Is your financial planner working in your interest?

To understand whether your financial planner is acting in your interest is, more often than not, a time-consuming and tedious process. People cannot understand the same unless they work with them. However, there are certain things that you may look for in a financial planner that can help you in deciding whether your financial planner is working in your interest.

Fiduciary
There are two sets of people who work in this industry. The first set is of those people, who have a fiduciary duty towards you. Simply put, these people are registered with Securities and Exchange Board of India (SEBI) as a registered investment adviser (RIA). The second set includes those, who are not registered with SEBI. The ones registered with SEBI are bound by the law to act in your interest as they cannot earn via commissions. On the contrary, the non-registered ones have no such obligations. This means that they can recommend you products that you ‘want’. However, those, who act as a fiduciary, would only recommend products that ‘suits’ you.

Half-fiduciary
The industry also has some financial planners, working as half-fiduciaries. Why half? It is so because, although they are registered with SEBI as RIAs, they can only provide advice under that. However, they have a separate license (of course not in their name) to act in the capacity of a financial planner on behalf of their clients, using which, they earn handsome commissions from product manufacturers. This also leads to a conflict of interests between the planner and the client. Having said that, it is better for your pocket to stay away from such half-fiduciary advisers as they can prove to be more painful than those who are either 100 per cent fiduciary or those who are not registered with SEBI at all.

Certified expert
Certified Financial Planner CM (CFP CM) is a professional certification, which is managed by Financial Planning Standards Board Ltd., US (FPSB Ltd.). To earn this certification, a financial planner needs to adhere to a stringent code of ethics and professional conduct and sit for rigorous exams. At present, this is the highest qualification in the financial planning space. So, if your financial planner is not a CFP CM then you might need to re-think over availing his/her service. One might think that how does this make a difference; a chartered accountant (CA) or chartered financial analyst (CFA) should be enough for this. However, one should understand that the difference between a CFP CM and a CA or CFA. Like MBBS, BHMS, and BAMS are all various degrees for medical practices and everyone, who holds any of these, is called a doctor, they are not the same. Their areas of expertise are different. Similarly, CFP CM, CFA, and CA are different certifications for different types of financial professions and every certified professional is an expert in their specific fields unless they hold other certifications as well.

Free lunches
This is a well-established fact that there are not free lunches in this world and even the financial planning space adheres to the same. Whether directly or indirectly, you have to pay for the financial plan you avail. Do not fall prey for such sales pitch, which offers you free financial planning services. I hope you all understand the quality that free things carry with them. Hence, make up your mind that you would have to pay to get a quality service, which can actually help you in shaping your financial life. Also, you should remember that it is not just about investment, but also about investing in view of your overall financial situation.