Agents, Advisers or CFPs?

When I speak with my clients about CFPs and value addition they can bring into their financial life, then first question from them is what CFP is? Therefore, I thought to share how CFPs are differing from Agents, Advisers.

Certified Financial Planner (CFP) is the professional certification for Financial Planners, which is granted to individuals after completing desired education, examination, experience and ethics by candidate. Financial Planning Standards Board India is the only body in India, which grant this certification mark after fulfilling all the above requirements. Presently around 108 CFPs are there in Bangalore (From FPSB India Page). Now I will explain in detail how CFPs are differ from agents, advisers or the so-called self-proclaimed Financial Planners.

AGENTS OR ADVISERS: All of us in our day-to-day life have met so many agents or advisers who represent particular Insurance Company, Mutual Fund Company or any firm. They usually not take any fee from you but they will get benefits after selling products, which are under their kitty. They will not disclose the commission or remuneration they are going to get by selling the products to you. Few of them are ready to share their profit with you if you buy their recommended product. They usually recommend you to buy ULIPs, Endowment Plans or Money Back Plans (If they are Insurance Agents), NFOs of Mutual Funds or without analyzing fund performance, they may recommend you to invest in their recommended Mutual Funds (If they are Mutual Fund Advisers) or in RD, PPF or NSC (if they are Postal Agents). They mainly consider your investment surplus instead of your future financial goals.

So the conclusion is “Usually they take a very narrow view, limiting the advice to investments. Basic intention was to sell. There will be high probability of conflict of interest, because of high commission structure for some products. They are ready to woo clients with rebates.”

CFPs: They charge fee, which is depend on clients profile. Fee is disclosed in the beginning. If invested through them then each products earnings are disclosed in Agreement note. Their recommendations are mainly on goal based instead of product based. Few of their recommendations include Purchase of Term Insurance, maintain contingency fund, goal based investment plans to reach individuals life stage goals like children education, children marriage, retirement planning or estate planning. They mainly consider Age of all family members, investable surplus, risk profile, life and health insurance needs, short-term, mid-term and long-term financial goals, retirement needs and past investments when recommending plan to clients.

So the conclusion is “Planners go beyond investments and looks at every aspect of the family finances. The plan laid down specific strategy for every financial goal. One should not see the upfront fees as an unnecessary expense. It could help you save lakhs of rupees by guiding you in right direction.”

Now it is your turn to decide whom you want-Agents, Advisers or CFPs?

Hope my postings are enjoyable and knowledgeable. Need your unbiased comments to grow my knowledge too. Wish you all Happy New Year in advance.