When it comes to managing your finances effectively and working towards your financial goals, seeking the guidance of a financial planner can make a significant difference. A financial planner helps you design a course for your financial decisions. This article will discuss the role of a financial planner, the benefits they can bring to your financial journey , how to choose the right planner, and some essential financial planning tips.
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Investment Plans
Generate wealthEarn 1 Cr# in maturity with Zero LTCG tax¶
Double tax savings^On premiums (under 80C) and on maturity (under
10(10D))
Financial planners are professionals who specialize in providing comprehensive advice and guidance on different aspects of personal finances. They help clients in creating a roadmap to achieve their financial goals and make informed decisions about their finances. A certified financial planner typically assesses your financial situation by collecting financial details, analysing it and suggesting strategies to improve their financial health.Â
A financial planner can help you by providing you with strategies for the following aspects:
Give valuable advice on saving and investing
Guidance and support in financial planning
Strategies to reduce your debt, minimise taxes, and protect your assets
Make informed decisions about your money
Now, let us quickly discuss Financial Planning meaning and its importance in every individual's life.
What a Financial Planner Do?
Here are some specific tasks that a financial planner may perform:
Assessing Financial Situation: A financial planner comprehensively assesses your current financial situation. They analyse your income, expenses, assets, debts, and other economic factors to gain a holistic view of your finances.
Setting Financial Goals: Based on the assessment, a financial planner helps you set realistic and achievable financial goals for various situations. These situations may include the following:
Creating a Budget: A financial planner assists you in creating a budget by identifying your spending patterns, suggesting improvement areas, and allocating funds towards priority areas.
Investment Planning: Financial planners assess your risk tolerance, time horizon, and objectives to decide on safe investments with high returns. They provide recommendations on asset allocation, diversification, and various best investment options.
Retirement Planning: They help you estimate the amount you need to invest in pension plans and annuity plans to develop a retirement income strategy to ensure a comfortable and financially secure retirement.
Tax Planning: They assist you in optimizing your tax strategies and minimising your tax liabilities. A financial planner identifies tax-saving investments for potential tax deductions, credits, and incentives to maximize your after-tax returns.
Estate Planning: Estate planning involves creating a plan for the distribution of assets and the management of financial affairs after an individual's death. A financial planner collaborates with estate planning attorneys and tax professionals to develop strategies that minimize estate taxes, ensure smooth asset transfer, and protect the client's wealth for future generations.
What are the Benefits of Hiring a Financial Planner?
Some of the key advantages of working with a financial planner are mentioned below:
Expertise and Knowledge
Financial planners stay updated with industry trends, tax laws, investment strategies, and market conditions
They can provide you with accurate and relevant advice tailored to your unique circumstances
Objective Advice
They offer objective advice that is free from conflicts of interest
They strive to find the most suitable solutions for your financial needs
Time-Saving and Stress-Free
Managing personal finances can be time-consuming and stressful
By hiring a financial planner, clients can delegate the responsibility of financial management to a professional
Maximizing Returns and Minimizing Risks
They have the expertise to design investment portfolios that balance risk and return based on your risk tolerance and financial goals.
Long-Term Financial Security
A financial planner's primary goal is to help you achieve long-term financial security and plans that address your short-term goals.
What are the Types of Financial Planners?
Various types of financial planners offer different services based on their expertise and qualifications; some of them are as follows:
Types of Financial Planners
Details
Certified Financial Planner (CFP)
CFP professionals are widely recognized and have completed extensive education and experience requirements
They are trained in various aspects of financial planning, including:
Investment Planning
Retirement planning
Estate planning
Tax planning
Insurance planning
Chartered Financial Consultant (ChFC):Â
ChFC professionals have expertise in comprehensive financial planning
They undergo rigorous training in areas such as:
Income tax
Investments
Insurance
Retirement planning
Estate planning
Chartered Financial Analyst (CFA)
CFAs are specialists in investment management and analysis
They have a deep understanding of financial markets, securities, and portfolio management
Registered Investment Advisor (RIA)
RIAs are financial professionals who provide personalized investment advice and manage investment portfolios for clients
They must register with the state securities authorities
Wealth Manager
They typically cater to high-net-worth individuals and families
They provide comprehensive financial planning services, including investment management, tax planning, estate planning, risk management, and philanthropic planning
How to Choose the Right Financial Planner?
When selecting a financial planner, it is essential to consider several factors mentioned in the list below to ensure a good fit for your specific needs:
Credentials and Qualifications
Look for a certified financial planner who holds recognized credentials such as:
Certified Financial Planner (CFP)
Chartered Financial Analyst (CFA)
Registered Investment Advisors (RIA)
These certifications indicate that the planner has met rigorous standards of education, experience, and ethical conduct
Experience and Track Record
Look for professionals with a proven track record of success in helping clients achieve their financial goals
Client testimonials and referrals can provide valuable insights into their expertise and reliability
Personalized Approach
Choose a financial planner who takes a personal financial planning approach to your goals
Each individual has unique financial goals and circumstances, so it is essential to work with a planner who tailors their strategies to your specific needs
Fees and Compensation Structure
Understand the fees and compensation structure of the financial planner before entering into an agreement
Financial planners may charge fees based on a percentage of assets under management, hourly rates, or a flat fee for specific services
Ensure that the fee structure aligns with your budget and the services provided
What are the Financial Planning Tips for Individuals?
The key steps you can take to improve your financial well-being are as follows:
Start Early
Start your financial planning journey as early as possible. The power of compounding allows investments to grow over time, so the earlier you start saving and investing, the better.
Set Clear Financial Goals
Define your financial goals clearly. Whether saving for a down payment on a house, paying off debt, or planning for retirement, having specific goals helps you stay focused and motivated.
Track Expenses and Create a Budget
Track your expenses diligently and create a budget. Understanding where your money goes can help you identify areas where you can cut back and save more effectively.
Diversify Investments
Diversify your investment portfolio to manage risk. By spreading investments across different asset classes and sectors, you can reduce the impact of volatility in any single investment.
Review and Update Plans Regularly
Regularly review and update your financial plans. Life circumstances and goals may change over time, so it's crucial to adapt your financial strategies accordingly.
Financial Planners vs. Financial Advisors
Although both Financial Planners and Financial Advisors seem similar terms, they are essentially different. Let us learn the difference between them from the table mentioned below:
Financial Planners
Financial Advisors
Provide comprehensive financial planning services, including budgeting, saving, investing, retirement planning, insurance planning, and estate planning
Primarily focus on investment management and providing investment advice to clients
Assess clients' financial situations, identify goals, and develop personalized strategies to achieve those goals
Help clients make informed decisions about their investments and manage their investment portfolios
Have in-depth knowledge of various financial areas and often hold certifications like Certified Financial Planner (CFP) or Chartered Financial Consultant (ChFC)
Often registered as Registered Investment Advisors (RIAs) and are regulated by the Securities and Exchange Commission (SEC) or state securities authorities
Offer guidance on long-term financial planning and help clients create a roadmap for their financial future
They may also provide general financial guidance, but their expertise is primarily in the investment domain
Consider multiple aspects of clients' finances to create holistic plans tailored to their specific needs
May specialize in specific types of investments or asset classes, such as stocks, bonds, or real estate
Focus on creating comprehensive financial plans to address short-term and long-term financial goals
Assist clients in selecting suitable investment options based on their risk tolerance, financial goals, and time horizon
Conclusion
A financial planner's expertise, objective advice, and personalized approach can make a significant difference in building long-term financial security for you. By hiring a financial planner and implementing sound financial strategies, you can take control of your financial future and make informed decisions about your money.
FAQ's
Do I need a financial planner if I do not have much money?
Financial planners can provide valuable guidance regardless of your income level. They can help you prioritize your financial goals, manage your budget effectively, and maximise your resources.
How much does a financial planner typically charge?
The fees charged by financial planners vary based on the services provided and the planner's fee structure. Some may charge a percentage of assets under management, hourly rates, or flat fees for specific services. It is essential to discuss and understand the costs before engaging a financial planner.
Can I trust a financial planner with my personal information?Â
Financial planners have a professional duty to keep your personal and financial information confidential. However, it is essential to choose a reputable and trustworthy planner with a track record of ethical conduct.
What credentials should I look for when hiring a financial planner?Â
Look for certified financial planners with recognized credentials such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA). These certifications indicate that the planner has met rigorous education, experience, and ethical conduct standards.
Are financial planners regulated by any governing bodies?
Yes, various governing bodies and professional organizations regulate financial planners. These organizations set ethical standards and require members to adhere to a code of conduct to protect consumers' interests.
Are financial planners only for the rich?
Financial planners are not exclusive to the wealthy. They provide valuable services to individuals of all income levels. Whether you have a modest income or significant assets, a financial planner can help you maximise your financial resources.
Are financial planners expensive?
The cost of hiring a financial planner varies depending on the services provided and the complexity of your financial situation. However, it's essential to consider the value and potential returns that a financial planner can bring in the long run. Their expertise and guidance can often outweigh the cost involved.
˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
Past 10 Years' annualised returns as on 01-04-2025
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
Tax benefit is subject to changes in tax laws. Standard T&C Apply
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).
Generate wealth Earn 1 Cr# in maturity with Zero LTCG tax¶
Double tax savings^ On premiums (under 80C) and on maturity (under 10(10D))
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