When it comes to your health, you’ll most likely consult a doctor. In case you have a legal issue, you’ll consult a lawyer. Then why should investments, that can impact your financial security in the future, be the only area where you go with random advice?
Depending on how complex your investment needs are, you might want to consult a financial planner or rely on online investment platforms to automate your investments.
Do you really need a financial planner?
In most cases, no. You’ll do well financially as long as you follow basic investing principles like
- Follow a disciplined investing approach
- Invest for the long term
- Invest in equities (company stocks, equity mutual funds, etc.) for long term goals and debt (bonds, debt mutual funds, bank FDs, etc.) for short term goals
When do you need a financial advisor? While most people will do well with a standard, yet proven, approach, in some cases you will need professional help. Your requirements can be quite complex or in some cases, you have no idea where to start and have no inclination to learn the basics.
Here’s a quick guide to help you shortlist a financial planner.
Questions to ask before finalizing a financial planner
#1. How can you help me?
Does your financial advisor have the skills and experience to handle your requirements? Will he be able to help you by providing a solid and actionable plan?
#2: What is the scope of your work?
Will the financial planner stop at providing you a plan or will he help you implement it as well, including the paper work?
#3. What kind of clients do you normally handle?
Depending on your life stage, you might have varied financial goals. It is always better to go with an advisor who has experience working with people similar to you, in term of goals or life stage. This avoids a lot of miscommunication and heartburn later.
#4. What are the charges?
Ask your advisor to be up-front about their charges and whether it will be dependent on certain factors. For example, if your advisor invests your money, will he be taking a share of the profits? Or is there a fixed fee for providing advisory services?
Being clear about charges is essential as you should be comfortable paying them. It would also help you understand and rate the advisor’s performance.
#5. Can you provide me a reference?
If a financial advisor can provide references whom you can talk to, it will help you understand if the advisor is right for you. You can ask references about how the advisor has helped them reach their financial goals.
Make sure you ask them about what, if any, they didn’t like when dealing with the particular advisor.
#6. Can you show me how you have helped an existing client?
An advisor who can walk you through how they helped other clients, can give you insights about how the advisor works and whether you’ll be comfortable managing your finances through them.
#7. How personalised is your service?
How closely will the advisor work with you? They should ideally be closely involved with most of your major financial decisions.
The final authority over your financial decisions, though, should remain with you.
#8. How frequently will we remain in touch and what kind of information will be provided to me?
Your advisor should ideally explain the strategies and approaches they are exposing your investments to. If they are merely advising, then they should explain why they feel that their strategy is effective.
Your advisor should, ideally, educate you about taking better financial decisions.
Mainly, listen to the questions they ask you…
An advisor is a confidant who must have your best interests at heart. So it’s important that he understands your current financial situation and your future goals well.
If the advisor seems more interested in pushing various products even before trying to get a sense of what you want, that’s a red flag. Good financial advisors always try to understand what you want and recommend products that are suitable for your goals.