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Making of a financial planner

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Tags: Financial planning, Role of financial planner, investment, Devang Shah, pre requisites of a financial planner

BY Entrepreneur  |  Oct 13, 2009 comments ( 0 ) |


Financial planning is one of the fastest growing professions in the world but as far as India is concerned there is a huge demand-supply gap. With the rise of the middle class, growing incomes and increased awareness, most people need guidance on where to invest, how to save taxes, the best insurance scheme, which fund to invest in, which stock to hold, which one to sell, how to plan their children’s education and marriage and their own retirement. Here comes the role of the financial planner, helping people manage their money and tapping a great business opportunity at the same time. 

Devang Shah, India’s first certified financial planner who founded Right Returns in 2000 says, ‘When I started off with Right Returns, financial planning was only a nascent idea. I was actually not trying to tap a great business opportunity. Instead, I saw a huge unaddressed need.’ So, before you start seeing this as an opportunity promising great bucks you need to have the right attitude as you are dealing with people’s money which is a very sensitive area. 

Role of financial planner
Financial Planners offer expert opinions on issues like retirement planning, estate planning, financial management of small businesses, trusts, tax, stock broking and investments and debt and risk management.
According to Shree Suneja of Plan Money, ‘The role of a financial planner is like that of a doctor. To begin with, you have to conduct a financial health check up of your client which includes understanding your client’s level of savings and financial standing. Thereby, you get an idea as to how to fulfill his financial aspirations. This is followed by preparing a financial plan that helps your client to be financially secure and fulfil his life goals.’ However, financial planners should abstain from showing a very rosy picture to the client in the beginning. Make your client understand the vagaries of the stock markets and other economic changes. ‘The mantra is to make a conservative plan to begin with,’ Suneja adds.

Requisite qualifications and skills : One should at least have a bachelor’s degree to start business as a financial planner. A degree in a finance subject like accountancy or economics is an added advantage. People will trust you to plan their finances only if they are satisfied with your qualifications. ‘Though a certification is not legally mandatory in India to start shop as a financial planner, you must acquire a CFP (Certified Financial Planner) certificate in order to build credibility,’ says Devang Shah of Right Returns. CFP certification is provided by Financial Planning Standards Board of India (FPSB). ‘If you are selling insurance products you need a certification from IRDA (Insurance Regulatory and Development Authority). You also need AMFI (Association of Mutual Funds in India) certification if you are selling mutual funds. These certifications are mandatory,’ informs Karan Kapoor, Research Analyst, Invest Shoppe India Ltd.  
As the hardest part of a financial planner’s job is to attract clients, marketing and selling skills are must to have. Additionally, being well organized and having a good knowledge of all finance and investment options is a great asset. Above all, a financial planner needs to be a good listener, a good communicator and a superb analyst to understand his clients’ needs.

Business model
Financial planners can work either on commission basis or fee basis. If you adopt a fee based model, you advise your clients with respect to their income and investment. A fee is charged for the advice provided. Whereas, in the commission based model, you are selling the financial products, say mutual funds, pension plans, or securities of other companies. Here, the planner charges a commission from the concerned company on the basis of number of products sold. Though you can opt for any of the models, yet it is a good idea to adopt a combination of both, fee-based and commission based models. ‘Your service may vary according to the needs of your clients,’ informs Karan Kapoor. 

Initial investment
According to Devang, ‘To begin with, one can start from home with a basic investment in a computer, internet connection and a phone. Besides, one needs at least 5-6 lakh per year as working capital to sustain your business operations for at least 2-3 years.’ If you are following the fee-based model, the breakeven point may take a little longer. For those who have also incorporated the commission based model, the breakeven point may come in little earlier. 

Start-up
The quickest route to success as a financial planner is to train with or work for a financial-services company or a wealth manager. ‘If you have worked in the finance arena for a few years, you will have developed a client base which will be very helpful in the initial stages of your business.  

Generating business
Success of a financial planner depends on attracting more and more clients and building up a customer base. Referrals from satisfied clients and prospects are also an important source of new business. Many advisors develop contacts through networking, conducting/ participating in seminars delivering lectures and meeting clients through business and social contacts.
The most important thing a customer looks for in a financial planner is trust. Your client’s satisfaction and trust in your services go a long way in consolidating your business. ‘Thus your focus must not be simply in selling products for a commission, but to build a long term credible relationship with your clients,’ says Suneja. 

Indemnity insurance
As risk is inherent in any business, so it goes for financial planning. Sometimes, the advice you have rendered to your client can backfire. Especially, in the case of risky investments, such as equity or mutual funds which are susceptible to market fluctuations. You can go for Indemnity Insurance to guard against any claim by a dissatisfied client. 

Rewards & reverses
The greatest reward of being a financial planner is the personal satisfaction one gets by helping people take care of their finances. Having established yourself as a trusted player, you can earn great bucks as well. On the flipside, one of the most pressing problems one faces is lack of focused trained personnel. As Devang puts it, ‘In India there is complete lack of set standards in financial planning. Infrastructure is another bottleneck. Financial planning is basically a practice as it is for doctors or lawyers. The greatest flipside as it is for any practice is to keep your clients waiting for you.’ 



 

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