3 Things to ask your financial planner before investing

3 Things to ask your financial planner before investing

Henil Shah
/ Categories: Mutual Fund, MF Unlocked

As it is rightly said a goal without a plan is just a wish. So, one must have a financial plan in place to have more clarity about various things, including your cashflows, investments, etc. Thus, it makes a lot of sense to hire a financial planner and get a chalked out financial plan from them.

Financial planning is a slow process that happens gradually. It is like watching a grass grow. So, before taking any decision related to investments or personal finance, it is important to consult your financial planner as he would be in a position to guide you properly to grow your money and simultaneously help you to avoid any such investments that won’t help you meet your financial goal. So, following are some of the things that you should ask to your financial planner before investing.

Risk Profile
This is the first step towards investment. Only evaluating financial goals doesn’t give you clear idea as to where to invest unless you have a risk profile in place. Risk profile helps you to gauge your capacity and tolerance to take risk. This is important because if you invest in a product which has high volatility that you are not able to stomach, it can disturb your mental peace. So, knowing your risk profile would help you select better products that will strengthen your path towards achieving financial goals.

Financial planner’s earning
How the financial planner is going to earn does matter. There are some financial planners who carry conflict of interest and there are others who act as a fiduciary. Financial planner’s earnings have a direct or indirect impact on the advice that they provide. In case of financial planner who earns via commissions, there is a possibility that he may recommend you those investments that gives him higher commissions. Though not all financial planners’ commissions are same, but they do carry conflict of interest at all times.

Performance-based fees
You must be very clear at the time of signing the agreement with your financial planner whether he/she charges any performance-based fees or not. When there are performance-based fees, there is a possibility that the financial planner may suggest risky investment strategies to enhance your returns. You want to grow your wealth with mental peace and not with anxiety that pops up every now and then. So, focus on stable growth by paying a flat or fixed fee to your financial planner.

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