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The Financial Planners
There is a complete new class of professionals called certified financial planners who offer solutions and plan for every stage of your life. A financial planner helps the client in achieving their financial goals by taking a holistic picture of their life
In the good old days of public sector banks, insurance companies and national investment schemes, financial advice reigned in the hands of your friendly neighborhood chartered accountant who managed your income tax accounts. Five years into the millennium, the world is filled with multiple entities offering multiple financial products. Its a new bewildering experience especially for the new professionals who have just graduated into the middle and high-income group.

Plan well
"There is a crying need for a professional advisory system, and slowly but surely investment advice is moving on from a relationship model of a professional advice model. There are two reasons for this, the increasing wealth affluence of the population and the huge market offering multiple products from insurance to mutual funds to saving schemes," states Ranjeet S Mudholkar, CEO, Financial Planning Standards Board (FPSB) India.

This is where your financial planner steps in. "Certified Financial Planners (CFP) are involved with providing advice (and/or providing the products required) covering every aspect of a clients financial life be it insurance, investments, retirement planning, taxation, estate planning (wills and trusts) etc," informs Jayant R Pai, CFP, Vice President, Business Development, Parag Parikh Financial Advisory Services Limited.

"A financial planner helps the client in achieving their financial goals by taking a holistic picture of their life. The planner accepts the fiduciary role i.e. keeps the clients interest first. They do this by building a strong relationship and by educating clients and by avoiding/reducing all conflicts of interest," says Zankhana Shah, CA, CFP, MoneyCare Financial Planning.

As per FPSB, CFPs have to mandatory follow a six-step process: Establishing and defining the client-planner relationship, gathering client data, including goals, analyzing and evaluating the clients financial status, developing and presenting financial planning recommendations and/or alternatives, implementing the financial planning recommendations and monitoring the financial planning recommendations.

There is no regulation at present, which defines minimum qualification or a particular license requirement for becoming planner. Chartered accountants, MBAs or a CFA can practice as financial planners. However, the promoters (Charter Members) of FPSB India who are also the major employers of financial planners have unanimously passed a board resolution that they shall give first preference to Certified Financial Planners CM during recruitment.

"CFPs differ from non-CFPs in that they are bound by the Code of Ethics and Rules of Professional Conduct as mandated by the Financial Planning Standards Board," informs Pai. FPSB India has several programs through which an aspiring candidate can he a Certified Financial Planner or an Associate Financial Planner. "An CFP certificate from FPSB has cross border mechanism wherein If you want to practice abroad say in US, all you have to give is a clearance exam with-out an additional educational training program," informs Mudholkar.

There are your technical skills, which you acquire from your work experience and training programs. However, Interpersonal skills are an essential requirement. "CFPs are as good as financial doctors. Hence technical competence such as product knowledge, tracking international and domestic trends etcetera are necessary but soft skills such as communication, empathy etc are an added asset," says Pai.

Mudholkar agrees. "Our job analysis survey found that apart from technical skills or analytical skills, soft skills are very relevant here. You are basically your clients financial doctor and adopting certain attitudes like being aggressive is not a wise step," he feels. "However, an essential component of the package is that the financial planner person should be transparent. Integrity and compliance with the FPSB code of ethics is an integral. My code of ethics would demand that if I am an agent or a distributor of a particular financial product then I need to inform my client of my vested interest, he adds.

A certified financial planner can set up his or her own business or opt for a corporate career. Mutual fund companies, insurance companies, portfolio management service providers, equity and broking houses, and banks especially in their private banking, wealth management and financial planning divisions, financial advisory companies are opening their doors to financial planners. Check out the promoters of FPSB to get a fair idea of the top employers.

"Usually, the-wealth management divisions of banks, mutual funds, brokerage houses recruit CFPs. Many of them also start their own practice as Independent Financial Advisors (IFAs)," says Pai. You can also turn entrepreneur. "Since financial planning is still in its nascent stage many companies have still to realize how a CFP can help them and their clients. So presently most financial planners are self employed," says Shah.

Career growth
Usually, a CFP will start in the middle management cadre in an organisation. "Depending upon their aptitude they can then move up. Positions could be Relationship Managers in foreign banks, Financial Planning Managers etcetera," informs Pai.

According to Shah, "Entry point work usually is technical and back end work, which means making financial plans, research etc. As you go up the learning curve you can start interacting with the client and manage their expectations. A fully trained person can then start his/her practice also. Given the skills and abilities, the single trait that would be the deciding factor for future growth is the financial planners honesty and ability to put the clients interest first." There is not much specialisation happening in India with a nascent market and low number of financial planners unlike the USA where planners specialise in specific areas such as insurance, investments etc. as also esoteric areas such as divorce planning, trust structuring etcetera.

"However, experienced planners soon find their niche in a particular segment, which is specialised as in, retirement planning, estate planning, wealth management for higher income ground etc," feels Shah.

There I, basically three models of remuneration. The first is the fee-based one, where he charges a certain fee for his services. The second is a certain sum is derived from the commission earned by the virtue of his recommendations. You could also have a combination of the two.

"Beginners could earn around Rs 2,00,000 to Rs 2,50,000 per annum. A well-established planner can earn over Rs 25,00,000 p.a. However, this is through a mixture of product sales and fee-based planning," informs Pai.

If you were in a corporate, your remuneration would depend on the organization. "It really differs from company and on your experience. But a trainee could expect 2.5 to 3.5 lakhs minimum p.a," says Shah.

The 2005 World Wealth Report, by Merrill Lynch and Capgemini put the number of high-net-worth individuals (HNWIs) (individuals with a net worth of at least U.S. $1 million), in India at 70,000, a jump of 14.6 percent over 2003.

However, it is not just the HNWIs that are potential clients. There is a huge population, which still subscribes to traditional investment systems. "They are uncomfortable with the new investment bouquets and are also ill advised. There is a mismatch somewhere. This is where the professional financial planner comes in. According to a Mckinsey report on wealth affluence, over 1 million people would seek professional advice by 2010," informs Mudholkar.

Experts agree on the fact that though the industry is still at a nascent stage in India, there is tremendous scope for professional financial planners in the immediate years. One of the major obstacles is the lack of awareness. "Though there is tremendous scope for financial planning in India in the longer term, right now, consumer education is still lacking. I foresee that the next five odd years will have to be spent on educating target consumers on how this process will benefit them. Demand-supply figures are not really indicative today as the supply is only around 100 CFPs and the latent demand runs into lakhs of families." feels Pai.
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Posted on : 29/10/2005
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