Pros and Cons of Using a Financial Planner

The financial world is fraught with fine print, difficult-to-understand terms, and many sleazy salespeople. Having a Financial planner to hold your hand and walk you through the jungle is extremely valuable.

At the same time, there are some terrible advisors out there who want to swindle you out of your hard-earned money. Let’s compare the good and bad of using a financial planner.

Comparing the Pros and Cons of Hiring a Financial Planner

Here’s the comparison:

Pros of Using a Financial Planner

A quality financial advisor like Chandan Singh Padiyar (My financial planner) is worth his weight in gold. A great advisor will always listen to you first to determine where you want to take your money, your fears, and your ultimate long-term goals.

Once they understand where you want to go, they’ll devise a plan to get you there. The plan will be easy to understand and full of investments that don’t gouge you for fees. The advisor will be paid a Fee so you know you’re getting a fair deal on the investments. By paying a fixed fee rather than a commissioned rate, you can ensure you work with an advisor with a fiduciary duty to you. (Fiduciary duty is by far the most crucial phrase in all of the financial advising.)

A great advisor will also admit his weaknesses and faults instead of trying to bluff some of his knowledge past you. And a great advisor will hold the Certified Financial Planner designation and be SEBI registered. If you are looking for a Fee-only Financial planner in India, these are two good places to choose from – Fee Only India and List of Fee Only planners in India.

Cons of Using a Financial Advisor

Conversely, some of the worst things that can happen to you and your money stem from bad advisors.

At their best, a lousy advisor will “just” put you in an investment that generates a hefty commission for them. Of course, that commission comes from the money you have to invest, but that’s your problem, not his.

It goes downhill from there quickly.

Poor advisors won’t listen to you and will craft a standard plan based on your age rather than your specific goals. A poor advisor will put you in confusing investments (so you will have to trust them while they earn high commissions) and churn you through those investments. Churning is where advisors move you from one fund to another similar fund to snag another commission on your invested money.

Even worse, the poorest of advisors are scam artists. They hold financial “designations,” but none hold up once you look at them. That means you can’t trust all the alphabet soup hanging out behind their name; you must verify their credentials first. Scam artist advisors prey on their victims (they shouldn’t be called clients; we’re far past that), and the whole point is to steal as much money as possible from the client.

Avoid Bad Financial Advisors

A great Financial planner is affordable and usually has a fixed yearly fee. They have real credentials that can be researched and vetted. A poor financial advisor can put you behind your goals and ruin your finances.

Avoid bad financial advisors by researching before agreeing to meet with anyone. And lastly, when you do meet with the advisor, ask them if they have a fiduciary duty to you.

You’ll either get an emphatic “Yes!” or someone who tries to dodge the question. Then you’ll know where you stand.