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The Ultimate Guide for NRIs to choose a Certified Financial Planner

Are you an NRI who is making most of your investments during your short visits to India?

Are you forced to take quick investment decisions because of the tight-packed agenda during those short visits?

Remember, those quick investment decisions will have long-term commitments. Are these investments aligned with your actual financial goals?

As a Non-Resident Indians (NRIs) or Persons of Indian Origin, instead of making investment decisions based on the broad views you get from your relatives and friends in India, it is better to have a financial planner who can give you a complete and comprehensive financial plan even when you are abroad.

While choosing a Certified Financial Planner (CFP) for personal financial services, NRIs should consider some factors to protect their wealth and to earn better returns.

Expertise & Experience in handling Non-Resident Indians (NRIs)

As an NRI you need to select an experienced financial planner, who will be able to understand the needs and constraints of NRI customers in a better way than the ones who have no experience in handling NRI clients. Like the other NRIs, you should not make the mistake of choosing a generic financial planner who has no experience with regard to NRI clients.

Expertise in advising NRI clients requires the financial planner to be aware of:

1) Exchange rate risk

Returning Nri

Your financial planner should understand the impact of currency movements on the value of investments made by NRIs. While giving investment advice, your financial planner should clearly explain to the NRI clients like you, the impact on the value of their investments of any adverse currency movement.

When the Indian currency depreciates against the currency in which an NRI earns, then the after-tax return generated from investment in India will be

lower in terms of the currency of income of the NRI.

Your financial planner should also be able to advise in ways in which NRIs can hedge their currency exposure while investing in India. Hedging can ensure that the value of investment remains the same in spite of adverse exchange rate movement.

2) Different sectors or schemes in which NRIs are allowed to invest

Not every investment avenue in India is available for NRIs. For instance, due to the regulations of the US Securities and Exchange Commission (SEC), most mutual funds in India do not accept investments from NRIs or PIOs based in United States. Same is the case with Canada.

3) Tax implication of the investment decision

Your financial planner should be well-versed about the tax implications of investments for an NRI in financial assets in India.

Securities transaction tax, taxes on short term and long term capital gains etc can affect the final value that an NRI investor realizes from the investment in India. Double taxation treaties of India with a number of countries can have some tax implications for NRI investors.

So, before selecting your financial planner, you need to check whether the financial planner knows all these tax implications.

4) Investment Product Knowledge

The right financial planner would be one who understands clearly the various investment schemes that are available for NRIs or PIOs. Due to the higher economic growth and higher interest rates in India in recent years, PIOs have shown a lot of interest in investing in Indian financial assets to generate higher returns.

5) Right Investment Process

The biggest advantage of choosing the right financial planner is that a systematic investment process will be followed. A systematic investment approach increases the chance of making the right investment decisions. NRI clients should take the services of a financial planner so that they make better investments.
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Many NRIs think that they do not need to take the services of a financial planner; they can make investments without needing any advice. This approach often proves to be harmful and loss-making.

6) In-depth Requirement Analysis

Your financial planner should be able to clearly identify the investment horizon of the NRI customers like you. Different NRI customers can have different investment horizons.

A clear investment policy statement should be made by the financial planner. This investment policy statement should clearly state the investment goals, investment horizon and risk tolerance of the NRI investor.

Your financial planner should be able to assess your goals in India and overseas. He should be able to come up with different investment options – repatriable and non-repatriable – for different investment goals.

7) Macroeconomic Risks for NRIs

The financial planner should also be able to understand the various macroeconomic risks that can have an impact on the investments made by NRIs in India. India is a developing country with its unique set of macroeconomic risks and opportunities.

These macroeconomic risks include higher oil prices and the country’s dependence on imports for meeting more than 80% of its energy needs. When oil prices rise, the Indian currency tends to depreciate against other currencies. An NRI may realize lower returns from his / her investment in India because of this depreciation.

Another macroeconomic risk relating to India is political or economic instability. Increase in fiscal deficit or current account deficit can be important macroeconomic risks for the economy.

8) Investment Transaction Execution for NRIs

The financial planner should also be able to offer convenient ways in which NRI clients can make the investment, once the asset in which the investment has to be made is decided.

The financial planner should advise on the entire value chain of the investment process. Ways in which investments can be made most conveniently, such as through online transfer in the scheme, is an area in which the financial planner should be well-versed in.

The financial planner should have an understanding of the transactional side too so that he can guide NRI clients on how to make investments most conveniently.

9) Easy Accessibility (Very Important for NRIs)

Your financial planner should make use of the latest Technology products or tools when it comes to communication.

The financial planner should be one who can be contacted easily through the use of Skype, email, phone etc. Due to the geographical distance involved, NRI investors like you may face difficulty and dissatisfaction if you are not able to communicate easily and in real time with your financial planner.

So, while choosing your financial planner, you should also enquire about the communication modes/ methods that the financial planner uses for communication with clients.

10) Online Access

Use of the FinTech Softwares, help a financial planner as well as their clients to invest and track their portfolio online anytime and anywhere.

A financial planner, with a help of communication tools, can send Portfolio Report/Newsletter to their clients effortlessly at regular intervals and whenever required to keep their clients informed about their portfolio and market.

Regular communication of a financial planner plays a vital role in keeping the emotion of investors under control which advises the investors to be rational and avoid taking wrong investment decisions out of market volatility.

NRIs Specific to a Country

Case 1: NRIs in Gulf Countries:

Over 2 million NRIs live and work in Gulf countries such as UAE. Most of them intend to return to India at the time of their retirement. They send billions of dollars every year as remittances to their families in India. They want to preserve their savings and grow them so that their retirement needs and those of their family members can be met.

The financial planner should have a clear understanding of the investment objectives of such clients while giving them advice. Factors such as the city where a client intends to settle after retirement, cost of living in that city etc, are important factors in the investment advice.

An issue with NRIs living in Gulf countries is that many of them go to these countries on temporary jobs or assignments. They work for 5 to 10 years and then come back to the country. Some of the white collar jobs are not secured. Anytime, they may lose their job.

How to accommodate this job insecurity in the financial plan, needs to be addressed by the financial planner.

Back in India, they work in Indian jobs at comparatively lesser salaries. The financial planner should understand this situation of many NRIs and advise them appropriately. Such advice should be about how to invest the savings made during years of working in Gulf so that the returns earned can offset the decline in income in later years.

Case 2: NRIs in USA, Canada and Europe:

USA and Canada based NRIs may have to pay tax on the accrued income from the investments made in India. This needs to be accounted for in the financial plan.

Your financial planner should have worked with different kinds of NRIs – NRIs who settle abroad; NRIs who will return to India in future; NRI who has not yet decided about returning or settling. These different categories of NRIs need different treatment in their financial plan. Your financial planner should be comfortable with all these categories of NRI and should have proper strategies to address their different financial situations.

Financial Planner’s Fees:

The fee that the financial planner charges should also be taken into consideration before the final decision to take the services of that financial planner. The very high fee can result in lower net returns for the NRI client from their investment.

The cost of choosing a wrong Financial Planner:

People often fail to understand the significance of choosing the right financial planner. They don’t realize that a lifetime of their efforts can go down the drain if they choose the wrong financial planner. The right financial planner can multiply their wealth significantly and make them richer and happier. The right financial planner is one of the requirements for a successful financial life. If you do not have one, then go get one soon.

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4 thoughts on “The Ultimate Guide for NRIs to choose a Certified Financial Planner”

  1. Need help in understanding tax complications as I am currently employed outside India but stuck in India during Covid lockdowns placed by many countries

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