While discussing various aspects of Financial Planning like preparation of budget, finding the best investment vehicles for your savings; Mutual Funds, Bonds and Stocks and also investment in various Pension funds as well as Tax-saving, I have mentioned that you may take the help of an experienced financial professional or advisor, as you may not be having a thorough knowledge about all the financial aspects. Sometimes hiring a competent and ethical financial planner/ advisor, at a cost, to help you make and implement financial decisions can be money well spent.
Your Financial Management Options : –
Everyone has three basic choices for managing money : –
(i) You Can Do Nothing : – These people are too busy to attend or deal with their personal; finances. They may be high ranking officials, businessmen, or people who have a very busy life, otherwise. The dangers of doing nothing are many. Putting off saving for retirement or ignoring to carry adequate insurance or allowing your buildup of debt eventually comes back to haunt you.
(ii) Doing It Yourself : – These people learn enough by investing some time in learning the basic concepts, to make them confident about making decisions on their own. The hardest part of managing money for most people is catching up on things that they should have done previously. After you get things in order, you shouldn’t have to spend more than an hour or two working on your personal finances every few months.
(iii) Hiring Financial Help : – Realizing that you need to hire someone to help you make and implement financial decisions can be a valuable insight. Spending some time and money with a competent professional can be money well spent. You may benefit from hiring some help at certain times in your life.
How A Good Financial Advisor Can Help : –
The following are some of the important ways, a competent financial planner/ advisor can assist you : –
1 Identifying Problems And Goals : – Some people are so busy with other aspects of their lives that they may ignore their debt or have unrealistic goals and expectations given their financial situations. A good financial planner can give you the objective perspective you need.
2 Identifying Strategies For Reaching Your Financial Goals : – A good planner can help you sort out your thoughts and propose alternate strategies for you to consider as you work to accomplish your financial goals.
3 Setting Priorities : – You may be considering doing dozens of things to improve your financial situation. Good planners help you Prioritize your ideas.
4 Saving Research Time And Hassles : – A good planner does research to match your need to the best available strategies and products and prevent you from making a bad decision.
5 Purchasing Commission-free Financial Products : – Purchasing commission- free is especially valuable when you buy investments and insurance and a good planner can save hundreds of dollars by identifying such products.
6 Providing An Objective Voice For Major Decisions : – A competent and sensitive advisor can help you by providing with sound counsel when you’re faced with some big decisions like house purchase, investments etc.
7 Helping You To Just Do It : – A good counselor can help you follow through with your plan and advise you about the actions need to be taken in this regard.
8 Making You Money And Allowing You Peace Of Mind : – A good planner shows you how to enhance your investment returns; reduce your spending, taxes and insurance costs; increase your savings and achieve your financial goals.
Finding A Good Financial Planner/ Advisor : –
Locating a good financial planner, who is willing to work with you and who doesn’t have conflicts of interest can be time consuming and quite a difficult task. Personal referrals and associations are TWO methods that can serve as good starting points :
(i) Soliciting Personal Referrals : – Getting a personal referral from a satisfied customer, you trust, is one of the best way. The best financial planners continue to build their practices through word of mouth. But don’t accept blindly someone else’s recommendation. Interview the planner yourself to find whether he/ she meets your needs.
(ii) Seeking Advisors Through Associations : –
- The National Association of Personal Financial Advisors(NAPFA)
- The American Institute of Certified Public Accountants (AICPA)
are the two renowned associations, you can contact in this regard.
Hiring Financial Help : –
Financial Planners or Advisers make money in three ways : –
— They earn commissions based on the sales of financial products.
— They charge a percentage of the assets they invest on your behalf
— They charge by the hour (this can also be done through fixed-fee )
Some planners charge a fixed fee to whip up a financial plan for you. If you need just someone to act as a sounding board for ideas to recommend a specific strategy or product, you can hire an hourly -based planner for one or two sessions of advise.
The Cautions To Be Taken While Hiring Planners : –
Many people encounter various financial problems and lose a lot of their hard earned money from hiring incompetent and unethical financial advisors. To avoid these mistakes, remember the following : –
— You absolutely MUST do your homework before hiring any financial advisor/ planner.
— Avoid or minimize conflicts of interest. Avoid “advisors” who sell products that earn them sales commission.
— You are your own best advocate. The more you know, the more you realize that you don’t need to spend money on financial planners.
CONCLUSION ; –
Finding a good financial planner is not easy, so make sure you want to hire an advisor before you venture out to search one. But if you’re too busy , or you don’t enjoy doing it, or you’re terribly uncomfortable making decisions on your own, using a planner for a second opinion makes good sense. If you have a specific tax or legal matter, you may be better off hiring a good professional who specializes in that specific field rather than hiring a financial planner.