5 Things to ask when hiring a financial planner

Financial advisor

The financial planning ecosystem is incredibly complex. The space is vulnerable to anyone with minimum qualifications. But, to glean out the financial planner who works best for you, make sure you are equipped with the right questions. Here are the five pressing matters you should be aware of before you hire your financial planner.

1. What are your qualifications and credentials?

The question is likely to cover how competent and knowledgeable the professional is in their field of expertise. Regulations require the person to be a Registered Investment Advisor (RIA) being licensed from SEBI. RIA regulations will ensure a certain standard of the advisor and various compliances are to be maintained. In terms of qualifications, they must ideally be certified by NISM Investment Advisor Certifications or hold a CFP from the Financial Planning Standards Board (FPSB) of India.

2. How do you ensure tracking of goals and data security?

Apart from executing a financial plan, it is critical to track your progress towards these goals. It is good to understand how the advisor tracks your portfolio, the reports they provide and at what frequency they will review progress towards achieving your goals. Further, they need to ensure that your data is secure. The last thing you want is for your confidential data to be leaked. Furthermore, with the wave of digital revolution, there are labyrinthine things that can go wrong in advertising, social media marketing, and communications. Take due note of each of these aspects before you make a decision.

3. How do you charge for your services?

Financial advisors are allowed to charge a fixed fee or a fee based on assets under management. You should focus not only on the fee, but the costs associated with their strategies like transaction costs, fund expense ratios, trading costs, and taxes.

4. How do you ensure that the engagement is aligned with my requirements?

While you are negotiating terms, it is important to find out what topics, decisions, or areas of advice are they not held to a fiduciary standard. You can ask the advisor to disclose any potential conflicts of interest. It may also help if you ask your advisor for a reference if you have not already approached them through one. You can talk to the reference yourself for a better understanding.

5. Do you have the secret ingredient?

Isn’t it ironic that transparency is the secret ingredient? It is important to be able to express your financial concerns and receive simple advice without jargons. You will need to have the negotiated terms signed in black and white and easily verifiable. It’s simple. Transparency breeds trust, two foundational experiences for a healthy working relationship with your financial planner. You can probe the advisor to get comfort on the transparency of their service.

Before you sign up, remember to knock these things off your checklist.

Ask yourself if the advisor is making you feel like your finances are too complex to be managed by yourself. The ideal financial planning professional would be one who gives you the flexibility to take back your finances into your own hands. However, be aware that professionals may be able to support you better in achieving your financial goals.

5 Healthy financial practices post-COVID

New rules for the new world order
What’s the easiest, most certain way to achieve your financial goals even in uncertain times?
Healthy financial habits.

Any goal you want to achieve is reachable through a few key habits with a little bit of time. It’s really that simple. Here are a few of these practices that you can include in your financial habits.

1. Leverage the gig economy.
On-demand contract work and the gig economy was possible even before the pandemic. But the paradigm shift in corporate culture has caused several companies to transform almost overnight. Gig economy workers have the benefits of earning money on their terms. The flight to digital and remote models of working have opened up opportunities to

2. Review expenses and savings
Even if salary budgets have been slashed, the virus outbreak has influenced consumer expenses in every industry (think cuts in expenses like fuel, travel, entertainment, shopping, dining outdoors, etc). Spending behaviors are settling into a new normal with a shift to value and essentials. You may also try to further optimize your cash flows and treat the margins as impact savings.

3. Reprice or refinance your home loans
Interest rates have also taken a plunge over the last few months. If one has home loans, check your rates of interest, and approach your bank for lowered rates. It is an opportune time for homeowners to review monthly cash outlays and ease up financial strains. You may either refinance (i.e., take a loan with another bank with lower rates of interest) or reprice (switch to a more competitive loan plan with the same bank), depending on which works for you best.

4. Review your financial plan
You may use the time to also re-visit your financial plan. Take an inventory of all your assets and liabilities and check for optimal diversification. Re-evaluate your choices. See if you have financial plans that can balance out your risks and guarantee safer and more secure returns. Re-shuffle your investments. Consult a professional if it helps.

5. Review your insurance covers
COVID-19 is a wake-up call. Very low medical covers in the past have fallen woefully short considering the number of days one is likely to be hospitalized if tested positive and serious. Check for the family floater plan of Rs 10L/25L/50L. The good news is that incremental premium is much lower for these. Protection instruments like health and life insurances can leave your savings scot-free while retaining your family’s lifestyle and long-term financial goals without disruption.

As local and global communities re-orient themselves to the new norm at a time such as this, you can re-organize your finances. The proverbial rainy day is here, and if you’ve made it this far, you can secure the future for you and your family. Even amid a pandemic, you can identify the new rules of financial planning and optimize.