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Who Is A Financial Planner And Should You Hire One?

Jul 11, 2018 | 2 years ago | Read Time: 4 minutes | By iKnowledge Team

Smart financial planning can have a large impact on your portfolio, perhaps even more than your return on investment.  Although it may sound like a conflict of interests and even counterproductive to spend money in order to save money, but you have to keep the larger picture in mind here.

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Sound and meticulous planning on all matters pertaining to finances can help avoid mistakes and missed opportunities, plan ahead for stressful times, and manage risk in a tax-smart way for your assets to grow. A study by Vanguard recently revealed that a professional financial planner can add more value to your assets than your “do-it-yourself” approach to money management would. Therefore, even if financial planning basics are available at your fingertips, like this comprehensive check list curated by experts at Aegon, seeking a professional to help organize your finances not only projects the results of your savings and investments before it’s too late, but also prepares you well for retirement. It helps you make judicious use of and prudent decisions with your money, that is necessary to effectively and efficiently attain your financial goals. So it all boils down to whether you want to be better off in the long run.

But what exactly does a financial planner do?

Financial planners are not wizards who can dispel all your financial worries with a magic spell. They are professionals who make a thorough assessment of your finances, much like a doctor gathers information from your medical history, taking into account all your savings till date, helping you tackle a specific financial goal, and providing the larger and objective picture on the interplay between your various assets. Based on their understanding of your needs and situations, a financial planner will then advise you on how best to save, invest, and grow your money.

While they may go by several names—advisor, accountant, investment planner—it is crucial to realize that each of these designations vary slightly in terms of their purview and specializations. Not all financial planners or financial advisors offer the same services; while some specialize in retirement or estate planning, some others provide consultancy on a range of financial matters. Many financial planners usually have expertise in one or more of these topics, but the scope of their services are often more diverse and extensive, where they provide you holistic financial planning. Very rarely do financial planners restrict themselves to strictly investment management or retirement planning. Financial planners also differ from accountants who can help you lower your tax bill, insurance agents who are always trying to pitch lucrative but complex life insurance policies or urging you to buy mutual funds.

Why you need a professional planner

To break it down in jargon-free terms for potential savers, you’ll know you’ve struck gold when your expert offers you financial planning tips on:

  • What you should do differently to save more
  • How much you need to save
  • What savings plan you should adopt
  • How you should requisition your retirement funds
  • Which mode of mortgage payment you should choose
  • Important insurance related decisions and insurance plans
  • Designing an optimal emergency fund for your needs
  • How you can improve your tax situation
  • Specific calculations to reflect how long until you reach a particular target
  • If the risk you’re taking is commensurate to your saving investment plans

What you should ideally be looking for is a certified financial planner (CFP) who can give sound financial advice on a macro level, counsel you through difficult times and help set expectations for your portfolio, so that you know the risks involved and what “success” looks like.

A CFP specializes in providing comprehensive financial planning services complete with a written financial plan covering all aspects of your finances. A comprehensive plan in writing can highlight easily missable but critical aspects of your finances. It comes with a clearly defined structure (“allocation” in professional terms) which diverts your assets into various kinds of investments like domestic and international stocks, bonds, real estate, and commodities.  This is where a financial planner can help you, in reducing the risk posed to your portfolio if one sector of the market sours.

Source: Visually

Be meticulous while researching and choosing the right planner. Every client has different priorities and is unique, so make sure your planner can help you where you need it. Financial planners are not cheap, and usually charge you by the hour, unless the agreement is on a retainership or flat fee basis.

So to answer your question, yes, you would do well with a planner than without one.

In today’s economy when the investment landscape is volatile, tax laws are complex, and small changes in financial decisions could have a domino effect on the rest of your plan, having a professional financial expert will ensure your savings and investment plans cover all areas of your financial life, and hold up a mirror to reflect how each area is impacted by your decisions, so that you can implement one or more financial strategies.

Advt. No.: IA/Jul 2018/4183


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