Portfolio : A collection of investments owned by the same individual or organization.
Will : legal declaration of how a person wish his/her possession to be disposed after their death
Return : Profit or loss derived from an investment
The gain or loss in an investment over a specified time, with respect to the amount of initial investment. It is generally given in percentage.
A set of assets which an investor holds. This may contain equities, mutual funds, insurance and other cash equivalents.
Wealth is accumulation of resources or as on date value of assets a person own. Commonly Net worth is the measure of Wealth of an individual.
It is the raise in the value of Consumer Price Index. That is the rate of increase of the price of a goods or services.
Are you concerned about the constant rise in the living cost and its risks? Are you concerned about the investment market volatility and the potential risk it brings to your portfolio?
Are you concerned about saving enough money for a comfortable retired life?
If you are one of those curious minds in search for
- An efficient financial management,
- A perfect financial solution that can bring peace to you,
then, you may consider a financial planner as an option.
However, if you are not sure of …
- Are financial planners worth the cost you pay?
- Will financial planners solve all your financial concerns?
- What is the value addition you get by going to a fee-based financial planner?
Then, you will find your answers here.
What Does A Financial Planner Do?
Before asking “Are financial planners worth the cost?” it is best to understand what exactly they do. As the name suggests, these individuals belong to firms which specialize in taking holistic approaches towards financial matters of many kinds.
As standards of living continue to rise, so does the need for smart investment, liquidating assets, and playing wise in competitive investments. The solution to figuring a guided way out is Financial Planning.
The aim of hiring a financial planner is to help people
- save and grow money in the short as well as long run
- get to know the ways with which you can avoid filing heavy taxes all the time
- manage uncertainties of job and unexpected job gaps by creating a pre-planned reserve
- find ways to manage investments in such a way they beat inflation
- invest and save your wealth in the most efficient ways possible
The above points list a sample and not exhaustive.
Who benefits from these financial planners?
Are financial planners worthy for everyone or a selected few?
Most people in India argue that this financial planning service, though steeply gaining popularity and rising in quantity, is just suited for the few rich people in a society who do not have to go through the everyday troubles of a common man.
Is that true? You can understand who can be benefited from Financial Planners from below points.
1. Risk Assessment and Management
You may want to know:
- How much to invest in risk asset classes and risk-free/safe asset classes?
- How to safeguard the portfolio from market volatility?
- How to invest when the market is low and encash when the market is high?
The risks associated with the investments can be calculated and minimized.
- Based on the financial goals, commitments, and potential, we need to figure out what is your required rate of return. This required rate of return will decide how much to invest in risky and risk-free asset classes.
- Rebalancing the portfolio based on the pre-defined asset allocation will help you to safeguard your portfolio from market volatility.
- Also, the asset allocation rebalancing will to some extent help in investing when the market is low and encash when the market is high.
The above risk assessment and management strategies carried out by a professional financial planner will help you in taking a right risk at the right time which in turn will help you get remarkable results.
Do you consider a financial planner helping you deliver remarkable results is worthy of the cost you pay or not?
2. Rational Decisions
Some people are curious to make more money the minute they strike a moment in their life where they can make enough, and this approach sometimes clouds the rationality of the decisions these people take.
With a financial planner watching out for you, you are likely not to compromise on your rationality for even the most tempting offers out there.
A financial plan is a blueprint created very logically to take care of your financial goals. This financial blueprint is more logical and less psychological. So a financial plan will insist on taking more rational decisions.
Limiting the emotional decisions and insisting the rational decisions will pave a strong way for your long-term financial success.
Do you consider a financial planner paving a strong way for your financial success is worthy of the cost you pay or not?
3. Save Money
Practising the restrictive measures tabled by these individuals results in you having saved up more. The more you save, the better your investment prospects will be in future.
- As financial planners advocate for spending after you save, you will limit your overspending and start saving more.
- The financial plan will guide you to automate your monthly investments which will increase your commitment towards savings.
- As financial planners charge you fees and are not dependant on the commission from investment schemes, they don’t recommend schemes which have hidden charges. This will help you save on the cost of investments.
- Also, financial planners recommend schemes based on the time horizon. As the schemes are selected based on the required time period, generally there will not be any exit charges or surrender charges.
Money saved is money earned. The money saved in all the above situations makes financial planners really worthy of their cost.
The above 3 points make very clear that financial planners can be beneficial to everyone and not limited to a few selected groups of people.
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Individual Case Analysis
Even for general solutions related to debt, investment, and saving money, a financial planner will certainly play a huge role in ensuring that your money remains with you and the amounts leaving your accounts are all for better returns. This is because these planners are trained to assess individual cases.
A High Income Earner
If you fall under that luxurious bracket, you are likely to benefit, because today you cannot simply sideline the element of risk and choose to keep all your money untouched in an account, knowing that you can make a ton more from various investment channels. Financial planners can guide you with respect to choosing the right channel.
A Middle Income Earner
As a middle-income earner, you may have typical Indian dreams of buying own house, children’s education and retirement. Without a solid financial plan, all these dreams may become a mere wish.
A Low Income Earner:
As a low-income earner, you may have some debt. This debt keeps you awake at night. You need a solid financial plan that will take care of your debt payoff. Also, a conscious spending plan with a budget is required to stay away from debt forever.
A person who has spent all his life doing nothing related to finance and ended up making a lot of money in the process is likely to be confused as he/she nears the age of retirement.
Inactive money in accounts is a hub of tax collection for the Indian state, which is not morally wrong because the protection and transaction of your money come with a price. For retiring people with sufficient money in their hands, financial advisors are worth the cost to invest wisely.
Keeping Education Bills at check
Students need to study abroad to make more out of their lives. But to allow them to live that dream, you need to have the kind of finances to afford the education. A financial planner can step into fraction out that cost and alter your spending patterns for you to think broadly for the future.
Can you still make it without the so-called Financial Planners?
Not having the professional expertise needed to analyze your case and deciding what will be your next step to sustain/grow contain possible finance related threats.
Good decision-making is crucial in the financial world because opportunities do not knock a second time on every door. A financial planner will tell you where to best spend your time and money with confidence, but you will not be able to do the same with as much surety.
You can end up worsening your crisis and making it harder to solve than it was before because a series of bad decisions can make a case more strangled, and it will take more time to breathe life back into a strangled scenario.
Case Study: How a Financial Planner can make a difference?
Mr. Avinash (40 years old) works in a private company as a mid-level employee. He wants to buy a second flat after buying his first flat through housing loan.
Without a Financial Planner, he may fall prey emotionally to the attractive offer neglecting to be rational about the future and its shortages.
With a Financial Planner by his side, he can do financial planning to decide wisely whether to buy the flat or to skip the offer considering his short term as well as long-term commitments, financial resources, expenses, goals, etc.
If Avinash does not use the services of a financial planner, generally he will decide to buy the property based on his loan repaying capacity.
If Avinash uses the services of a financial planner, then he will be asked to consider not only the repaying capacity but also how this new financial commitment will
- Delay his retirement?
- Adversely impact other goals?
- Increase his illiquid investments?
He will be advised to think and come up with realistic ideas and resources to decide the buying. The Financial Planner here advises him neither to buy nor to skip.
The Planner helps him understand the situation, resources available, goals at hand and future possibility, and leave the decision making all to Mr. Avinash who now is clear on what to do.
How to choose a worthy Financial Planner for you?
The following are the criteria you should consider when you head out to get a financial planner for yourself.
The Securities and Exchange Board of India (SEBI) is the department which is concerned with the validation and certification of firms which claim to offer financial planning services, so before you decide on the firm you want to contact for an advisor, be sure to check out the latest list released by SEBI for minimal chances of fraudulence.
In the introductory meet where you decide whether an individual can be hired as your financial planner or not, you need to ask questions which open you up to your potential advisor so that you can get to know
- his/her spontaneous response quality,
- his/her degree of knowledge, and
- the synchronization that individual can develop with you.
This goes a long way in effective financial planning.
Reveal your present financial situation to your planner with full transparency, because an advice given under limited information will tend to counteract only the problems you raised. Maintain transparency, and you will automatically see the rise of good advice.
The more you are transparent, the more you will able to assess the potential of the value-addition from the financial planner.
You need to check your planner how far their hands go in terms of executing the extensive paperwork you draw with him/her. A good measure of this ability is to check for their past records and see how well the individual has been able to handle clients and cases.
Your experience with the financial planner will not only give you the understanding of avoiding difficulties in the future but also of how your progression or downfall solely relies on your effective decision-making. And once this accountability hits, you will never tend to go through the same series of mistakes and bad crisis management again.
As financial planners are capable of making everyone save more money and earn more investment returns, they are really worthy of each and everyone’s money and time.
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