Here are some pointers that will help in selecting the ideal financial planner.

8 Things to know before choosing a financial planner

An important financial decision also needs to be practical. Money is precious, especially hard-earned money. So, before you hire a financial planner, prepare a list of things you expect from them. To be safe, make sure they are registered with SEBI. Of course, their fees – whether it’s a commission or a flat rate – should be reasonable as well. Here’s what should be on your checklist:

1. Familiarity with the person:
See if there are people in your known circle who perform this role. The logic is that a person you know would probably pay better attention to your funds. The reverse can happen too, but generally someone you know in person will be more inclined to have your best interests at heart. You can also do a background check on them more easily and assess their reputation and financial skills.

2. The planner’s portfolio suggestions:
Verify the mix of companies and sectors the planner advises investments in. One can assess their financial planning capabilities from their personal portfolio. A professional planner needs to have a good market knowledge to be able to identify the highest profits possible on your investment. Interview your planner thoroughly to gauge their financial acumen in identifying lucrative sectors that are cheap to buy but provide high returns year on year. For instance, during the early days of COVID-19, many planners suggested ditching the aviation and hospitality sector and recommended parking available funds in pharmaceutical and medical infrastructure projects. Such timely financial suggestions are expected from a good planner.

Related: Important financial reviews and when to conduct them

3. The planner’s qualifications:
It’s always better to choose someone with a financial degree and superior knowledge of finance, so that they can provide sound advice on taxation and financial investments. The planner needs to be able to logically explain why it makes sense to buy or sell a stock (or make an investment) rather than rely on hunches. The planner needs to be able to suggest a mix of old stocks that have a proven year on year growth, and be able to anticipate the trends in financial sectors which see a boom in certain industries from time to time and which they need to be able to advise accordingly for purchase. 

4. Knowledge of international market trends:
This is an important portfolio management capability. Many predictions are made by observing trends abroad and deftly applying them in India. Study the impact of various investment sectors for maximum gains. For example, if crude prices rise abroad, advice to buy petrochemical sector stocks would make sense. Similarly, selling of oil sector stocks when prices fall would be a logical advice from your planner.

5. References and opinions from known circles:
Asking a successful relative or friend to a recommend a planner. Business happens through networking, unless it is a monopoly. So take time to interview planners before selecting one. The planner’s reputation for updates and follow-ups is very important. As a customer, you should be able to get feedback on a daily basis. Active communication between your planner and you is the mainstay of your financial portfolio. Make sure you are recommended for the best resource in terms of a financial planner. An effective background check is necessary.

Related: 5 Money lies that hold women back from achieving their dreams

6. Emergency fund advice:
Does your planner advise you to build an emergency fund? Yes, taking risks allows maximum gains, but getting your basics right is the best advice your planner can give you. An emergency can occur without warning, so this is one of the first things your planner should inform you about. So they should definitely consider it a priority to help you set up an emergency fund.

7. Assessing your requirements:
Your financial planner should be able to understand your objectives and provide advice that makes your money grow with the least headache. They should devise a method of showing gains year on year. A mixed portfolio of steady income stocks and high-risk stocks will help you to sustain in a volatile market scenario. Since gold is a safe commodity, your planner could advise its purchase. A steady income is the need of the day.

8. Multiple sources of income:
Your planner should have the capability of recommending new areas of earning money. An income generating plan needs to be implemented. Maybe your own hobby could help you earn some extra money. Your planner should show their capabilities by giving you the right advice to ensure maximum profits. Whether they recommend real estate or suggest investing in commodities or gold, your planner should show concrete results.

Related: 4 Ways to create additional sources of income

Last words

You need the best financial planner you can afford. Please do a lot of research before selecting someone. Do bear in mind that planners are not infallible – they are human too and could be wrong. It would be prudent to recheck every investment so that your financial planner can easily explain the financial dynamics to you – so you can pull back, invest, or re-invest as the case may be. Your financial planner should have a good idea of everything from tax to mutual fund investments to stocks and commodities. Happy hunting! Why and when you should take your own financial decisions?