Fee Only Financial Planners are quite sought after these days. The USP of these advisors is that their Professional earnings are only from the Fee from the client they are serving.
In other words, they do not earn any commission from any product manufacturer or any broker, which used to be the norm a few years back.
This ensures that these Financial planners work as a fiduciary, with no Conflict of Interest, and no bias in their advice.
There are many “lists of best fee-only Financial Planners” available on google search, but you may find a bias or promotion of specific people in all those.
Actually, all SEBI Registered Investment Advisors are Fee-Only Advisors. Though if they are in a Corporate structure then they may offer you commission-based services but in that case, they cannot charge any fee from you.
So, from the advisory perspective, these advisors can be assumed as the Trustworthy lot to believe and engage with, for the Financial Planning and Investment Advisory.
But this also means that you are asked to pay fee to them which you may not be habitual to.
Yes, direct fee-paying is painful as then you may start judging the services of the Advisor and end up thinking that what they do is easy enough for you to do it yourself, by following some blogs or watching youtube and TV shows. (Also Read: How to Evaluate a Financial Planner?)
You may also start searching for the Ideal Fees to be paid to the Fee-Only Financial Planner and definitely find some articles on google from those who are not planners themselves.
Just like there are many YouTubers who are not certified or SEBI registered but still advice people in general on Investments and Financial Management, same way there are many Bloggers too. Even your banker or your CA whom you ask for all your investment decisions may not be certified enough to give you investment advise.
So, I tried to compile many thoughts in this article from the Investor and Planner perspective, to help you make an informed decision over the selection of the Right Financial planner for you.
Fee-Only Financial Planners in India – Fee Structures and List of Planners
As the name suggests, these are Financial planners who earn only Fees for their advice. They do not deal with any product selling and thus do not earn any commission from any product.
The main job of these professionals is advisory, and when they earn only from the client, then it is assumed that their advice is in the best interest of the client, with no bias.
If you are wondering that all financial products have some sort of commission inbuilt for the Planners/Advisors or by whatever name you know them with, then you are not updated.
Since 2013, at least in Mutual funds, there is a “Direct” Mutual fund category, where the Expenses are less and No Commission is paid to anyone. (Also Read: Invest in Direct Plans, the Financial Planning way)
SEBI Registered Investment Advisors are mandated to provide Fee-Only Services to their clients and advice only in the “No” Commission product where ever available.
Yes, you guessed it right, this means all SEBI Registered Investment Advisors are Fee-only, but all of them may not be Financial Planners. That advisor may be advising on Stock investments, or deal only in Mutual funds advisory.
Whereas Advisors who are Financial planners too will advise you on each and every aspect related to your personal finances like Insurance, Taxes, loans, Estate and Succession, etc.
You may not seek it all right away but sooner or later you will definitely seek advice on all these subjects, as all these are important aspects of personal finance management.
When SEBI came out with SEBI Investment Advisor Regulations in 2013, at that time its intention was to regulate the advice on which Advisors are charging fees and specifically doing Financial Planning.
That time they have allowed advisors to earn commissions if they are in corporate structure or in the name of some family member provided the proper disclosures were given to the client.
So, at that time some advisors who got registered with SEBI, even banks, decided to go with a Fee-based model where they charge some annual or transaction-based fees but also keep earning the commissions. Very Few of the Individual advisors went for a Fee-only mode of charging where they will earn only fees from the client.
Recently in 2020, SEBI realized this anomaly and mandated that all SEBI Registered Investment Advisors will work on a Fee-Only basis.
Also, those who are not registered with SEBI should refrain from using the words “Advisors”, “Planners”, “Consultant” or any such nomenclature which leads to confusion in the mind of the Investor.
Now if you are approached by some person calling himself an Advisor, do ask him/her the SEBI Registration Status and also confirm the same from SEBI Website.
Commission-only people are now called Distributors or Agents, they are no longer advisors as they get their earnings, only as commission from product manufacturers.
The fee Structures of Financial Planners vary depending on the kind of service they provide.
Some provide Comprehensive Financial Planning services covering all aspects of personal finances and charge for package services, such as lumpsum cost, which could be annual or One time.
They may also charge for the Investment management as a certain percentage of the Investments under their Management which normally starts from 1%-1.5% Plus GST and may keep reducing with the Increase of Investments Value. (Read: What are the fee models of various SEBI Registered Investment Advisors?)
They may have different cost structures for different offerings. Like they may ask separately for Estate Planning, Debt Management, and different for Investment Advisory and Management.
For complex requirements, they may have to take the help of different professionals like a Lawyer or a Chartered Accountant, so their, charges would be additional.
There are others who offer Limited advice or I should say they limit themselves to just advice and do not handhold the clients in the complete process.
These Fee-Only Financial Planners normally charge a one-time fee the first year and the Same Fee next year onwards to Review the Plan. Here again, you may find variation in the fee structure as some planners may ask for Rs 15,000 first year and some go up to Rs 1 lakh as well.
You may be wondering about the basis of these fee structures and whom should you choose for your financial planning? Does the Costly one be better as he/she may be offering the high-quality Service or the Cheaper one suit you, as more or less all advisors advise on the same structure?
Here you need to understand the thought process of the Financial planner by talking to the person. Nowadays there are many professionals offering Online Financial planning, so visiting their office is no longer a trouble. You may schedule a call over Skype, Google Meet, or their internal software.
Always Remember while deciding on the advisor, it’s never about Cost, but the benefits attached to the services. Cost should not be the only factor to decide.
There are planners who feel that you should devote enough time to your health so you can enjoy the wealth you want to have.
They stress upon keeping yourself professionally upgraded so your main source of Income (from Job, Profession, or Business) should not get hit.
They may want you to give more time to your real wealth i.e., your Family, and with all this to not let your finances get ignored they want to offer you comprehensive services, and handhold you in your wellness journey. These kinds of Fee-Only Financial Planners say that they Grow along with the Client.
You may consider the fee-paying to them is the cost of wellness you strive for not only in terms of money, but also in terms of health, time, and profession. The fee to planners may be the cost of buying their time so you can enjoy yours.
If you are a person of this mindset then you should go with the Fee-only Financial planner offering Comprehensive Services.
But if you think that you already are a good manager of your life and have enough time to work on your Money, then you may consider the Other financial planners, who offer One time Services.
This lot of Financial Planners will help you make a Financial plan that suits your requirements, and guide you on different action points, like weeding out the non-suitable investments, buying specific insurances, rationalizing your Investment portfolio, and making new investments. They may also advise on debt management and estate planning.
But these financial advisors will not help you execute the advice which you have to do on your own.
Some Planners like us offer both kinds of Services – One time & Comprehensive.
Once you know what kind of services you want, you should have a clear list of questions to ask the planner so you can finalize one for your requirements. (Read: Questions you should ask while choosing a financial planner in India)
Do not fall for any list that is available on other websites, which may be biased as they could be promoting the association members or their friends. You may explore the List of Fee-Only Financial Planners who are SEBI Registered Investment Advisors from the SEBI website or follow the steps mentioned in this article to find the Right Financial Planner for your needs.
Conclusion:
Finding the Right Financial advisor used to be a task earlier. You need to depend on the Bankers, Insurance agents for all kinds of investment advice. But with the coming up of Fee-Only Financial Planners, taking holistic advice for all your Money Management needs has become easy.
Since these advisors are Registered with SEBI so you can feel safe in your data sharing and Trust them for not misguiding you.
But this is a question of your hard-earned money, and with so many distractions and misinformation available online, it is wise to do your research and decide whom you want to go with. But once selected, stick to one.
Fee-Only Financial planners are just like family doctors who in the beginning need time to understand you, your family, your aspirations and then keep guiding you for the long term for your financial wellness.
Manikaran Singal is the founder and Chief financial planner at Good Moneying Financial Solutions. He is a CERTIFIED FINANCIAL PLANNER CM and SEBI registered Investment adviser (Regd no. INA 100001620). He’s having 20+ years of experience in financial services space.
