At Personalfn, we have always maintained that financial planning isn't necessarily as difficult as it is made out to be. All you have to do is, stick to the basics and there's a more than a fair chance that you will do well for yourself.

You might be tempted to believe that if the aforementioned is true, then there should ideally be no need to engage the services of a financial planner. In other words, financial planning is just another, "do it yourself" task. However, that's not quite the case.

The financial planner has a vital role to play in aiding you achieve your desired financial goals. And rest assured, the presence of a competent, experienced and honest financial planner can ensure that the financial planning process becomes an easy task.

So why does one need a financial planner?

To begin with, to help you sift through the vast (and ever-expanding) list of investment avenues on offer and select the one that is right for you.

A financial plan would typically involve adding avenues like equities, mutual funds, fixed income instruments and insurance, among others, to the portfolio. There are multiple offerings within each avenue vying for your attention (your wallet, actually). Tracking each of these offerings and selecting the right ones is a full-time job. That's where the financial planner enters the picture.

Bid adieu to the agent

Convention suggests that the local 'agent' is the man for the job. And why not? He has been servicing your family's investment and insurance needs for ages. He helps you with all the paper work and delivers all documents to your residence.

In some cases, he goes a step further and even offers a commission i.e. rewards you for the investment by parting with a portion of his earnings. To put it mildly, that investment style is pass�.

An agent whose forte is his ability to ensure that your tax-saving investments (i.e. NSC and PPF), are duly made is about as useful as the proverbial 'cat in a toy mouse' factory. The modern investment scenario is way too complex for a conventional agent to handle.

To be fair to agents, they have done their bit to acclimatise to the new conditions. They have tried hard to masquerade as financial planners. For example, now agents are armed with laptops which are used to display fancy PowerPoint presentations.

Also, coloured print outs showing illustrations along with graphs and pie-charts are the norm. But scratch the surface (i.e. ask a few pointed and non-standard questions) and the gloss peels off, exposing the same old agent.

What makes a financial planner

Having discussed the failings of an agent, now let's take a look at what a financial planner can offer. A financial planner is someone who is equipped to 'advice' you on a range of investment avenues.

He will have an informed view on the economy, interest rates and markets. He is someone who can accurately read the events in the economy and educate you about their impact on various investment avenues.

Secondly, he can devise an investment plan that is right for 'you'. The concept of 'one size fits all' doesn't work while investing. Investment avenues that are apt for say, your friend can be grossly unsuited for you. The financial planner's skill sets will enable him to accurately quantify your investment objectives; also, he will construct a plan that will help you achieve your investment objectives without compromising your risk profile.

The financial planner will monitor the investments and ensure that you stay on course to achieve your targets. He will incorporate necessary changes to the investment plan in line with changes in the investment scenario and other factors like your risk appetite. This is where his experience and skills will come into play.

Finally, an honest financial planner can bring a lot of value to the table. Now why should honesty feature so prominently?

Simply because, here is the individual you trust your finances with. Hence, it is pertinent that, at all times, he is looking out for your interests and not his own. In fact, his gains should be the result of your targets being achieved.

It is common to hear of investors being misguided into investing in avenues that were completely unsuitable for them, but right for their financial planner (because of the high commissions). And then, regular churning of the portfolio i.e. exiting a mutual fund scheme and getting invested in another with a view to make higher commission earnings are common occurrences.

Mission impossible

Finding a financial planner, who is competent, experienced and honest, might seem like an uphill task, a mission impossible of sorts. Well, it's not.

All you need is patience to stay put for the right financial planner and willingness to shoulder responsibility in the financial planning process. Before engaging the services of any financial planner, ask for references and have his credentials verified. Ask relevant questions about how he intends to help you achieve your goals, question his recommendations, ask for alternatives and back-up plans, if his plan fails to deliver as expected.

More importantly, stay actively involved in the investment process. There is a fine line which divides having confidence in the financial planner's abilities and having blind faith in him. Never cross over to the latter.

In conclusion, the financial planner's role in helping you achieve your financial goals is undisputed. And you would do well to take due care before engaging the services of one.

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