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What care you should take while hiring a financial planner - Outside View by PersonalFN

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What care you should take while hiring a financial planner
Jul 9, 2014

All of us want to live life comfortably and want to see all our wishes and dreams get fulfilled. We want to send our children to the best schools, live in a decent home, go for an exotic vacation each year, get our kids married with a lot of fanfare and zeal and retire peacefully, among other things. Although people know that they need to save to achieve their goals, more often than not they donít understand the means of getting there. You see, saving alone cannot lead to the achievement of all your financial objectives. This is where a financial planner comes in.

Let us first understand who is a financial planner and what can he do for you.

A financial planner is someone who will draw a financial plan that will help you to define and prioritize your goals, analyse where you stand currently with respect to your current financial situation and provide you a clear road map of how to achieve your financial goals. Such an approach ensures that you are well equipped to deal with dynamically changing circumstances such as inflation and lifestyle. You see, in the absence of a financial plan, you might not be empowered to accomplish what you have dreamt of achieving and might also be under-prepared to deal with unforeseen contingencies.

Now you might be thinking that why should you pay for a financial plan when your bank or somebody who claims to be a planner is probably offering it to you for free of cost. Well, you need to understand one thing that nothing comes for free - there are no free lunches! If some person is offering you a financial planning service for free, then you need to introspect the quality of the same. A free financial plan should be an alarm for you. You should ask yourself why will he provide it to you for free, what benefit will he get out of it? Probably all the recommendations that he will give you will be biased and commission driven. These recommendations might or might not meet your financial objectives but will ensure that they fill the pockets of the financial planner.

What should a financial plan include?

There is a high possibility that those who are offering you a free financial plan will not include some extremely important points while imparting their service to you. However to make you aware, PersonalFN has listed down certain points that a well-constructed financial plan should ideally include:

  • Assessment of your Risk Appetite
  • Assessment of your Contingency Requirement
  • Assessment of your Life Insurance Requirement
  • Restructuring of your Existing Loans
  • Review of existing Mutual Funds
  • Review of existing Life and Non-Life Insurance Policies
  • Analysis of Future Cash Flow
  • Planning for Financial Goals such as House Purchase, Child Education, Child Marriage, Vacation, Retirement etc.
  • Defining Asset Allocation for your Financial Goals
  • Rebalancing of Portfolio
  • Recommendation on New Insurance Policies and investment recommendation
  • Action Plan
Hence your experienced and expert financial planner will include all the above mentioned points while preparing your financial plan. Moreover, he / she would be unbiased while making recommendations to you. You must note that if some financial planner is charging a flat fee for making a financial plan without any obligation for making investments through him then there are higher chances that all the recommendations he provides you in a financial plan will be impartial.

PersonalFN is of the view that everyone does not have the expertise or the time to manage their finances prudently. In such a case, hiring the skills of a financial planner can help you achieve your goals in a planned and systematic manner. However, while you do so, it is imperative to choose a planner who will take care of your finances with as much care and wisdom as he would do for his own finances.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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