Do you test your Financial Planner?

We see a lot of hot topics about the negativity of agents of insurance, mutual fund or any other financial products. But do you really check even how few so-called financial planners can back stab you? Below are the few checklist you need to be cautious while hiring any financial planner.

1) Products he is referring-In plain it looks to you that he have no intention or indirect earnings from these product references. But when you look inside you will find a different story. Lot of planners have tied up with big brokers. So while referring you the product even though they are not earning that much like what a direct agent may earn but the earnings will be surer. Again I am not saying that earnings from selling a product is totally wrong, but hiding the real motive and showcasing as if not attached to the sale will actually wrong thing.

I experienced the same when I had a short stint working under a Financial Planner. That organization used to sell offline term plans saying they don’t have any earnings from sale but actually they used to earn equal to any traditional life insurance plans. While selling mutual funds also they used to declare that for them earnings from mutual fund investments are totally zero. So they used to charge a fee based on the AUM. Poor investors without knowing how much that planner earning, used to be so happy that they have hired a wonderful planner 🙂

So what I mean to finally say is, if your planner is earning from recommending you any product then let him declare the same. Test him by asking the reasons and motive behind recommending the particular product.

2) CFP Certification and other educational qualifications-Lot of people search for a CFPs while hiring a financial planner. But I am clearing you the misconception that CFP certification will actually open the door of knowledge to financial professionals. Rest is his ability to understand, learn and implement it. Being myself CFP certificant, I feel proud that this certification actually changed my way of thinking and relating to money matters. But do remember that financial planning is an art. So if you are given an option to create a plan to 100 CFPs then I am sure that each plan will be unique. That is why I am saying merely by hiring CFPs or a highly qualified financial guy may not guarantee you that he will deliver you a good plan of the earth.

So besides having CFP and other high qualified financial degrees in his kitty, understand the depth of knowledge your planner has. Test his knowledge by asking plenty of questions. This testing will actually make him get ready and knowledgeable and up to date with current happenings in the financial world.

3) Financial Plan he prepares-Today in the market there are plenty of software to aid financial planners in building a plan. So they just need your data to feed and with the click of button plan will get ready. It does not mean that plans so created are not good. But if it is not suiting your need and instead it generates the same soft copy to each datum entered then is it really a customized plan for you? There are a few software which creates around 150 to 200 pages of the plan . In such scenario instead of simplifying the life of customer financial planner may jumble with a lot of data and research. An investor who simply planning to invest with a surplus of around Rs.5, 000 monthly and got a 150 page of financial plan then what he will do? He has actually run away from that reading and just hand over his decision-making and understanding part to the financial planner.

So understand each part of plan your planner handover you. Check out whether it is actually required or not. Because more confusion in a client’s mind means more chances of charging high fees from planners 🙂

4) The data he uses-While looking at the plan just understand what standard data he assumed like inflation, returns from debt, return of equity, life expectancy or education inflation. Because may be there is a chance that they may change it to suite your need. For example, suppose you have an investable surplus of Rs.1,00,000 per month and after discussing the plan you noticed that your all financial goals need to contribute Rs.75,00,000 then there is a possibility that your planner may change few data like increasing the inflation or decreasing the return on investment so that he can use your full surplus of Rs.1,00,000 for investment purpose 🙂

Hence better to concentrate on the data he presumed to arrive at last figures of investments and targeted goal amount.

5) Behavioral Interview-Today morning I read a post of Carl Richards of Behavioral Gap fame, where he mentioned the Google’s latest finding that grades and test failed to predict employee success in future. Instead things working are something what Google’s Laszlo Bock refers to as behavioral interviewing. Means asking about real questions which one faces and how resolved or come out of that problem. By knowing about this, what you can predict is his real nature and problem solving skills he has.

Apply the same while hiring your financial planners. Ask him to share real-time issues  with you like how he proved correct about equity investments at the time of market falling? Or How and what way he can resolve the situation where a client have all wrong products? This will actually make you to understand planner in a better way.

Hope above points are actually useful to all who are looking to hire quality planners in their financial life 🙂 At the same time I am clearing it that above qualities will not be with all planners but a few may have. Hence this post is to make you aware about the issue which you will never come to know.


7 thoughts on “Do you test your Financial Planner?”

  1. Such articles can only be written only by people who are very secure about their own abilities. Every month you reiterate this quietly to your readers. I have a request. Can you do a post on: “Is my personal information safe if I go to a planner?” clarifying what information a planner uses and how one need not be worried of misuse. Thanks.

    1. Basavaraj Tonagatti

      Pattu-First of all sorry as your comment moved to spam folder. I don’t know why it happened. Sure I will try to write on this issue and thanks for providing a hint to write 🙂

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