How do you quantify the value Fee only Financial Planners add for the fee they charge?

First of all let us understand who is a Fee only Financial Planner. Financial Planner is the person who does Comprehensive Financial Planning for the individual which includes

And for these services Fee only Financial Planner charges FEES.

Till last decade common man relates a word advisor to Insurance advisor/Agent only, who sells Insurance products. Then came Mutual fund Distributors who sell regular plans of mutual funds. The main point to note down here is that these persons are attached to the particular Insurance company/companies or Mutual Fund AMC/AMCs. Their main objective was to earn commissions received from these particular products. As the model is commission based lot of miss selling has been happening since long. Only those products were marketed and sold to the customers where agents we’re getting huge commissions. At the end Customer was at loss as his Interest was not taken care because these agents run behind earning commissions.

In 2013 SEBI came with the Investment Advisor Regulation which has introduced a new version of the Investment Advisor that is RIAs i.e. SEBI Registered Investment Advisor who works as Fee only Financial Planner. He/she will act in a Fiduciary capacity towards their clients and shall disclose all conflicts of Interests as and when they arise.

Instead of getting remuneration or commissions from Mutual Funds AMCs and Insurance companies RIAs are allowed to take upfront fees from the clients for their comprehensive advice, support and hand-holding of their clients.

In India this whole concept is new. Till 2013 people know commission based Financial Planners where clients get advised without paying a single penny. But in this practice SEBI found lot more mis selling happened. So new regulation was needed where clients interest and his betterment is well taken care of instead of pushing him/her to buy those products where commission is huge.

So when Fee Only Financial Planner who are registered under SEBI are allowed to ask upfront fees for their services just like Doctors, Lawyers, architects, Chartered Accountants or Interior designers etc people sometimes ask the justification of their fees.

Here I am sharing my own observation which I experience daily in my client interaction when someone wants to know whether Fee only Financial Planner’s fee is really WORTH?

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 ,feel , touch or experience. And that too for managing our finances, where plenty of free information available around us.

But one should understand that all free pieces of information which are available on internet or TV are generalized. These are not given keeping YOU in the center. So general guidelines which are shared can not fit in each and every individual case at it is. Each client’s profile is different and unique so the advice given by Fee only Financial Planner is also different and customized keeping client’s profile and interest at utmost priority.

Financial Planner’s fee is justified because the fee does not involve just and around client’s investable surplus which he/she wants to invest each month. Along with mapping investable amount towards your financial goals, the planner brings in the 360-degree view about client’s financial life. Financial Planning does not consist of just investment, it revolves around the Basics of Financial Planning like

Financial Plan by fee only financial planner also make 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 portfolio than only maximizing returns. They arrive at the common consensuses with their clients about market fluctuation, market risk prevail in Equity asset class and the return expectation from Equity.

These technicalities most of the time is 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 DIY approach clients may have compromised one thing that is TIME which they can’t get back.

In investing TIME is MONEY. If the time is lost, Compounding effect is lost.

Everyone should keep this mind.

My last thought:

Fee only Financial Planners will provide you with a lifetime ROADMAP on which you are going to walk whole life by paying just a onetime fee(if renewal doesn't happen)

As far as their fees are concerned it is justifiable because it is for the EXPERTISE, KNOWLEDGE and SUPPORT they provide to their clients to make them Financial worry-free and Financially Independent.

Fee only Financial Planners are your guide, friend and philosopher in your financial journey. If you walk with them in this journey you will experience lesser bumpy rides, lesser headache and lesser panic attacks compared to walking alone. Financial planners will hold your hand firmly and help you sail through the trouble if any smoothly. Trust them. Have faith. And be with them.

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