Many financial distributors, agents, and banks often refer to themselves and brand themselves as financial planners or advisors. They may also liberally define their expertise as being top of the line in wealth management and financial planning. Such technical jargon may not necessarily be understood by customers, who subsequently end up being confused.
When it comes to finances, investments, savings, and other monetary issues, we generally tend to consult many different people in our lives, including family, friends, colleges, CAs (chartered accountants, stock brokers, advisors, banks, insurance agents, planners, and wealth managers. Most of us take a bit of advice from a variety of sources and eventually end up with several extraneous and redundant financial products.
The right way for financial sagacity is the creation of a thorough written strategy that would encompass every facet of your personal investments and finances. It is essential for us to take a complete review of our financial situation. There has to be just one dedicated team or one individual that takes care of all your assets, cash inflows/outflows, liquidity requirements, and liabilities, etc., as well as assist in achievement of different financial targets and goals.
What is it that you can do when evaluating a financial planner? You may follow the below listed steps to meet a financial advisor who is right for you.
Step One: Verify the level of thoroughness and specificity in the data-collection meeting with the planner.
It is one of the most vital questions that you need to ask and verify. This is what will lay the path for the process of financial planning and drive all kinds of advice that may follow therein or in future. So ask yourself:
- Was the process of data collection sufficiently comprehensive and detailed?
- Did the financial advisor collect all relevant data about you, your life, your family, income, goals, dreams, ambitions, aspirations, assets, expenses, investments, cash flows, insurance, wills, liabilities, tax returns, and power of attorney, etc.?
- Did the advisor jot down all the information that you could not provide and ask you to revert with all such data?
- Did the planner inquire about your bearish and bullish market tendencies? Did he inquire your tendencies to risks?
- Did the advisor comprehend all the financial errors of your past, how they were caused, and what caused them?
The right kind of financial advisor may take 1 to 2 meetings or a chat of about 3 to 5 hours collect all the above mentioned financial data. They will then analyze and scrutinize the information and get back to customer for additional clarifications to ensure complete grasp of the overall financial situation of the client.
Step Two: Don’t blindly seek advice just by looking at the brand of a financial institution or bank. This is because it is an advisor who will help in planning your finances and not the bank. It is important to remember the fact that a majority of relationship managers in varied financial institutions are mainly sales persons who are continuously looking to sell more and more to customers. Also, the advisors rarely stay at one bank and often move from one financial institution to another.
Step Three: Pay close attention to the discussion that the financial advisor has with you about different associated risks and potential returns in the future. Verify whether:
- The advisor discusses at length a good risk profiling regimen, informs about the stock market returns over the long term being about 12 to 15 percent, and that returns of 30 percent are false and glorified reports.
- The planner is excessively self-promoting, or makes promises of huge financial rewards, or boasts about his achievements in providing the best returns in the past. The right kind of advisor does not engage in such practices. Avoid them.
Step Four: Check if:
- Has the advisor discussed different important aspects of finances like retirement planning, estate planning, other varied investment offerings, etc.?
- Has he/she discussed all financial matters pertinent to you and your needs?
Financial planners typically do not directly assist customers in such additional aspects, but the good ones will offer a general idea and recommend a competent advisor in those financial areas.
It is important to remember that a large number of distributors and private banks are known for selling life insurance as an option of investment as the first choice to clients as well as mix portfolios in the name of financial planning.
The current issue in the financial services and banking industry is that it has become very difficult to distinguish between genuine planners and fake advisors. This is due the fact that all involved in the industry use the same name or title. It is important for all of us to comprehend the terms and conditions of wealth management, financial planning, and wealth manager before going forward. Otherwise, we may just be handled with a lemon under the disguise of financial investment and planning.