The snag here is that the product is inefficient in that, the returns are low and the product has been somehow used to mimic a regular return product. In comparison to the premiums, the final payouts that come to the policy holder are low, when it could have been a lot better if more thought were given to retirement planning & how to achieve that goal optimally.
Customers have a problem in understanding who is a financial planner/ advisor. Most who just sell products hold out as planners and advisors which confuse customers.
There is a huge confusion in their minds as to who is an advisor and what to expect from them.
We have just seen what is financial planning. A person who provides that kind of service is a true financial planner. Some advisors may not get into this level of detail and may look at the person’s situation and offer advice after broadly understanding their needs. Customers may need to understand what they want and accordingly engage with an advisor/ planner.
The fee to be paid will also vary accordingly. Overall, Financial Planners/ Advisors will help in ensuring that wrong decisions are not taken by the client and the decisions taken are aligned with the goals and future needs. Also, they would help in optimizing the tax savings and money management itself. Mostly the fees to the planner/ advisor would be justified by the savings and efficiencies that one can derive from all these. And most importantly, there will be a blueprint to follow and there should be clarity & peace of mind.
Financial Planning is needed by everyone. It is more needed by those who are moderately endowed than the rich – for the margin of error in the latter is much smaller. Hence, financial planning is needed more by those on a tight leash than those who are rolling in money.
Whether one wants to do it oneself or would like to hire the services of a professional financial planner is left to their evaluation of their personal needs and what would suit them.
To ensure good quality advice, Securities & Exchange Board of India ( SEBI ) has come out with an Investment Adviser Regulation 2013, where anyone professing to offer advice in the financial area should be registered with them.
IA Regulation enforces a higher level of standards, compliance, education & certification norms and avoidance of conflict of interest. Those registered as Investment Advisers ( RIA ) need to derive income only in the form of fees from their clients and not in the form of commissions/ incentives from product distribution. Hence RIAs are fee-only advisers, who also accept a fiduciary responsibility.
Fiduciaries are those who put their client’s interest above everything else, including their own. That is the guarantee to the customer that their interest will be served when they approach an adviser. Distributors follow the suitability standard.
Also look at – to know about Fiduciary responsibilities.
No. There are very few who have registered. The number across India after over two and half years is less than 300 !
So, most who profess to offer advice are not interested in submitting themselves to scrutiny and the compliances that this regulation calls for. Most do not want to be fee-only advisers. They want to distribute products and incidentally want to offer advice as well. This brings in conflict of interest, which is what the regulation seeks to avoid.
Half the battle is won, if you choose the right advisor. With someone posing a one, you’re sunk. To know more about choosing the right advisor for you also go through this - Clarify for yourself what you need & then go about planning. Whether you choose a planner for the purpose or you do it yourself, it’s a matter of choice and requirement. But planning for the future, needs to be done anyway. That’s something you cannot do without!