Last Updated on March 7, 2015 at 9:02 am
I see more and more people wanting to approach financial planners. Quite frankly I don’t see this as a good sign. Simply because choosing a financial planner is harder than doing it yourself. In this post, I would like to discuss a simple way to figure out the intentions of the financial planner you had approached.
Many ask me if Mr/Ms. XYZ is a fee-only financial planner (gets money only for advice) or fee-based planner (gets money for advice and from product commissions either directly or indirectly via a family member).
They ask me why Mr. ABC a popular blogger is not on my list of fee-only financial planners. Financial planners want their names to be included in the list.
Why is my list of fee-only financial planners so short?
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Seven out of 10 names in that list never distributed any financial product. So they were not affected by the SEBI ruling that anyone providing investment advice (including distributors) must be registered with SEBI. This is because SEBI suddenly realized that investment advisers have fiduciary obligations. In a country where products sells only because of commissions, this move is only about 60 years old!
So many in financial services have ignored these regulations. Making it tough on investors to separate the wheat from the chaff.
I knew seven of them more than two years ago but did not publish their names because I was debating about this. When I took a stand, I decided to add names only when I was sure of their credentials with the help of trust worthly references. This is not always possible. So I am not eager to add more names.
If you contact any of the 10 people in my list, you need to pay only for the financial plan and investment advice. You are free to invest wherever you want.
If you wish to consult a financial planner who is not on this list, but would like to find out how he operates, tell him the following:
“I will pay for the financial plan creation and investment advice and invest in direct mutual fund plans”.
Planners Response A: “If you do that (invest in direct mutual fund plans), I cannot track the performance of your mutual funds, because I will not get ‘feeds’ ( a fancy word for account statement) from the AMC. So I suggest your invest ‘via’ me in regular mutual funds or you can invest via ABC firm who are ‘well known’ to me”.
In this case: Say goodbye. This person is trying to earn from commissions in addition to financial advice. The legality of this can be debated endlessly. SEBI is toothless in this matter. So forget the legality. The point is, why should you pay the person twice? Any financial planner who states they cannot advice without ‘AMC feed’ is trying to con you. Such people are displaying their incompetence by saying such stupid things.
Planners Response B: “Go ahead and invest in direct mutual funds plans. Please note that if you wish to review the performance of your financial plan, I need to have access to all the investments you made and their current value”.
In this case: This is a fair request. Discuss more with the person about fees, and check if you are comfortable working with them. If you are comfortable, and if the fee is reasonable, you have got yourself a financial planner. Set up an account with portals like Value Reasearch to track your direct mutual fund investments. At the time of financial plan review, print out the summary of investments page and discuss with your planner. Or you can email it to them.
That is all there is to it. Easy peasy lemon squeezy!
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- 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 using 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 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr 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(X), 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 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 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!
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!
Do you 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 & its 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
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published 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
This 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
This is an in-depth dive 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)