Who require Financial Planning – HNIs or others?
The general belief is that Financial Planning is for the High Net worth Individuals (HNIs) and not for the middle class.
It actually works the other way round. If you are very rich, you don’t need financial planning. You would have enough resources to take care of your needs. You need not work hard, because your money will work for you and generate returns.
Financial planning is for others who have limited resources and big dreams. It helps you understand your needs, prioritize them and take the best possible path to reach there with the minimum outgo.
Financial Advice in India
In the absence of any regulations, everybody is acting as Advisors. Let us list some of these advisors available in the market.
- An insurance agent licensed to sell the policies of a particular life insurance company.
- A fresh MBA, recruited by a broking firm as Sales Manager.
- A graduate working with a private bank as a relationship manager/wealth manager.
- National distributor of all investments, insurance, fixed income etc. with branches in all major cities.
Now, let us study, the outcome of your investments done through the above advisors.
- You will end up in investing mutual fund NFOs, which are not good for you. He will not tell you about the good mutual funds in the market for the last 15 years giving consistent return.
- You will buy endowment or money back policies only to earn 4 – 5% return after 15 or 20 years. Or you will buy a Unit Linked Policy (ULIP) without knowing that around 20-25% of your premium is going towards various expenses of the insurance company. There are various recurring expenses in ULIPs, which will again reduce your fund value. He will never tell you about the advantages of buying a Term policy.
- The broker will be interested in day trading to get the maximum brokerage for him. He will never teach you the advantage of long term equity investments.
- The national distributor will have preferred players from all sectors where they get the maximum benefits. They will push only their products, while better products are available in the market. They will make fancy presentations on the worst products and sell them for higher commissions. They will never offer you the best products available in the market, as per your requirement.
All these advisors are working for their sales targets- don’t expect quality advice from them.
The Role of Regulators
The regulators are not in a position to stop these wrong practices. The regulators are taking action against the distributors, when complaints are reported. But how any customers are lodging complaints? By the time, the regulator initiate action against an agent, he would have sold such products to hundreds of customers. Banks with huge branch network is engaged in large scale misselling of toxic financial products.
The regulators have a bigger role to play while approving such products, which are not good for the customers. But many regulators are simply acting as godfathers of the financial institutions. Customers are taken for a ride.
The way ahead
Getting expert unbiased advice before starting any investment is the right step. But how to select an expert? How much he will charge?
If you approach a financial planner working with a bank or a distribution house, the planner also will have the mandate to push their products. He cannot be neutral and protect your interests fully. If you go for an individual financial planner, who is also a distributor and getting commission, then, doubt his neutral stand. He will be tempted for the commission. If you go for an advisor offering free advice, be careful and find out from where he is getting his income? It will be at your cost.
It is better to go for an Independent financial planner working on a fee based model and not selling any products. This is because, he will be in a position to give unbiased advice, keeping customer interest in mind. His only income will be the fees paid by the customers.
Also look for advisors with qualifications in the financial planning subject and relevant experience in financial sector. Certified Financial Planner (CFP) is an internationally approved qualification in Financial Planning.
Will you pay for advice?
Most of the financial planners are charging 10,000 and above in the first year for a Financial Plan and then around 3000/- for the annual review. Customers feel this as high and this act as a hindrance for many to avail the financial planning services. Though, the investors can save much more than this by financial planning, the Indian mindset of free advice demotivates investors. They go for some investments based on the free advice by the sales agents and get into the financial trap.
What way Finvin Financial Planners can help you?
Finvin is an Independent Financial Planning Firm with no distribution activities. Our Mission is to ‘offer unbiased advice at affordable prices’. We charge an annual fee of Rs. 5000/- only for this financial planning service. We do it online and can cater to customers anywhere in the world.
Under this offer, we will analyze all your current investments/insurance and give our independent opinion on the suitability of these. This will act as a second opinion for your investments. Then we will discuss with you in detail about your current financial position, your financial goals in life and will give you an independent advice on how to reach your financial goals. Since we are not selling any financial products, you are assured of an independent and unbiased advice. You can contact us any number of times through mails/phone on matters on personal finance.
If you are interested in availing this offer, please visit www.finvin.in and click on ‘Contact Us’.