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Most frequent questions and answers for personal financial planning
Let’s understand what is Financial Advisory – 

Everyone hires services of many professionals in daily life. Right from a mechanic to interior decorator.

Why do we hire such services? The reason is, its always better to get things done from the expert in that field. So the same applies with ‘Personal Finance’ as well! Financial advisory mainly includes advising on the ways and options for investments as per your risk appetite, short term and long-term goals and investment tenure. This needs to be done with expertise and after considering qualitative and quantitative inputs from the investor. Advisor must know how and which options to advise on, how to review all investments done and insurance policies taken and help the investor to achieve his/her goals to the fullest.

You get this ‘Financial advisory ‘service, from three ways:

  1. From Financial Products distributors and Insurance Agents.
  2. ‘Fee based’ financial advisers.
  3. From SEBI Registered Investment Advisers.
All the distributors and agents give you ‘advice’ on your investment and insurance ‘for free’ but they do distribute /sell products and insurance to you. But, when you invest through them, you often face following-
  1. Products you invest in are a mismatch with your risk appetite and goal, so, you redeem them when you face losses even if its not needed.
  2. You end up investing in product which is a mix of insurance and investment. Here, you don’t get enough insurance cover also and investment don’t is also not sufficient to fulfill your goals.
  3. Many a times, you end up investing in a product about whose features, tax implications, benefits you don’t know properly. So, it is not an informed decision about investment that you take.
  4. Investments done are not reviewed properly.
  5. Many a times, your major goals like ‘retirement planning’, etc are not considered and focus is majorly on ‘the returns’ you will get from your investments.
‘Fee based Advisors’, take ‘fees’ for their services of financial advisory and planning but work as distributors also. Hence, there is a possibility of ‘Conflict of interest’ because they sell the products and insurance and act as an advisor. Here, they receive earnings from client’s fees and remuneration from the distribution activities. Then there come, “SEBI Registered Investment Advisors”!

Securities Exchange Board of India i.e. SEBI, took first step in regularizing ‘financial advisory’ field, and came out with “Investment Adviser Regulation” in the year 2013.

As per this, only those who are registered with SEBI as an “Investment Advisor” can act as “Financial Planner” and can give Financial Advice.

They work on ‘FEE ONLY’ basis and provide you with professional and expert opinion on your personal finances and give advice on your investment and insurance. They are not involved in distribution of any ‘financial product and Insurance’ hence, this advice is totally ‘unbiased’ and ‘pure’.

1. Professional Qualification: ‘Fee only planners’ are professionally sound. SEBI has laid down stringent guidelines about Educational qualifications of SEBI RIAs where it states that a person should have a certification from ‘National Institute of Securities market’ or he/she should hold CFP (Certified Financial Planner) Qualification from Financial Planning Standard Board i.e FPSB.

2. Pure and Unbiased Advice:

Looking after ‘personal finance’ is crucial for everyone. Getting right and unbiased advice about your finances, investments and insurance is very important. This must come from a well experienced professional who is able to give unbiased advice. ‘Fee Only’ planners only can provide such advice.

3. No conflict of interest: ‘Fee only’ planner doesn’t have any product to distribute, so advice given is always ‘unbiased’ and without any conflict of interest.

4. No indirect costs for you:  You ‘pay fees’ to a planner for his/her services ‘directly’. So, no hidden ways of commission payments involved. You pay for the expertise and experience of a planner which he/she uses to give you best possible advice and plan. ‘Fee only’ planners give you a letter of agreement to be signed mutually, where fees charged, scope of services, way of communication, grievance redressal details, etc will be clearly mentioned for your understanding.

5. Fiduciary responsibility:  A ‘fee only’ planner puts ‘YOU’ first. All the advices given and plan made is client centric always. Your goals, risk appetite, desires and investment tenure are always considered and a plan revolves around them.

6. Code of Conduct: SEBI RIAs who work as ‘fee only’ planners, are bound to adhere to ‘code of conduct’ by SEBI. The regulations are in line with global standards.

7. Compliance: SEBI has directed compliance for RIAs and they need to abide by that from time to time.

8. Confidentiality: All the data given to a SEBI RIA about your investments, income, loans, insurance etc is put confidential always. As per SEBI regulations, RIAs will never disclose any personal and financial information of a client to anyone.

1. Complete review of your existing investment and insurance policies:

A ‘Fee only’ planner first reviews all the investments made, loans taken, insurance policies purchased, your income and expense pattern, your risk appetite. This is important to give you a ‘second opinion’ on your existing investments and insurance.

2. Making you more aware and educated about Personal Finance:

‘Fee only’ planner makes constant effort to educate and aware clients and people in general about personal finance. It adds value because you act on your financial plan with due understanding of it. A ‘fee only’ planner writes articles, blogs etc to make people aware about basic and important aspects of personal finance.

3. Plan your finances as per your realistic goals:

A ‘fee only’ planner, helps you to set realistic short/long term goals for you. When these are set, you are better equipped to achieve them with the help of planning. A ‘fee only’ planner helps you to do that.

4. Understanding your Risk appetite:

Often, people randomly invest in any product by chasing returns or simply copying others. They do this without understanding their own risk appetite. Hence, many a times, then get panic and sell off their loss -making investments even if it’s not needed.  This happens when there is a mismatch between investments made and your risk appetite.

So, understanding your risk profile is very important. A ‘Fee only’ planner always make an effort to understand it beforehand and advise you accordingly. Without understanding it, he/she will never advise or plan.

5. Reviewing your financial plan:

A ‘fee only’ planner, not only lets you starts your financial planning journey, but makes sure that the plan is implemented as advised and a regular review is taken care off. Review is a must because, there are changes in the market which affect your investments, additional responsibilities are to be considered when you purchase insurance policies, new incomes and any new goals which you want to achieve are to be accommodated where possible. So, review gives a clear picture of where you stand in this journey of personal finance and investments.

6. Making you ready to face contingencies:

A ‘fee only’ planner not only prepares you to achieve your goals but also helps you to be prepared to face emergencies in life. Creating a contingency fund, advising you on suitable health and life insurance is crucial part of a financial plan and advisory which he/she takes care.

7. A companion in your journey of personal finance:

A ‘fee only’ planner is your true companion when it comes to guidance on your personal finance matters. He/she helps you understand your “Money personality”. Makes an effort to create a blend of your and your spouse’s ‘Money personalities’ and helps you both to achieve more from your money. He/she acts as your confident by not disclosing anything about your investments and a financial plan to anyone, so, you can discuss freely.

– Disclaimer –
Registration granted by SEBI (INA000011796), membership of BSE Administration and Supervision Limited (BASL) (BASL 1878), and certification from National Institute Of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investments in securities market are subject to market risks. Read all the related documents carefully before investing.