November 12, 2012

Fee-Only and Fee-Based Financial Planners-Who is best for you?

Today their are different type of Financial Planners in market who by small differences in their service types can name themself. In all other cases it is easy to understand the difference between but when it comes Fee-Only and Fee-Based Financial Planners, it is commonly mistaken that both are one and same. But both generate their fees from difference sources. Hence it is better to understand the difference between these two.

1) Fee-Only Financial Planners-As the name suggest, they get their revenue from the plan they design for you and yearly charges which they charge for you on continues base. They are not associated with any brokerage firm, mutual fund company, insurance company or any wealth management firm.

Their revenue is fully depend on the fee they charge to you. You can say that this type of serve is purely advice based not implementation based. They look at your financial conditions, risk appetite and goals and based on that they design a suitable plan which you need to follow. Hence when it comes to just recommending, they will not bother about any selling tactics rather their main motto is to make you be in a right path of your financial life.

They usually charge on yearly base based on the asset they manage your assets. But in western countries fees are charged even on quarterly or hourly base, which we cant imagine in India as of now 🙂

2) Fee-Based Financial Planners-This name confuses with the fee-only financial planners and their is every possibility that thinking of you hired fee-only planner. These type of planners earn their revenue from the fee you pay to them and the commission or brokerage from the products where you invest. So you need to be bit cautious when dealing with such type of planners.

You need to verify what % of commission they will get when you invest in the products they recommended for you. Usually you may find some conflict of interest due to selling part is also attached with such type of planners. They may recommend you the product where they may get better revenue rather than the best available product.

As I told above they charge annual fee and with that they too earn commission from the products you invest.

Hope with above description now you are in a better position in choosing a planner who suites for you. Wishing you all Happy Diwali Festival 🙂

25 Comments

  1. Dear Basavaraj,

    Are you registered with SEBI as CFP now ?

    Reply
  2. Dear Basavaraj,

    Are you registered with SEBI as CFP . I am looking for a fee-only CFP for financial planning?

    Please let me know if you can provide that service for a fee ?

    Reply
    • Dileep-As of now NO. But soon within few months I am registering with SEBI.

      Reply
  3. Dear Basavaraj,

    How about yourself? Aren’t you a fee only planner yourself? What fee only services do you offer?

    Reply
    • Venky-I am not providing either fee-only or fee-based as I am not yet registered with SEBI. Wait for a year. Once I register myself, then I start offering the service of fee-only.

      Reply
  4. Hello sir,

    Can you please recommend some reputed fee only based financial planners in Mumbai?

    My annual income is around 5 lakhs so i am not looking for someone who has a very expensive fee.

    Regards,
    Sameer

    Reply
    • Sameer-You can be in touch with few of them, whom I know personally and best in industry. Below are their addresses. Both of them are reliable.

      1) 1. Melvin Joseph
      10, Olive Excel, Ground Floor, Plot No. 16, Sector-42, Seawood, Nerul
      West, Navi Mumbai (New Mumbai), India
      400706
      http://www.finvin.in/
      Phone 098 20 843739

      2) Abhinav Guletchha
      Soham Financial Planners
      Shop No. 3, Pathak Residency CHS, Anand Nagar, Near NL Complex, Dahisar
      East, Mumbai – 400 068
      Website: http://www.sohamfp.com
      Email: abhinav[AT] sohamfp.com
      Contact: 022) 28282718 (L), +91 9819 342 185 (M)

      Reply
      • Thanks sir. On Mr. Guletchha’s website, it says that they primarily provide services for NRIs & PIOs. Is it only restricted to them?

        Also, I have researched quite a bit on the internet since yesterday and I have listed down the names of fee only financial planners (apart from the 2 you mentioned) in Mumbai. Below are the names. Any from these that you would recommend?

        1. Kavitha Menon (No website)
        2. Gaurav Mashruwala (gauravmashruwala.com)
        3. Suresh Sadagopan (ladder7.co.in)
        4. Prakash Praharaj (maxsecfp.in)
        5. Sadique Neelgund (No website)
        6. Shilpa Wagh (waghfinancials.com)
        7. Atul Mishra (amigosfinserv.com)
        8. Vivek Rege (vrwealthadvisors.com)
        9. Azad Programme by Rajiv Jamkhedkar (azadonline.com)

        Reply
        • Sameer-No, Mr.Guletcha provide service to resident Indians also. These two persons offer you FEE-ONLY service. But I can’t guarantee about others. Rest is left with you to decide.

          Reply
          • Ok. Thank you so much 🙂

            Reply
  5. Hello Basu Nivesh Sir
    Can you please suggest some good fee only financial planners near jayanagar area in bengaluru.

    Reply
    • Dr.Pankaj-Sadly even though they are SEBI registered advisers, but in true sense none practice FEE-ONLY planning in Bangalore. But I can provide you few who are from other cities. Also, distance does not matter with the faciltiies of communicaiton like SKYPE or HANGOUT.

      Reply
  6. Nice to see a CFP talk about this! I too believe that it should be mandatory for all CFPs to be fee-only planners like Pattu. My Only Poin to add here is, to Give Awareness. We must take a group effort to spread awareness on the difference between Fee Only and Fee Based Financial Planning Servics . I appreciate you, for the effort taken to share this piece of information.Fee Only Financial Planning ” is now introduced in Kerala by, Mr. Sanjeev Kumar GopalaKrishnan, CFP, founder of PrognoAdvisor.com. Another state initiating Fee Only Financial Planning is definitely a good sign. Since he is the first froom Kerala, I am sure, Pattu will take initiative in adding him in his list of” Fee only Financial Planners in India.”

    Reply
    • Anna-Thanks for your sharing. If the person you mentioned is SEBI registered adviser, then let him come forward and contact Mr.Pattu. He is generous in adding that but the only condition is the planner must be FEE-ONLY.

      Reply
  7. Nice to see a CFP talk about this! I wrote about this sometime back in my site.
    freefincal.wordpress.com
    I think it should be mandatory for all CFPs to be fee-only planners.
    Conflict of interest is a poorly understood concept in India and it is very difficult to talk to someone without them getting all emotional
    Even if someone decides to go to a fee-only CFP difficult to choose because fee today ranges from 5 K to 25K.
    I have all sort of answers to this when posed to CFPs but no regulations no union based agreement make it a problem for clients.
    Radhey Sharma had written about this in NetworkFP

    Reply
    • Pattu-Thanks for sharinv your views. Yes it need stringent regulations is the need of the hour. But above all we planners need to maintain our own set of rules and values so that we can’t divert from our set objectives.

      Reply
  8. Now it depends on the client and the planner. I manage mutual fund portfolio, but while I write in unbiased way, in case of application my clients may go to other investment advisers, but if my clients want to implement the same through me I charge on AUM base.

    Upfront charge is always go in favor of clients, in case of fee-only, it may be my mental barrier that hardly clients can compensate me properly. Still we work at a subsidies rate in India due to lack of awareness among investors. I charge Rs. 7000 for single plan & Rs. 15000 for comprehensive plan. I have to review at lest thrice in a year, I have to incorporate all the changes, I have to concentrate on the behavior patterns of my clients. I have to follow up and follow through whether they have implemented strategies or not.

    We need peace of mind, if we are not financially independent how can we work? In India we have to wait for the same. While I have registered myself as a CFP, I have taken exemption from LICI, facing lot financial hardship now, in future I’m optimist about the future of our profession.

    Just I have mentioned something out of this topic and I’m really sorry for the same.

    Reply
    • Uttam da-Your sharing are always welcome and thought provoking. It is agreed fact that fee based financial planning need to grow as it is still in it nascent stage. It takes time but with our unbiased effort and knowledge sharing initiative we can definitely find ways. Thanks commenting 🙂

      Reply
      • Thanks for your kind words. We have to keep in mind:

        “The role of the financial adviser has to be more than just finances. It has to be life coaching.”

        Dan Sullivan – Financial Planning, Sept. 2007

        Reply
        • Uttam Da-Well said 🙂

          Reply
  9. Very rightly described by you about the distinction between financial planners. This is much needed information for our people along with other general financial awareness.

    Let me add further that Fee-Only Planners are again of two types:

    1) One is which is described here i.e. they charge only fee but based on the client’s assets they manage (some percentage of the assets). This type is in the majority in this class.

    2) The other type of fee-only planners is very rare in India presently. They charge flat-fee based on the amount of work/effort expected for the plan preparation. This is the class which is completely free from any conflict of interest whatsoever. This may further give birth, in future, to a sub-class in which planners will charge fee on quarterly or hourly rate.

    Thanks!

    Reply
    • Sukhvinder Sidhu-Thanks for adding few more points 🙂

      Reply
      • Can you recommend one each in both these categories with reasonable fees and good service?

        Reply
        • Dhaval-I will not suggest any Fee-Based Planners (they are plenty in India). But definitely, I will recommend Fee-Only Planners. Refer this post of Mr.Pattu.

          Reply

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