Magician vs. Financial Planner
Let me allow defining the meaning of a ‘magician’ who is person skilled in mysterious and hidden art of magic where the illusionist asks Rs 10 note from you and turn it into Rs 50 bill. When a person can pull off that kind of trick, provided that it is real that Rs 10 note become Rs 50 note, he might make himself rich instead of entertaining others. The magician is often symbolic of having strength of will to create a great life for you. But financial planners are unable to make the magic real for you. It’s totally out of their control if you can’t compromise on your cash flow. It is important to know that financial planners are not magicians playing gimmicks and superhuman; they are in fact human beings who really attempt to do is to organize the scattered pieces of your financial life – putting things in order, aligning existing investments to your goals, channelizing the income surplus and making a road-map to achieve of those goals. They cannot create a new fountain of income out of nowhere, or invest your money in some magical products, which gives superlative returns.
Financial planners’ responsibility is to advice you on methods to maximize and re-allocate your existing wealth so that your financial goal can easily be achieved across the time frames. At the other end, it’s your onus to make more money, not theirs. All the financial goals in your mind need resources allocated for it. Everyone’s resources of finance are limited and the planners’ role is to properly plan your money resources to accomplish your goals. They are, akin to architects that design your financial house, not a genie who gives dream house as you wish. You want comfortable retirement. You want adequate education and marriage funds for your children. Financial planners only help by providing you the safest plan available within your limited resources. However, don’t always expect the plan to work if you can’t co-operate.
Be crystal clear with Planner
Some people are afraid to talk to financial planners. This is because they tend to think that planners take their money away. They ask you to buy more insurance and surrender endowment policies. They ask you to invest more in equity-oriented funds. They ask you to reallocate your money. They even tighten up your cash flow. But why fear from them? They are not magicians. They won’t make money out of thin air for you. They won’t make your money disappear either. They turn your ordinary income into long-term return. Magic happens in a split second. That’s what amazes the audience. The unreal become real just after a blink. A financial plan is a long term plan. This means it takes a long time to accomplish! Any plan that promises a high return in short term means simply a scam. Since the planner is no magician and can, at best, help you to understand the risks and probabilities involved in each financial instrument so that you can invest as per your risk appetite and understanding.
What kind of advice you want?
On the subject of advice, people want fair and non-bias financial advice but they are not ready to disclose anything about themselves or their financial needs and status, not even the basic details. Planners do not know what the person’s financial health is; about their motivations for investing; their other savings; or the kind of risks they can take, etc. They do not also know how much money they want to invest either. Of course, no one wants to even know whether there is a fee for the knowledge or skill; they do not even bother to think about why I should help them out. There is a great deal of responsibility in ‘giving’ advice, especially when it comes to matters of money.
Once you decide on a planner, make sure that you spend time sharing your financial data. It does not pay to hide stuff simply because a good planner can help you to rationalize your investment strategy. Do not ask the financial planner for specific goals. Let the planner tell you what is possible with the resources you can spare and the choices available.
For each recommendation, it is important for you to understand the risks involved. Once you take this approach, you will find fewer problems with your finances. However, if you tell him about your aspirations, there is a high possibility that high-risk and, often, unworkable strategies or asset allocation may be recommended. It is important for you to understand some basics about money and investments, since it is your money and involves your future. A rudimentary comprehension of various asset classes can be a good beginning.
How to engage Professional Financial Planner?
The last point about choosing a planner is whether you are going to hire an imaginary financial magician who still recalls a popular magic trick or a professional financial planner who helps to deal with various personal finances issues through proper planning just akin to a doctor for our physical problems as Financial planners for our Financial problems.
Finally, ask yourself what kind of financial advice do you need? If you are beginners who cannot afford to pay for the advice, it is best that you stick to mutual funds or insurance advisors who do not charge a fee because they are paid by the fund house or insurance company in the form of their commission etc. I would recommend going to a professional planner only if your family income is more than Rs 5 lakh per annum, you can definitely afford first-time & on-going financial planning fees. Even if your income is less than 5 lakhs, you should consider at least getting the financial plan done for the first time. You may implement, monitor and review the financial plan on your own.
Please bear in mind that a financial planner won’t create money for you out of nowhere. They are not magicians. But you are your own money magician if you desire to be the main role model of your money success story. Talk to your financial planner as if they are the architect, the designer, the planner, but definitely not the magician that turns your pennies into gold.
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