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Over paying your financial planning

Are you overpaying your Financial Planner? Discover how much fees Indian Financial Planners charge

Are you wondering, how much do financial planners charge as fees?

The financial planning is not a product, and therefore standardisation is not possible. How much financial planners charge is based on your needs and the Financial Planner’s package i.e. service and process (selective or comprehensive) involved in financial planning.

In this article, we are going to analyse,

How much fee does Indian Financial Planner Charge?

To figure out the right estimate of the fee of a Financial Planner, let’s learn about, what is the work of Financial Planners? And, how you can benefit from them?

In short, Financial Planners are responsible for:

  • Creating a comprehensive plan to meet your financial goals
  • Invest and grow your wealth in the most efficient ways possible.
  • Helps to avoid filing heavy taxes.
  • Manage uncertainties by creating pre-planned reserves.
  • Manage investments in order to beat inflation.

For more details and clarity on the job and responsibilities of a Financial Planner, read “Are Financial Planners worth the cost?

The annual financial planning charge ranges from as little as Rs 6,000 to as high as Rs 40,000. It can be higher in some complex cases.

People nowadays are increasingly seeking a Financial Planner’s advice when it comes to investment planning, risk management, wealth management, and tax planning considering inflation, uncertain employment, health problems and future financial goals like own house/company/car, higher education, early retirement, travel, etc.

Are you planning to hire a financial planner or change your financial planner during this economic crisis / corona crisis?

If you haven’t hired a financial planner yet and if you have made any of the following mistakes during the COVID-19 crisis, it’s time you hire a financial planner.

Now let’s see what are those mistakes you could have done and how a financial planner could have helped you.

  • Withdrew from equity

With the recent stock market crash nearly 40%, many would have withdrawn from equity because of fear and panic but this a huge mistake.

How would a financial planner have helped you?
A financial planner wouldn’t have let you sell at a loss, rather he would have kept your emotions in check and if your goals were on track and your asset allocation right, he would have asked you to continue your investments and would have avoided huge losses.

To know more read: how to recover faster from the stock market crash.

  • Opted EMI moratorium

Even despite having the funds to pay off your loans, if you availed of the 3 month EMI moratorium, you had made a big mistake. It was meant for people who had job losses or had a salary cut so that they would get some relief.

How would a financial planner have helped you?
Your financial planner would not have suggested you choose the moratorium, because it’s just a temporary relief, as the EMI gets extended, you will be paying additional interest for it and it becomes an extra burden for you.

To know more read: Why not opt EMI moratorium?

  • No Liquidity

If you had a huge salary cut or a job loss and had to use money from your savings account, then having no emergency funds is a huge mistake.

How would a financial planner have helped you?
The first thing a planner would have done on hiring is to create a provision for emergency reserve and not letting you take money from your savings account.

To know more read: All you need to know about Emergency fund planning.

  • Shifted to equity or bought real estate

If you had become excited about the market fall and shifted your cash and debt investments to equity or bought real estate because there was a discount, then both are mistakes.

How would a financial planner have helped you?
He wouldn’t have encouraged you to buy real estate if you already owned a house. He would have let you stick to the original asset allocation and would have advised about rebalancing your portfolio.

To know more read: How portfolio rebalance is done.

  • Insurance lapse

If you missed paying your premiums then in the case of hospitalization you would have to spend from your savings. It is also a mistake as it disturbs your savings.

How would a financial planner have helped you?
He would have alerted you about your insurance premium due date in advance and saved the policy from lapsing.

Don’t you think these would have helped you during the corona crisis?

If you have already hired a financial planner,Try answering the below questions and you will know if the financial planners are worth the cost or not.

What is the amount your financial planners charge you?

Do they tell you on what basis they charge?

Do they justify the fees charged?

Do they deliver real value for the fees you pay?

What if the answers, for the last three questions were a YES, in that case, you can go ahead with the financial planner. If your answer was a No, then it’s high time you change your financial planner. Find a financial planner who can tell you genuinely about how they charge you, Find if they justify and deliver real value for the fees you pay.

You would have seen how financial planners can help you. Now let’s see In what other ways can they help you during this corona crisis?

They can help you by:

A. Preparing a coronavirus financial contingency plan.

They can help you create the plan by:

Ensuring family coverage and COVID 19 coverage, preparing for emergencies, making note of your mediclaim policies, and making an information vault. These are the steps taken as a safety measure for you and your family.

To know more read: coronavirus financial contingency plan.

B. Sorting your investments.

People take some emotion-based decisions during corona-crisis, that is

    a) Withdrawing to avoid further losses
    b) Timing the market bottom.

Do not choose an easy option, but rather the right option. Have you heard of the quote “Nothing worth having comes easy”? Hence stay invested, if in an emergency, use your emergency funds, debt investments, and in the worst-case scenario, you can use the EMI moratorium.

For more info read: How to take advantage of the coronavirus crash.

C. Making you recover faster and better from the Stock market crash.

Three ways can help you recover faster and better:

  • Revamp of portfolio
  • Move your funds from poor-performing into better-performing. Analysis conducted on portfolio revamp with previous data worked. You must stop your endowment plans and ULIP’s. Should you redeem and reinvest now? To know, read: How to revamp for faster and better results.

  • Rebalance of portfolio
  • The asset allocation would have changed, after the stock market crash. Then you are supposed to bring it back to the original asset allocation. This is portfolio rebalance. For more, read: How portfolio rebalance is done.

  • Making a good choice on your SIP
  • What are you supposed to do with your SIP?

    Two experiments with three different categories investors were done, each of them chose one among the following options, i.e. to stop, to continue and another to increase SIP (during the market fall).

    In both the experiments, the one who increased his SIP during the market fall, earned the highest portfolio value.

What happens?

    i. When you stop SIP, you will recover less.
    ii. When you continue SIP, you will gain better.
    iii. When you increase SIP, you will gain much better than the other options.

Hence increase your SIP for the best returns. For more, read: How to play smart with your SIP.

Don’t wait, act quickly as these are to be done before the market recovers. Only then will your portfolio recover when the market recovers.

A financial planner can help you do all these in an easy, practical, and organized way.

An average investor would not choose a financial planner, but a successful investor would definitely opt for a financial planner and would also recover faster and better. Are you also one of those successful investors?

Read through this article to know more about how financial planner charges, if they justify the fees charged and deliver real value for the fee charged.

Cheapest Vs Best Financial Planner

A Financial Planner can help you achieve your short-term as well as long-term financial goals with a realistic Financial Plan. Since there is no standardisation in the cost for Financial Planning in India, people are confused with the average cost and its features for it.

“Cheap and Best” is a term used frequently in marketing. However, ‘cheap and best’ is an
oxymoron. It doesn’t exist practically. If you are searching for the cheapest financial planner, then you will be getting what you pay for.

It is advisable to look for a TRUSTWORTHY Financial Planner and you will end up finding the best Best Financial Planner for you…

Now, what are the characteristics of a Trustworthy Financial Planner? Few are listed below:

  • They have sound professional experience.
  • They have a deep understanding of the Client’s requirements.
  • They have a lot of Client testimonials and referrals

So, are you looking for a trustworthy financial planner for you? Let’s learn the Definite ways to find a Trustworthy Financial Planner

Or, are you still looking a cheap one..?

If a friend were in your shoes, what advice would you give him…? To choose a cheapest financial planner or a best financial planner…?

What would be the impact on you and your family members, if you are able to choose a right financial planner with the right fee structure…?

In this post, you will know the different types of charges for Financial Planning in India and what kind of value addition they do for the fees they charge.

4 Ways Financial Planners Charge fees to you and which is the best way for you?

Not all financial planners are created equal. Before you enrol with a financial planner, you need to ensure that you understand

a) the financial planning fee structure, and
b) what are all the things/services covered for that fees.

A trustworthy financial planner should be able to easily explain in what are all the ways he adds value.

If a financial planner gives a vague or roundabout response, it is better to stay away from them. A financial planner should discuss the fees upfront.

It is also advisable to avoid financial planners, who ask you not to worry about the financial planning fee or if the financial planner tells his services are free of cost.

But you and I know that there is no free lunch. A financial planner needs to be transparent.

In your first meeting with your financial planner, you should be aware of 21 things to expect from your Financial Planner

Can you trust a financial planner who is not transparent with his fee structure?

overpaying finacial

1. Commission Based

Commission based financial planners claim themselves as “Free financial planner” or “No-fee financial planner” which looks very attractive from the outside. But there is a catch. There is no free lunch.

Commissions are paid to Financial Planners from financial or insurance products you buy through them. When you invest money in a policy through a planner, they get a commission for the product sold.

When you invest in 50,000 rupees policy through a Planner, they get a commission as high as 25% which is Rs.12,500 in this particular case. These are generally collected as hidden charges. Since you don’t pay the Planner directly, you might not worry about the high commission price paid.

Due to this, misselling may happen with biased interests of the Financial Planner to earn more commission through product sales which might not be the best for you.

2. Asset Based

When Financial Planners manage client’s wealth, they typically charge 1% of the assets per year.

A Financial Planner ideally spends the same amount of time to manage Rs. 20 Lakh, as well as Rs. 2 Crore worth of wealth, since the work he does to manage the wealth, is same.

Some planners charge Rs. 20000 for managing 20 Lakh rupees worth of wealth, and Rs. 2,00,000 for 2 Crore rupees worth of wealth. The huge difference in charges is not justifiable.

If your financial planner justifies by telling you that it is 10 times more complicated to manage a 2 crore portfolio compared to a 20 Lakh portfolio, then your financial planner is trying to cash in on your unawareness.

A financial planner should not charge you more fees, because you are ignorant. A financial planner should charge you more fees or lesser fees, based on the value he adds.

3. Performance-Based

This is a type when clients seek Financial Planners for higher returns on investments.

In this case, Financial Planners are often paid a basic flat Percentage fee for their service and an extra percentage of fee based on the higher returns after a certain level which is initially decided by both the financial planner and the client.

Example:
1% basic charges on the assets managed + 20% share in profit over and above 10% returns.

Even in the case of loss, the client will pay a basic fee to his financial planner for the service. Only in the case of higher returns beyond an agreed level, a percentage will be shared again with the financial planner.

Performance-based fees encourage a financial planner to take the excessive risk than what is required, which you may not be comfortable with.
 
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4. Flat Fee or Fixed Fee or Fee Only Based

From preparing a financial plan to periodical reviews to personal consultations, Financial Planners charge a flat fee for their service. Some financial planners charge to complete a particular project, and some even charge on an hourly basis.

The flat or fixed or fee-only financial planners have a fiduciary responsibility to act only in the best interest of their clients. Fee-only certified financial planners do not take commission from product sales, and so they provide more comprehensive advice to clients.

This type of charge has been welcomed by top certified financial planners and people all around the world for its efficiency.

How much do fee-only financial planners charge? In general, financial planners charge for their time or wisdom or combination of both. The fees Financial Planners charge also depend on their geographic location, level of services and client’s specific needs.

The fixed fee charged by the financial planner is not based on the volume of investment and also not earned as a commission from buying some investments. So you can be assured of the professional advice from the financial planners who charge flat fees.

Cost of Fee-only Financial Planners in India

Though the cost of a financial planner varies with many factors such as demographics, size of the project, and experience level of a financial planner, the fees of a financial planner can be estimated as given below:

One Time Fee: For the complete project, a financial planner will charge around Rs.25,000 – Rs.35,000, as a one-time fee.

Monthly Subscription Fee: Along with the initial upfront payment of somewhere around Rs.7000-Rs.10,000, then there will be the monthly subscription fee of Rs.1000 – Rs.1500, approximately, to be paid each month.

As most of us pay to the premium services such as NetFlix, YNAB, or Mvelopes each month, it is a wise idea to pay a small monthly subscription to your trusted Financial Planner who can monitor and plan all your finances in the best possible ways.

Are you aware of the 3 Common Models of Fee-Only Financial Planners? Discover what the best model is for you.

A. Financial Planners with Online Calculator model

You might have seen the online Calculator Model Financial Planning which is the cheapest model of all, where users have to give their details, and the Financial planner simply will feed these data into an online calculator to get an output. Based on the output the financial planner will advise you to opt for relevant policies or plans.

Financial Planner’s interpretation in planning will be minimal here, and importantly, inflation will not be calculated correctly. This model, which is designed to prepare a general financial plan, will not consider your unique situation and its factors for your future.

Lack of their knowledge will help you neither in the short run nor in the long run. No reviews or follow-ups are possible with the Financial Planner.

On an average, Certified Financial Planners with Calculator model, charge you a fee of Rs.5000 or less per year and the cost will remain fixed for following years as well.

B. Financial Planners with Analytic & Robotic model

Valuable Insights from analytical tools and artificial intelligence are their strengths. But human disconnection will be there. Financial Planners should understand your life and your important goals in life which are all made up of emotions and feelings.

Without a proper understanding of these, a Financial Planner cannot provide you with better financial solutions for your life. You will always be one among their 1000 clients in a division.

They provide automated customer support to retain their client base with them. You may not be able to meet the CFP most of the times; their assistants would be guiding you all the way. This would create conflicts during pressing situations.

Financial Planning needs a lot of one to one interactions in situations, where

  • The financial goals are not realistic and not passing the achievability test,
  • The market underperforms continuously,
  • Some temporary losses have to be made in the portfolio revamp
  • A new complex financial product or strategy to be understood.

A Robo advisor will not be able to provide sufficient handholding in the above situations. As the Robo advisor lacks in-depth human relationship, they will be able to charge you less fee for financial planning.

Robo advisors recommend schemes based on a pre-defined algorithm. They shortlist investment recommendations based on only quantitative parameters like past performance, AUM… They will not be able to consider the qualitative parameters like the strong investment process followed by the fund house, the ability of the fund house to retain its fund managers…

On an average, Certified Financial Planners with Analytics & Robot model, charge you between Rs.6000 to Rs.10, 000 per year and the cost will remain fixed for the following years as well.

C. Financial Planners with Analytics and Experience Model

Direct support of a CFP is the most beneficial thing here. You will get customised support to meet all your goals since they focus more on individual clients. Multiple reviews and follow-ups are possible to help you implement the plan without challenges.

Since human emotions are given importance, the Financial Planners with this analytics and experience model will create ample scenarios to meet your financial goals to your fullest satisfaction.

These Certified financial planners use technology, and at the same time, value and respect the human relationship.

Genuine Certified Financial Planners with Analytics and Experience Model, charge you between Rs.20, 000 and Rs.35, 000 in the first year and 50% from the second year for a Comprehensive Financial Planning.

Fees are higher compared to Calculator and Robotic model since you get personalised, effective expert advice to reach your financial goals.

In all the above three types of Financial Planning models, fees are charged quarterly or half yearly or annually depending on a Financial Planner.

Fees differ based on the process and model used by the Financial Planner. Know the ideal Financial Planning process below and check if your fees are justified.

The ideal Financial Planning process that justifies the fee charged

Warning:

2 out of every 3 people are paying more to the financial planner or getting fewer benefits from the financial planner. Will You Be One of Them?

So understanding the ideal process of the financial planning will help you get more from your financial planner by paying him a fair fee.

The client will tell their financial status and future requirements. The planner will discuss the prospects, the process involved, and fees required for these. If the client agrees to work, the Financial Planner will start the work for a comprehensive Financial Planning.

I. Collecting Information

The financial planner will collect a client’s financial situation and lifestyle-related essential information which include total income and expense per month, past income tax returns, home loan, insurance policies and family wills.

Financial Planner will derive their cash flow and net worth statements.

II. Identifying Goals

Financial Planner now will identify actual goals and objectives of the client and create scenarios to meet clients’ goals towards retirement, income, tax, portfolio, education, travel, etc.

III. Making the Financial Plan

Here, the client’s goals get transformed into real financial terms. The Client will fine-tune the Financial Planner’s rough draft of the Financial Plan to his utmost satisfaction.

The financial planner will then hand over a Final Draft of the Financial Plan to the client, which is the blueprint for the client to meet their financial security and goals in the calculated time.

IV. Implementing the Financial Plan

Regular follow-ups will be there to help the client to follow the blueprint as well as to solve challenges if any in implementing the Financial Plan.

V. Reviewing the Financial Plan

Quarterly/ Half yearly/ Yearly Review/ when needed

Periodical Reviews help clients to stay on track with their Financial Plan and the financial planners to know the results of their plan in that period. The financial planner will also send a monthly report to keep the client updated on the Financial Plan.

Situations may change, and there might be a need for re-evaluation. You may get

  • a pay rise or promotion,
  • a new medical/ education bill,
  • an unfortunate death of a family member or accidental damage to your house or car.

In all cases, the financial plan has to be adjusted for a clear path.

Which type of financial planner delivers real value for the fees you pay?

Financial Planners may have different processes based on different opinions, and so the process will differ from Financial planner to Financial Planner. It’s up to you to decide and work with a Financial Planner with a different process, but make sure he does everything for your best interest.

Among others, the Financial Planners with Analytic and Experience model will provide you maximum support from making a customised financial plan to meet your goals and to implement the plan.

Now let’s see about financial planners whom you have to be alert or cautious with.

Beware of financial planners:

  • Who have no qualification

Check his credentials and ask his clients to know his worth. He should possess the Certified Financial Planner (CFP) certification, awarded by the Financial Planning Standards Board (FPSB) of India.

  • Who promises big returns

The returns vary over time. During a recession or in bear markets yielding high returns is very rare. Hence don’t believe the lies of big returns.

  • Who does not hold meetings

If you have already hired a financial planner, and if he doesn’t conduct quarterly or half-yearly meetings to review your portfolio (to assess your needs in terms of insurance, tax, rebalance or other such needs), then you need to change him,

  • Who doesn’t consult you

If he doesn’t consult or ask you about what he is going to do, whether rebalancing, selling, or any other financial activity then it’s time to change him, as it is his sole responsibility to consult you or take permission before doing any changes to your finances.

  • Who agrees to whatever you say

If he does what you tell, then that’s not how it should be. He must guide you, tell you when you are wrong, take the necessary steps, and make sure that you reach your goals.

  • Who lacks ethics

If he lies while buying insurance, or filing tax returns, reporting your incomes or profits. You may not only end up facing a penalty for his lack of ethics but also lose your money.

Make sure your financial planner does not have the above-mentioned characteristics.

Will you choose your right Financial Planner now?

Among people, there have been a lot of perceived myths on Financial Planners. Let’s find out the truth about them and try to answer the below questions:

  • Which type of financial planners (from the above) do you like the most?
  • What are the benefits and cost of each type of financial planner?
  • Would you like to choose a particular type of financial planner to initiate the preliminary discussion?

You have known the charges, models and ideal process of Financial Planners, but still, you may be confused on how to choose the right Financial Planner.
Examine the things mentioned below, and you will be able to choose your right Financial Planner confidently.

Before Consultation

Do a background check on the Financial Planner’s

  • Credentials (Qualification, Achievement, Experience) and
  • Credibility (Positive Reviews & Ratings through references) before fixing an appointment for Consultation.

Reviews are the most valuable and reliable social data. Google reviews and ratings provide a fair idea of your financial planner. The number of reviews and the high ranking indicate that the financial planner is worth considering or not.

In addition to the Google reviews, you can also visit the website of the financial planner and check for the testimonials and client reviews published there. That will give you the level of expertise and service the financial planner provides.

Only if a financial planner adds enough value to his customers (for the fee he charges), he will get good reviews and a positive testimonial from the clients.

During Consultation

What would need to happen for you to walk away with a feeling that your time with the financial planner was well spent…? Look for the following factors in a Financial Planner to have a fruitful and stress-free financial year ahead.

  • Creativity
  • See if your financial planner is creative enough to come up with different scenarios to meet your goals without compromise.

  • Psychological comfort and Connect
  • Check the financial planner’s nature for a good lasting relationship with professionalism, friendliness and human values.

  • Availability for One on One discussion
  • Ask the financial planner how often he can be available for consultation when needed.

  • Same School of thought

What school of thought your financial planner belongs to?

Does your financial planner support day trading or long-term investing?

Does your financial planner recommend sector-specific funds or diversified funds?
School of thought is the most important thing you should know about your Financial Planner to work along with him in an efficient and stress-free manner.

Many people would be confused and feel terrible some months or even years later for not knowing why a specific investment plan or stock plan or portfolio adjustment has been recommended to me in the first case.

The Financial planner should be transparent and unbiased in thoughts behind the pieces of advice given and that thoughts should align with your way of life. If it is not aligned, then this is detrimental to a long-lasting and prosperous relationship.

After Consultation

Ask the Financial Planner to give their references and financial planning models for your understanding of both Financial Planning and Financial Planner.

What will your financial planner do to change your financial situation..? You need to get a satisfying answer to this question.

Even after all these steps, if you are not able to decide, then ask yourself “What is holding you back?”. You can explain your concern with the financial planner, he should be in a position to clear it out.

Hope this post will end your search for Financial Planner’s Charges in India for Financial Planning and related queries.

Share your first experience with a Financial Planner and tell us what and how he charges for Financial Planning in the Comment Section below.

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