“All that glitters is not gold”. This cardinal truth applies to financial advisors too. Most financial planners/ advisors you meet will seem promising to help you
• Take Right Investment Decisions
• Save Tax money
• Become Financially Secure
• Become Financially Free
A Trustworthy Financial Planner can help you take control over your financial future with right financial decisions.
But, an Untrustworthy Financial Planner can hurt you by making you lose control over your financial future with wrong financial decisions or with conflict of interest.
Before we go further to find ways to find trustworthy financial planners, kindly think of the below scenarios for a moment.
Let us compare how exactly our financial fortunes are going to be affected if we end up in the hands of an untrustworthy financial planner.
Case 1: Competence without ethics or character
In the world of personal finance, Trust is delicate, and a small rupture can destroy it.
A financial planner recommends a client to make a particular investment, in which they have some vested interest. The investment option may not be the best one to the client’s interest regarding returns, risks involved, time period, terms and conditions, tax, etc.
Here, the flawed ethical values of the financial advisor are exposing the client to dissatisfaction or loss.
Case 2: Ethical and of good character but not competent
There are advisors who are committed to doing good for their clients. They do not indulge in practices which are harmful to the interest of their clients. They may be approachable and are willing to listen to their clients.
However, they could still cause harm to their clients’ interest by recommending poorly performing investment schemes due to their lack of knowledge/expertise. They will also be unable to meet the needs of their clients.
Also, without gauging the risk appetite of the clients, the financial planners could suggest investments in conservative funds where the client has a high-risk appetite and vice-versa.
Here the financial planner is not competent and hence not worth considering only on grounds of good character and ethical values.
How to find Trustworthy Financial Planners
The best way to find trustworthy financial planners is to go about the task methodically by checking these basic traits of trustworthiness in their services:
1. Professional Qualities &
2. Personal Qualities
Let’s see these traits in a financial planner for trustworthiness in detail.
I. Professional Qualities to Check for Trustworthiness
1. Professional Competence:
Professionally competent financial planners have the ability to effectively perform personal finance related tasks to meet your satisfaction. They restrict their activity to providing active guidance only and refrain from other unrelated matters.
IMPORTANT: Out of ignorance, many people ask Insurance Agents/ Chartered Accountants (CA) for investments related advice. Please Do Not Do That.
Insurance Agents are not professionally competent to provide financial advice. They are more interested to sell their specific insurance products for extra money as commission.
Chartered Accountants are professionals who do Accounting and Auditing Finances, are not professional financial advisors/planners to help you take better financial and investment decisions.
To get extra money or to really help their clients, CAs many a times act like financial advisors/planners. CAs cannot match a professionally competent Financial Advisor/Planner in the long run. So, you will naturally lose trust on them.
2. Professional Experience:
Financial Planners/ Financial Planning Companies, who have been in the field for many years and who have got the exposure to different scenarios and have successfully satisfied clients coming with different sets of needs, are the ones best suited for the task.
To be exact,
• Has the financial planner seen many Market Cycles (Rise and Fall of the Market)?
If Yes, how well did he tackle the Market Cycles and serve customers better in the past years?
• Has the financial planner withstood the Regulatory Changes made in the personal Finance Industry?
Government of India has brought many regulatory changes to reform the policies of Insurance, Mutual Fund, Taxation, etc to avoid Misselling and Scam and to improve Transparency.
How well did the financial planner manage to adapt to the regulatory changes and serve customers better in the past?
An experienced financial planner will help you make the principles of finance & investing easy to apply in your daily life. With a financial planner’s help, you can achieve your financial goals, not just to manage your investments. Their expertise will help you secure better peace of mind and sleep, and not to regret in future.
3. Good support team for implementation:
“A financial plan will be just a plan on a paper without implementation.”
So, implementing your financial plan properly is key to achieving your financial goals. From doing the paperwork to periodical reviews to renewals on time, implementation is vital. This cannot be done without a proper support team.
Good financial planners are the ones who have a potent backup team in place.
In situations where a financial planner is not able to attend to his or her client, due to some reason, a good support team will fill in the void seamlessly and the client will be served well with no less satisfaction.
Implementation is one thing, responsiveness to address client’s important urgent issues is essential to have a peaceful journey.
While filing tax or paying advanced tax, you may need to talk with your financial planner or sometimes you may need your Auditor to have a talk with your financial planner for clarifications. Without having a responsive financial planner you would go through a stressful experience and might end up paying more tax.
These are the reasons why a Financial Planner with a good support team is better than a Financial Planner with poor or no support team.
4. Deep understanding of client’s requirements:
Just as a good doctor understands the symptoms based on his prognosis and diagnosis, a good financial planner will use his skill and competence to understand the client’s requirements.
Understanding the short-term, mid-term and long term goals of a client and investing accordingly in right investments are very important after thoroughly considering from these perspectives:
• Job and its Nature
o People with a permanent job / People without a permanent job
o People with uncertain jobs (Jobs in Gulf Countries | Due to Market Crash/ Recession)
o People with Seasonal Income (in some industries)
• Expected income and expenses (From Family Perspective)
o Hike/ Bonus
o Education Fees, Running expenses, etc
o Employee Provident Fund (In some companies)
• Unexpected or emergency Expenses (From Family Perspective)
o Medical Fees
o Lack of job for a short time (While taking a break and Switching Jobs)
II. Personal Qualities to Check for Trustworthiness
Check whether a financial planner is willing to help people from different backgrounds and situations.
• Some may have basic idea about financial planning and some may have little or no idea about financial planning.
• Some may come with a lot of goals. Some may come with a lot of debts.
• Some may come at their 30s. Some may come after their retirement.
• Some may want to do financial planning for them as individuals. Some may come for a financial planning for their entire family.
• People begin investing with as low as 2 lakhs to as high as 2 crores.
So, you should carefully check whether a financial planner you seek is competent and willing to help you professionally based on your background and situation.
A good financial planner will always be responsive and they have the ability to meet all your requirements. They will listen to you patiently and be warm in their approach.
Proactiveness is about anticipation. It is about the ability to change track or plan when the going gets rough. A proactive financial planner will always be open in his approach and will always ensure that the client gets the best advice and results. If something unforeseen happens, the advisor will take due care to safeguard the interest of the clients.
If a financial planner is competent and proactive, then
• You will be informed earlier to pay advance tax on time.
o You will also be given a clear information whether or not to pay tax for money or investment managed by them at that moment.
• You will be informed how your funds perform, through monthly newsletters.
o When a fund underperforms, you will be informed whether to wait and watch or to take any actions.
o So, you will not be reactive to all market buzz about your funds.
A matured person is always in better control of his or her life and also those around them. Having a matured financial planner to create your financial plan and monitor its progress is always an advantage. They would be more prudent and realistic in advising the best possible options in any given situation.
• Handling Emotional Clients
Right from saying that insurance policies are not investment plans to introducing Mutual Funds and Stock Market Funds as Investment Options, a Financial Planner has to be mature to make emotional clients take time and accept things slowly even if all these are based on rational decisions.
• Handling Ambitious Clients
A financial planner has to handle ambitious clients kindly to thoroughly understand their big plans, expected increment in salary, early retirement option, luxury house buying option and other things to find out whether these are achievable on practical methods.
Without Saying YES to all of their ambitious plans, a mature financial planner has to inform the clients on the feasibility and risks involved in their plans politely.
Each and every client is unique, a financial planner has to respect them and take very good care of each of their hard earned lifetime earnings. This is where a good financial planner differentiates them from others.
An ideal financial planner will be the one who instils confidence and trust. Trustworthy financial planners will not panic under pressure and will consistently provide their services through measured practical decisions. They will always remain a “go to” individual or institution for their clients as far as financial advice is concerned.
In a nutshell, a financial planner has to be mature enough to handle emotions of their clients and make them focus to take right decisions.
Honesty and Trust always move together. If a financial planner is honest and does not resort to fake gimmicks to engage their clients, it is more likely that he or she will bring more success to their clients in the long run. Being forthright and honest about the expected outcome will also provide clients with a clear idea as to the future course of action that needs to be taken.
• Conflict of Interest – Financial planner advising for Misselling or Misbuying to get extra money or commissions affects Client’s best interest and causes poor return or loss.
• False Projection – Financial planner adding Hype or false projections on fund performance will disappoint Clients badly. Decisions taken based on the false projections will create problems in future.
• False Promise – Promising the moon to a client and not being able to deliver can be disastrous. Based on facts and figures, a realistic assessment and plan are the needs of the hour, and a good financial planner will always stick to that as an ethical practice.
The presence or absence of all of the above criteria to an extent in a financial planner will help you choose or reject them. A financial planner with more good qualities will be the ideal trustworthy financial planner.
Additional ways to spot a Trustworthy Financial Planner
I. Client Testimonials
Google Reviews and reviews in Personal Finance Business Listing sites can help you get an idea about a financial planner, their clients, and their over all experience.
Company Testimonials on website or in company brochures can also help you understand the trustworthiness of a financial planner.
A background check, will definitely improve the chances of finding the most trustworthy financial advisor. Talk to the existing clients of a financial planner and know their benefits, challenges and future ideas.
II. Client Referrals
Word of mouth information or personal recommendations from your family, friends and colleagues will also help you find trustworthy financial planners.
Here, the clients or beneficiaries are known to you. You can get unique working experience of them with their financial planners. By this, you can get a clear idea of the financial planners’ fees, implementation process, review process, support team, strengths and weaknesses.
“Trust precedes action. And, it will be only after a financial planner has earned the trust of you, you can confidently allow the financial planner to manage all the earnings of your lifetime.”
Now you know how to find trustworthy financial planners. Kindly share your comments below. Do not forget to share with your family and friends if you like this article.
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