless you quantify the amount by considering the time value of money, your goals remain unfulfilled. You have to consider inflation, rate of return, income tax, capital gain tax and time horizon etc. while you invest. Your concern is about the surplus money available today must be invested to offset inflation, which is safe, tax efficient and have liquidity to generate wealth. You can generate wealth during accumulation phase & can withdraw during distribution phase. Simultaneously, you may opt for both accumulation & distribution. Right now you may be a producer & consumer both (Productive Consumer) or may be a mere Consumer. Irrespective of your status, you must set out your Financial Plan.
Your aspirations are intangible. You can only feel and realize them. A Financial Planner accompanies you for accomplishment of your life goals. He helps you by fixing & calculating (numerical calculations) the date & amount so that you can reach your destinations in time. Goals must be achievable & measurable within the time frame. A Financial Planner always respects & considers your qualitative & quantitative inputs. Your qualitative inputs are intangible (your aspirations, purpose of life, your troubles and blessings, your commitments & responsibilities etc). Only you can feel them and you can’t express them properly to give a shape without the professional guidance. Thus, here you need MOTHER’S CARE. A Financial Planner smokes you out to get your qualitative inputs. A professional Financial Planner is a patient listener, who listens to your gut.
The role of a Financial Planner has no bounds, i.e. is very strong and seems to have no limits.