Do You Need a Financial Planner?


Just Imagine, you know the product you wish to buy and you know where to buy it from. All you need to do is to write a cheque, fill in the relevant document and submit it to respective point or insurance company or registrar. There are host of websites which facilitate online investments. Then do you really need a financial planner?

Here are some reasons why taking care of your own investment needs is not an individual’s cup of tea.

Globalised market

Indian markets are globalized and affected by the vagaries of the global financial markets. Currency movements, oil price movement, brexit issue, federal interest rate change, country specific election, bilateral relationship, floods, politics…………. almost anything could affect the financial markets. As an individual investor, it can very difficult to keep track of everything that is happening around.

Asset classes

There are various asset classes, be it equity, debt and gold to choose from. Within these asset classes too, there are various products available. In India, there are 42 Mutual Funds companies with 2000+ primary mutual fund schemes.

In BSE there are 5500+ companies listed and in NSE there are around 2000+ companies listed.

Believe me, It’s true.

To check with insurance industry, there are 24 life insurance companies and 28 general insurance companies with numerous schemes and products.

Check the total no. of schemes available in the market? Imagine the total no of schemes!

Just imagine, how many banks are doing business in India? There are 21 public sector banks, 23 private sector banks, 5 payments banks, 44 foreign banks with branches in India and 57 Regional Rural Banks (RRBs).

What percentage should they constitute, when you should buy or when you should switch or sell, is something very difficult for an individual to do on his own. It is impossible for an individual investor to monitor all asset classes on his own.

After all, no matter how much information is available online, your personal situation is bound to be unique and it can be helpful to get personalized advice.

A financial planner or Certified Financial Planner (CFP) is one who guides you on all your investment decisions. He is your financial doctor or guide in the vast financial jungle.

Generally, the financial advisor offers three services. The first includes understanding the customer, his existing finances, risk appetite, relationship with his own money, time horizon and future needs and making a ‘Comprehensive Financial Plan’ for him.

What is Comprehensive Financial Plan? Comprehensive financial planning involves the detailed review and analysis of all facets of your financial situation including cash flow analysis, retirement planning, risk management, investment management, tax management and estate planning.

A written financial plan (around 60 – 70 pages written comprehensive financial plan report) – The strategy used in achieving your financial goals and objectives.

The second role is execution, wherein the advisor helps in buying, selling redeeming and such other operational aspects.

The third and final service is periodic review and timely advice.

If you have questions regarding your finances, investments, taxes, or retirement, speaking with a financial planner can provide the answers you need. A CERTIFIED FINANCIAL PLANNER (CFP) can help you organize your personal finances and establish a retirement plan. They can also help you make sense of financial problems, whenever they may arise.

Top reasons to hire a financial planner, as well as what to expect once you hire them.

You are planning a big purchase or making a big change-

If you are planning on purchasing a home, or making another large purchase, a professional can help you determine how much you can afford to spend. They can then help you develop a plan to meet your financial goals and afford the home or purchase of your dreams. They can also help you prepare for life’s big events, such as an upcoming baby, career change, or new car.

The financial planner’s guidance and strategy underlines the importance of making your money work for you at every stages of life.

Suppose A & B want to purchase their dream home as soon as possible. Both are earning 50000+ per month salary. To purchase a dream home, both are thinking to take a housing loan of Rs. 50 Lakhs. All the banks are ready to grant their loan application.

Mr. A’s housing loan is Rs. 50 Lakhs with 8.35% rate of interest per annum for a period of 20 years.

Just calculate the EMI – it is Rs. 42,918/- per month.

In 20 year (240 EMIs), Mr. A paid total amount of Rs. 1,03,00,236/- (1.03 Crore) to the bank. Out of this total payment, Mr. A has paid Rs 53,00,236/- (53 Lakhs) as interest payment. Yes, it is 53 Lakhs of interest amount.

Mr. B has discussed with a financial planner to purchase his dream home. As per his financial situation, the financial planner advises him to create corpus of Rs. 10 lakhs with 5 years for his financial goal – buying his dream home.

Mr. B created Rs. 10 lakhs corpus for purchasing his dream home within 5 years as per his financial planner advise.

Having a corpus of Rs. 10 lakhs, Mr. B’s housing loan is Rs. 40 Lakhs with 8.35% rate of interest per annum for a period of 20 years.

Just calculate the EMI – it is Rs. 34,334/- per month.

In 20 year (240 EMIs), Mr. B paid Rs. 82,40,188/- (approx. Rs. 82 Lakhs). Out of this total payment, Mr. B paid Rs 42,40,188/- (42 Lakhs) as interest payment.

Mr. B has saved Rs. 10,60,048/- interest amount (Rs. 53,00,236 – Rs.42,40,188).

Saving Rs.10 Lakhs interest payment! Wow! Really it is advantageous to hire a financial planner.

This is one small example and other calculation & strategy for different situations………… Financial planner will check all the details to make a strategy for your benefit during your entire life.

Clearly, financial planner’s guidance and strategy can have significant impact on your financial life. Be careful, entering a debt trap is very easy but departing is more difficult.

[blockquote style=”1″]Financial Planning is the process of meeting your life goals through the proper management of your finances.[/blockquote]

You need to change your retirement plan.-

Whether you are changing your retirement plan, or haven’t started planning at all yet, a financial planner can assist. They can help you develop a plan for financial security both now and into retirement. If you need to save more, they can help you develop a solid plan to increase your savings and contributions. That said, many people are comfortable planning for their own retirement, and if you’re investment-savvy enough to do so on your own, a financial planner may be unnecessary.

You need financial or investment advice.-

If you have trouble organizing your finances and payments, a planner can help you get a grip on it. A financial planner can provide you with investment advice and explain the pros and cons of various investments options. They can also help you develop a strategy for down markets to better protect your money before retirement.

All forms of investments and retirement accounts have associated management fees and expenses. If you are unsure of what you’re paying for your investments, it’s time to speak with a financial advisor. They can explain what your funds cost and can determine if you are spending more than necessary.

You got married.-

Determining which debts to combine, which debts to pay off, and what you need to do to reach your financial goals as a couple can be very difficult (especially for the newly married). Instead, let a financial advisor deal with the finances and help you organize your spending, debts, and assets. They will help you determine which strategy is right for your taxes, investments, benefits, bank accounts, and personal finances. They can even help you determine what your spouse’s retirement plan may be able to offer you.

You’re starting a family –

Getting married and having kids both introduce a lot of new financial challenges. From joining finances, to managing the new costs of having children, to thinking about life insurance, estate planning, and college savings for the first time, young families have a lot of financial responsibilities on their plate and it can be hard to balance them all.

A good financial planner will help you navigate and prioritize all of these responsibilities so that you can create a secure and enjoyable life for your family both today and in the future.

Your income tax –

Taxes can damage your ability to save. You know that taxes can have a diminishing effect on your net income, impair your ability to save and, as a result, affect your overall wealth. There are many ways to maximize your assets and free up cash to carry out your projects, while minimizing the fiscal consequences of your decisions. Financial planner can advise you on ways to reduce the fiscal consequences of your decisions.

You own a business –

Owning and running a business can be very stressful. Having a planner on your side can help you organize your business expenses and taxes, employee benefits, business investments, and any other financial information related to your business. If you will be buying, selling, or passing on a family business, a financial planner can make sure everything progresses smoothly.

You’re a high earner –

If you’re a high earner, you may have the ability to save a lot of money but not know the right way to prioritize things and take advantage of the various tax breaks available to you.

A good financial planner can not only help you make those decisions and recommend tax-savings strategies, but may also be able to take over some of the implementation and management responsibilities so that you can focus your time and energy on making the money and enjoying your life.

At last, your relationship with your advisor is of complete faith and trust. You should choose an advisor who has your interest foremost, passion for investing, analytical skills, access o local and global resources, insight and research. Your and advisor’s interest should be fully aligned.

You pay professionals such as lawyers, doctors, tax advisors, accountants – so why not pay a financial planner? It makes sense to pay a reasonable fee and get quality advice and service, rather than losing a portion of wealth due to incompetent and poor advice.

Over time, your financial planner will continue to periodically monitor your progress to ensure you are still on track to meet your financial goals today, tomorrow, and into retirement. They will likely be your trusted financial partner for life because they can help you make wise, informed choices before you make any large financial decisions.

Do you go to a doctor when you get sick?  Of course!

Do you take your car to the mechanic?  Yes boss.

Do you have a financial plan for your future? Move now!

It is never too early to begin preparing for the future, however; something this important usually requires a professional……….now just where will you find one?

[blockquote style=”1″]Every investor should have the services of a Financial Planner or financial advisor.[/blockquote]

Want to become a Crorepati with nominal income? Read it.

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