Architecte presenting a new project, smiling young couple
Architecte presenting a new project, smiling young couple

Who is a financial planner? What is his job? Kiran Telang answers these questions and several more.

Financial planning is a word you hear very often from various people ranging from your bank relationship manager to your mutual fund or insurance advisor. Actually who is a financial planner amongst these? And do you really need one? Let us try and answer both these questions.

Aruna has recently joined as a deputy manager in a private sector bank. This is her first job after her MBA. She has had a sheltered life till now with her parents taking care of all her needs. It is April and she has been asked to submit her investment details for the coming year to work out her monthly tax deduction. Thought she has studied this in theory during her MBA, she has no clue how to go about it in real life. She is looking for guidance on what to do. A financial planner in this case can be a good resource. At this stage a financial planners’ job will have more emphasis on being a coach. Hand holding her client and introducing her to concepts goal setting, savings and investments will form a strong base for achievement of goals and also for wealth creation.

Ranjan and Shruti have just had a baby girl. They are now thinking of investing for their little one so they can provide her with the best in life. Do they make a fixed deposit or buy a child policy of invest in an education oriented mutual fund or should they simply stick to gold? They are not able to make up their minds. Besides, they will soon be looking for a bigger home to move into. Will they be able to comfortably service the EMI’s while saving for their daughter? These questions are faced by most young parents. A planner can help them set a goal based plan which ensures providing well for their daughter while at the same time looking into protection solutions for the family in case of death/disability of any earning member. All this has to be done keeping in mind the existing cash flows and also the lifestyle. Living frugally today for unforeseen future requirements may not exactly be palatable to most youngsters. So there needs to be a balance achieved.

Ayesha is looking forward to getting into a medical college. She has been studying hard and is pretty confident of getting through. Are her parents ready with the funds? They will need to look into withdrawing money from their investments done over the last few years to fund this need. If there is a shortfall, they will have to look for a loan. Depending on their level of preparedness, this goal might affect their own retirement corpus. So what is the optimal solution? A financial plan will cover all aspects and offer various possible solutions which can be available to the client.

Ramesh will be retiring in a couple of years. He has a pension from his employer but is not very sure if that will suffice for his lifetime. He wants to live a financially independent life. In case he predeceases his wife, she should also be able to live comfortably. His investments are spread over various different asset classes and products and he really has never been able to take the time out to consolidate them. He knows he should have been out of some of his investments long time back, but he kept procrastinating and things never happened. He is not sure of the best ways to derive income from his accumulated corpus. Who can help him consolidate and provide a guide to a comfortable retired life?

Gayatri has recently separated from her husband, and has complete responsibility of her 7 year old daughter. Being qualified and in a good job, she has not taken any alimony from her ex-husband. But now she worries about every expenditure she has to incur. She worries about her daughter’s education, she wonders if she will ever be able to own a home, she thinks she might not be able to afford holidays.  At this juncture in life, she is unsure of her acumen to make good financial decisions and might have already made some expensive mistakes in dealing with her money. She would want a clearer picture of her financial future so that she can have a peaceful present. Help with goal prioritization and drawing up a cashflow statement will help her immensely in her current situation.

All these scenarios require looking at both the big picture and the finer details. A financial planner is a qualified professional to provide these. Someone who is a specialist on one area like mutual funds or insurance or stocks might not be able to look at the bigger picture. He might not look at the interplay between various aspects of finance that might affect the client’s life. Anyone who can optimally provide such detailed options for the clients can be of immense help. Many people are comfortable with a do-it-yourself (DIY) approach, but it can be a risky affair unless they have the capability to look at their personal finance in its entirety. Lot many mistakes cannot be undone at all, or entail large financial losses.

A Certified Financial Planner (CFP) qualification prepares a finance professional to do exactly this. So the CFP certification can be seen as the first step of credibility of the advisor you are looking at. The regulator SEBI has mandated that people who provide advice on investments need to be registered under the SEBI (Investment Advisers) Regulations, 2013. An adviser registering under this is bound to act in a fiduciary capacity towards its clients, has higher level of educational qualification, experience and compliance requirements, and hence is likely to be more trustworthy. Apart from looking at the qualifications and licenses, you need to interact with the advisor to get to know more about his philosophy, experience, way of working, method of charging and whether you feel comfortable dealing with him. Once these things are in place you can be assured of getting better advice in the area of your personal finance.

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