Welcome to MPF,
Ahh we understood that you are in the urge of understanding the importance of a financial advisor. At the same time something popping up your mind that “Do I still need a financial advisor or a planner to decide my retirement, child planning or wealth management?”.
A hypothetical question! Let me try to explain why you require a financial planner or an advisor to protect your money or to start with your wealth creation.
Who are a Financial Planner / Advisor?
Professional with deep understanding in finance, taxation and wealth management who service their clients to accomplish their financial goals by allocating their money in different financial instruments like equity, mutual funds, Term Deposits etc. For many people the goals are towards their children education, retirement planning, buying a home, starting a business, vacation, wealth creation etc.
Financial advisor carry out their activity through “fact finding” sessions by asking number of questions to understand your requirement and your current financial positions. Based on the discussions they come up with the affordable and suitable financial products for you to achieve your future goals.
Though the financial advisor do the same activity, but the immense difference among the service are provided by different types of advisors and now the services may cost you few thousands.
Now a days professional are coming up with different titles, sometime they are financial planners, financial advisors, and Investment planners, Investment advisors or wealth managers. They may not do the same type of work, in general financial planners or advisors may be / interested able to help you on the complete picture of portfolio including budgeting, debt balancing and financial planning, however Investment advisor or wealth managers mostly will help you on finding the best investment opportunities.
Fee based Planners
Now fee based planners are quite popular in the industry and they provide a solution or recommendation to you for a fee. The fee can be an hourly fee or a planning session fee or it may be charged as an annual fee based on the assets under management (AUM). They offer financial planning, retirement planning, child education planning, budgeting; debt balancing etc. the entire fee details are revealed to the clients upfront and the clients can understand the exact service what will be getting for the fee. The biggest advantage here is, the service what we are getting is an unbiased advisory since the planners don’t get any compensation or sales fee from the organizations. So they do not offer you any particular product.
Commission based planners
They also provide the same set of service as fee based planners, however they don’t they don’t charge any fee from their clients. They receive commission or a brokerage from the organization for selling the product. Mostly they receive a percentage of the total amount clients invest in particular funds or products. Now you may think that the possibility of suggesting a product which gives them a big commission even though they are a profitable to the client.
You may have a question now when do I need to hire a financial planner? Hmm tricky & a good question, its completely personal, if you have any queries related to money, taxation, saving, retirement planning or just a re balancing your financial portfolio, financial planner or an advisor can help you. Because they are in the market, they will get the updates on the inflation, deflation, GDP, market situation and a global economy etc. they will be able to help you professionally. On the other hand may tend to take an emotional decision during the crisis.
However if you’re capable to manage your finances without any emotional decision, if you find enough time to do the research, if you have amole amount of knowledge or skills when it comes to investing, then absolutely you do not require a financial planner. If your answer is no for any of these question definitely you should hire a financial planner to take care of your financial situations.
How much you pay for the planning or advice?
Fee based financial planner may charge from Rs 1000 to Rs 5000 per hour, you may find some planners will advise only HNI’s and impose investment of Rs 5 lakh on the low end ranging upto crores. Commission based advisers will receive a percentage of the total number of transaction that you make. Financial planners also offer managed Portfolio Management Services (PMS) may charge 0.2% to 2% of the total investment amount.
Ultimately this is absolutely own discretion of individuals to choose financial planner / advisors to make their money grow, and again when you get an advice from the professional it is your duty to understand the concept well and ask them many questions before investing in any products. Finally it’s your hard earned money. At the same time nobody can force anybody to take advisory service or force them to invest in the recommended products.