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.