What Should I consider when hiring a fee-only financial planner?

Published: October 12, 2017 at 9:55 am

Last Updated on October 8, 2023 at 1:48 pm

When I announced the launch of Fee-only India, a coming together of SEBI registered fee-only financial planners to help clients and each other, Alok Singh, made this interesting suggestion: “It’s a good initiative to bring fee-only FPs under one roof. Would it possible to come up with a post describing as to what factor/points one should consider while hiring a fee-only planner? There are many fee-only FP and people might be finding it difficult to choose one. Even after hiring one, many times doubt arises whether it was a good decision, once we refer to his/her advice and what we have learnt over a period of time (this happened with me when the advice was going southward from what I’ve learnt, but still I am following advise)”.

So I discuss Alok’s point as well a few other related issues in this post. Before that, an announcement:

Feedspot is a RSS reader. The FeedSpot team has chosen freefincal as the 5th among the “Top 25 Mutual Fund Blogs and Websites for Investors”. Thank you, Anuj Agarwal, founder, Feedspot for the recognition. Without the support of readers, no recognition is possible. Thank you.

 


Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

First some basics. A fee-based financial planner earns from creating a financial plan from and also get commissions from the suggested products. A fee-only financial planner – a true fee-only planner – works only for you and suggests commission-free products.

Not all fee-only planners work this way. Many of them get commissions indirectly via friends and relatives after referring their clients to them.  There are only a few “true” fee-only planners in India. I have been maintaining a list of such planners for the last 3 years.  Most of the planners from the list met recently to launch Fee-only India: the launch of a movement to serve investors and advisors.

Considering the steady stream of clients they get (one path is from freefincal + FB group Asan Ideas for Wealth -their words, not mine), I think individuals confident to earn a living this way, will do so.

Now for general pointers regarding financial advisors (in general, not fee-only). Many from the financial services industry compare themselves with doctors. This is beyond stupid and investors should run away from anyone who does this.

The financial planning process has a duration of years to decades. Creating the basic financial plan – for those who do not know, here is an example – is about 1% of the journey. The rest 99% is reviewing the plan at least once a year, making course corrections to the portfolio and try to achieve as much of the required corpus as possible while minimising risk.

When we go to a (competent) doctor, the time it takes for the diagnosis, prognosis, to start of treatment is at best weeks. And within a reasonable time frame (months), we – the patient – will know if the treatment is “working” or not.

Even after consulting a financial planner (any kind) for years, you may not have any idea if a plan is suitable or not. Three things are possible.

  1. You trust the planner, do as told and hope for the best.

  2. Learn more about the money management process and learn to appreciate your progress (if any) and continue to work with the planner or end the relationship

3.  Get confused with recommendations in the media or other sites (say freefincal) and worry if you have done the right thing or not.

This brings us to an important attribute of the fee-only financial planner. The person must encourage us to learn more about the financial planning process. That is the person should be pro-DIY*. Even if they are not, we ought to be!

This way, we do not have blind trust and learn how to evaluate the services of a financial planner.

  • This does not mean we question every recommendation they make and demand justifications. Like a mutual fund, we should cut them slack for a few years and then learn to evaluate progress independently.

Second opinions do not work here!

It is amusing to note when people seek second medical opinions. If the first opinion was, “this can be treated without surgery”, how many of us will seek a second opinion to find out if surgery is really necessary?!

We seek second opinions only when uncomfortable advice is provided. However, the first and second opinion between two honest, competent doctors practising the same form of medicine will not vary too much. Because treatment is based on categorising symptoms into clear bins.

Financial advisory does not work that way. Two ethical financial planners with same qualifications and say, from same schools of thought will often give very different advice. For example, if you ask the nine planners from Fee-only India to suggest products for a particular investor portfolio, each of them is likely to be different.

If you cannot accept this reality, do not engage a financial planner. This is why you should learn to evaluate progress (which will take less than 30 minutes for those with clear financial goals) on your own.  This is true for people suffering from incurable diseases. In a few years, they get to know enough to evaluate a doctors advice.

Hang on, do I hear you go, “If I should evaluate my progress with a financial planner on my own, why should I go to them in the first place?!”. Well, you don’t have to, but then again which responsible hirer does not keep an eye on the work of a hiree?

Unlike a doctor, where we can easily get references there is no meaningful way to evaluate how good or a bad a financial planner is, before we hire them. We must learn to do so only afterwards – Let’s Face It: Everyone Needs Do-it-Yourself Skills!

Ashal Jauhari made an important observation – many clients who prefer fee-only financial planners have some “sense” of what a financial plan is, if not a DIY investor looking for validation as Vikram Krishnamoorthy pointed out recently: What is the real purpose of a Financial Plan?

So many of them would be looking for a person who is willing to talk like as an equal rather than put on airs and call themselves a “financial coach” or some such crap.

It is not important for the fee-only planner to be in your city. A phone call should be enough for you judge if the voice at the other end is friendly enough to work with.

The things to consider before hiring a planner (assuming you are thinking about hiring one) depends on your money management IQ + inclination.

If you are are a total noob (which is fine – ignorance is not a crime, only confidence based on half-baked knowledge is), then much of your decision is based on trust and comfort level. You will have to take a chance and make a choice. You can consider feedback from a fellow noob who hired a fee-only planner.

You can consider the experience of the planner in addition. Not in financial services, but a pure fee-only planner – longer the better. The fee is a problem as it can range from 5K to 25K.

The fee is a problem as it can range from 5K to 25K. A higher from someone who has been practising as a fee-only planner for a few year is quite acceptable. You will have to take a quick call and start working with one.

If you are a DIY investor with interest in money matters, but looking for a professional to verify your strategy, then a direct question should be asked: “how will you manage my portfolio so that I can achieve my goals”. Ask for details and hire one whom you are impressed with.  Of course, a newbie can also ask this question, but they should be in a position to appreciate the answer. In this case, only feedback from an “experienced client” will be relevant. Finding one will be tough.

Please note that a financial planner cannot guarantee anything. They are trained to manage money and all we can do is to expect them to do so to the best of their ability.  If you ask silly questions (in their opinion!) or ask them too many questions, they would prefer not to have you as a client.The idea should be to ask relevant questions – meaning, less is more.

NOTE: The above is only for those looking to hire a planner from Fee-Only India

If you wish to hire one in general, the following are the basic requirements before considering the above:

  1. Should be registered with SEBI as an investment advisor – individual registration. Not corporate, not LLC, not anything else. Stay away from them.
  2. Tell them straight away that you will not invest “via them”, “through them”, “with a friend” etc. and insist on commission-free products – direct mutual funds, insurance obtained online. If they provide stock advisory, choose your own broker.
  3. Hire one whose fee is flat and not dependent on your AUM. All planners in my list now are flat-fee.
  4. Find out their experience. Many will say “20Y in the financial services” or some such thing. Ignore that and ask their experience as a fee-only financial planner and how many clients they have worked with.

Remember that financial planners are also students of personal finance. We should keep them on their toes with relevant and reasonable expectations. After all, who money is it anyway?!


Use this form to ask Questions or reg. the robo template ONLY (For comments/opinions, use the form at the bottom)

And I will respond to them in the next few days. I welcome tough questions. Please do not ask for investment advice. Before asking, please search the site if the issue has already been discussed. Thank you.  PLEASE DO NOT POST COMMENTS WITH THIS FORM it is for questions only.

[contact-form][contact-field label=”Name” type=”name” required=”1″][contact-field label=”Email” type=”email” required=”1″][contact-field label=”Ask your question (Got an opinion or comment, use comment box at the bottom of the page. DO NOT post them here)” type=”textarea” required=”1″][/contact-form]

GameChanger– Forget Startups, Join Corporate & Live The Rich Life You Want

My second book, Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantco-authored with Pranav Surya is now available at Amazon as paperback (₹ 199) and Kindle (free in unlimited or ₹ 99 – you could read with their free app on PC/tablet/mobile, no Kindle necessary).

It is a book that tells you how to travel anywhere on a budget (eg. to Europe at 50% lower costs) and specific investment advice for young earners.

The ultimate guide to travel by Pranav Surya is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for ₹199 (you will be emailed the pdf after payment)

You Can Be Rich Too with Goal-Based Investing 

My first book with PV Subramanyam helps you ask the risk questions about money, seek simple solutions and find your own personalised answers with nine online calculator modules.

The book is available at:

Amazon Hardcover Rs. 271. 32% OFF

Infibeam Now just Rs. 270  32% OFF. If you use a mobikwik wallet, and purchase via infibeam, you can get up to 100% cashback!!

Flipkart Rs. 279. 30% off

Kindle at Amazon.in (Rs.271) Read with free app

Google PlayRs. 271 Read on your PC/Tablet/Mobile

Now in Hindi!

Order the Hindi version via this link

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.

  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter with the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision-making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & it's content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)