5 Things to take care while choosing the right financial planner

What is the first image that comes to your mind when you think of a financial advisor? A stressed person completely occupied with his phone and PC, buying and selling orders, and trying to make as much money as possible for his present as well as potential clients.

While this advisor imagination stated-above, may still be true for some of the present day advisors, you will also find that many others have moved above just investment planning. They have evolved their practices into a more comprehensive approach in sectors like tax, insurance, budgeting, estate planning, funding, and retirement planning.

In process of searching the right advisor, you also need to clench to areas, where you seek help. Only then, will you be able to determine the skills and expertise of your advisor, thereby examining the right and suitable candidate before hiring. Let us now explore the criteria you may use to do this.

His qualification, knowledge, and his managerial experience: 

Before hiring your financial expert, never hesitate to inquire about his education and relevant experience in the field. It has become quite necessary to examine an advisor well, based on these factors because with the financial industry being bombarded with numerous professional designations, which one can obtain without many efforts.

In case, you are looking for anything different from the everyday guidance, it may be a wise advice for you to hire a certified financial planner, as your representative. These CFPs are of the highest standards in terms of their knowledge compared to the usual advisors. It is necessary for you to have an advisor, who is adept with managing both his personal as well as your finances.

Conflict of Interest:

This is the prime responsibility of a financial advisor that is to, act in your best interests. He/she has a position of special trust and confidence in the investors’ minds. In the finance & investment world, it is in the advisors’ best interest to abide by the standards of their investors, which the CFPs can very well take care of.

One should be safe with the stockbrokers, who can be over-glorified salespersons, hired by big wire houses to sell stocks and proprietary mutual funds. The more buying and selling done by a broker in the investor’s account, the higher is his commission payout. However, excessive of this, known as churning, can sometimes result in investments that might not be appropriate for the investor. Therefore, it is also important to take care of the quality along with increasing the quantity.

Understand what you give and what you get back: 

Once you have found your advisor, it is now time to get a little deeper to clear up some more issues on a one-to-one basis. Firstly, beginners need to understand about how to pay the advisors, whether on the basis of fees or of commission. In the recent times, more investors are shifting every year from the traditional commission approach towards the latest fee-based one. As this fee-only approach is a new concept, it tends to surround investors with certain common questions, like that about the fair fee and the billing system.

Therefore, it is necessary for investors to find advisors, who can package a program, including the investment costs, and costs of trading, custody and planners’ professional services. Since, most deals now bill on an annual basis, so one needs to know how to pull a sweet deal. Then, you can discuss with the advisor about the frequency of your meetings for reviewing your portfolio.

Find a true comprehensive financial plan: 

One needs to have a general idea of his/her weaknesses prior to selecting the professional assistance. These will help you determine what kind of financial planning firms to look forward for help. Then, understand the services available with the firm you choose.

While doing this, consider about whether it will track your investment based on costs, and whether it will help you file your tax returns and find solutions to other tax related queries. In addition, also know about its risk management abilities, estate-planning assistance, and whether or not, it will refer you to other professional service, if it cannot provide the same itself.

What else to look for?

Efficient financial advisors are like life-coaches, as they help you get through some of the life’s most complex financial decisions, such as buying a car, refinancing for home mortgage, etc. They deal with such things on a daily basis, and thereby know if you are paying too much for something.

Good advisors also help you reach your goals, save money in insurance matters, and other such decisions throughout your lifetime. To have an even better experience with your advisor, allow him to review your legal documents, share your concerns (if any), and most importantly, entrust upon him to take care of your money.

Bottom line:

If you take adequate care in selecting a right financial planner, the financial planner you selected will take care of your personal finances right.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in