I somehow sense many times that a prospect who approaches me for financial planning is in a dilemma of what are the benefits which s/he can derive from this association. Is it really worth going ahead with a paid service?
I can understand their situation. Many times we get skeptical at the time of paying fees for the advice or service which we can’t see or experience. And that too for managing our finances, where plenty of free information is available around us.
But kindly understand, all such free pieces of information are generalized. They are not shared keeping YOU in the center. So general guidelines can not fit in each and every individual case as it is.
Each client’s profile is different and unique so the advice should also be different and customized keeping his/her profile and interest at utmost priority.
Financial Planning refers to the process of streamlining the income, expenses, assets, and liabilities of the household to take care of both current and future needs for funds. Financial Planning aims at ensuring that a household has adequate income or resources to meet current and future expenses and needs.
Financial Planning is a lifelong process. It is not a one-day, one month, or even one-year activity. You need to keep on walking on the roadmap laid down by a Financial Plan. Along with calculating the investable amount towards your financial goals, the financial planner brings in a 360-degree view of your financial life.
Financial Planning does not involve just investment. It involves the basics of financial planning like
# How well you have to prepare for emergencies (like loss of life, hospitalization expenses, meeting with an accident, or sudden income loss/job loss),
# How to be a conscious spender by understanding the concept of Needs and Wants after interacting with the planner
# How to identify the life goals and segregate them into short term, medium term, and long term categories.
# Which goals to be prioritized in your life if your current savings is not sufficient to fund them all at their current cost.
# How to fund and achieve those goals by well-planned strategy.
Financial Plan by fee-only financial planner also makes you understand which financial product is suitable for each and every goal according to its time frame and asset allocation. All suggestions are provided by scrutinizing your Risk profile and current state of Financial Life. The foremost important thing is these Fee-only Financial Planners always give preference to manage DOWNSIDE RISK of clients’ portfolios than only maximizing returns. They arrive at the common consensuses with their clients about market fluctuation, market risk prevails in the Equity asset class, and the return expectation from Equity.
These technicalities most of the time are missed in the DIY approach (DO it yourself) from the client. Even if after reading and understanding details of Personal Finance clients start investing. They may do good also but in the DIY approach, clients may have compromised one thing that is TIME which they can’t get back.
Financial planning is not just about where to invest. If offers much more than this.
The following points will give you an idea of how a handholding of a Fee-Only Financial Planner helps you to manage your finances well.
1. You are paying fees to the planner for not just mutual fund or index fund suggestions.
2. Competent planner brings in a 360-degree view of your financial life which includes analyzing insurances, loans, and investments.
3. They offer hand-holding and listening ears to all your financial concerns.
4. They limit the biases and emotions you have in your own financial decision-making.
5. They offer a clear structure of your current and would be financial life.
6. They try to inculcate good financial habits which will have a bigger impact in the long run.
7. They help you controlling your behavior towards your money and investments and sticking to what you have adopted being with them.
If you can handle human emotions well and can look at your investment without prejudices and biases you can take the DIY approach
or else better to handhold a good financial planner for worry-free financial life.
It’s all about individual choice.
In investing TIME is MONEY. If the time is lost, the Compounding effect is lost.
