Do it Yourself Vs. Hiring a Financial Planner - Network FP
May 17, 2011

Do it Yourself Vs. Hiring a Financial Planner

Sadique Neelgund

Some days back my article on this subject got published in Mint Newspaper. I have been receiving critical feedback from one and all, my graduation classmate from Bangalore commented on facebook “Sadique, as a part of the CFP fraternity, u will be ousted if u tell the world to do it ur self!!!”.

One person Mr. Gupta, who I guess is a financial advisor on the mint website commented “Though u r a CFP, even then u r recommending individuals to plan financial matters themselves after reading some finance sections of newspapers and magazines. It really needs a lot of courage.” Another financial planner Rishu Kumar wrote on LinkedIn “Financial planning may not be rocket science, but just think why people go to doctors even for the smallest of diseases, even if the advice and cure is available free online”.

Through this article I made a case for individuals to manage their money themselves. Yes, I know we are Financial Planners and will need to earn our living from charging a fee to clients. But that does not mean we can stop the way this profession is bound to evolve. There would be enough people in this world who think and would like to be “Do it Yourselfers”. Take for example living a healthy life. If a proper diet, a routine exercise and an adequate relaxation is part of your daily lifestyle, it can keep you away from doctor for most part of your life.

Now there are two things to be considered here. One, all of us know these simple mantras of living a healthy life, but how many of us follow it? Second, can a doctor stop encouraging this kind of a disciplined lifestyle to patients and public in general fearing he will be out of business?

I feel consumers should be given a fair chance by financial planners, media and the regulators to manage their money themselves. The idea is to get them started, let them subscribe to the concept of financial planning and start appreciating the importance of money management.

Having said that, I think the same people will approach you for professional help either when they feel they can afford your services or need a second opinion and most importantly refer people around them who are not doing it themselves.

Also please carefully read the situations under which I am in favour of “Do it Yourself”. They look easy to fulfil but practically are very hard to follow. But if someone is disciplined enough, works hard and has an inclination to get things moving, it should actually be no rocket science.

I am not trying to underestimate the existence of this profession, but I am trying to highlight the importance of embracing the financial planning process by consumers – either ways.

looking at this from another angle, I also think there can be many business models built by financial planners (maybe in collaboration) to cater to Do it Yourselfers. Like blogging, conducting trainings & workshops, robust & transparent distribution of financial products, writing in media, publishing ‘how to’ books, developing calcultors, money management softwares, portfolio trackers etc.

These are not times to conclude, but times to start discussions on important topics, so I request the fraternity to take this in the right spirit.

Below is the transcript of article along with the comparison chart. I am publishing the comments and replies from LinkedIn and Mint Money, they make a good reading too.

Start

Be it gymming, dieting, curing simple health problems, building a house, tax filing or money management – there are two ways of getting them done, either hire a professional for guidance or do it yourself.  In each case, the decision to hire a professional is based on many factors which vary for every individual. Like for example if you are building a house on a plot, you may decide to hire an architect based on the size of the project, what kind of interiors you want, your budget, etc. Else you may simply give briefing to a local contractor and supervise the construction yourself.

Financial Planning is no rocket science; it is combination of simple financial strategies, few calculations and most importantly discipline. You may not have written plan and a second opinion given by a professional financial planner, but can still do fine doing it yourself if the following five factors are in your favour and you are disciplined & self-motivated to take charge of your money.

Time

You have to commit ‘time’ if you want to manage money successfully. You will first need to start by educating yourself with personal finance matters and products. The best way to do this is by reading money magazines or money sections of your daily newspaper. You may also spend time watching TV shows or surf the internet. There is too much of information floating around, you need to get used to terminologies and products on insurance, investments, banking, taxation etc.

You will also need ‘time’ to understand your needs, set financial goals, learn to use financial calculators (most of them are available on internet), compare products, take a decision and execute it. Getting a grip over your money is a continuous affair and doesn’t happen overnight; it will take at least 2-3 years. Spending 6-9 hours a month over weekends should serve this purpose.

If you are not able to make this commitment, it’s a good idea to hire financial planner who will do the handholding, advice and maybe even execute the plan. Even in this case you will have to spend 2-3 hours month in meeting the planner, understanding the plan, executing and reviewing the plan.

Do it Yourself Vs. Hire a Financial Planner

Affordability

Hiring experienced & professional financial planner costs money. In India currently, CFP practitioners charge anywhere between Rs. 10,000 to 30,000 to make plan, execute & monitor it. It’s no point having a plan done from self-proclaimed planners who are actually insurance agents or mutual fund distributors doing it for free and in the end recommending the products they want to sell.

‘Willingness to pay’ is best left to you. But ‘ability to pay’ can be quantified to some extent. In general if you are earning more than Rs. 6 lakhs a month or have an investment portfolio of Rs. 5 lakhs and above, you should be in a comfortable position to pay up the fees. You can use this as a benchmark for deciding whether to hire a FP or DIY. It’s a simple tradeoff – you pay fee to save your time, efforts and get professional advice, but let this not be the only deciding factor.

Availability

This may be a non-factor after some years, but as of now it is huge factor. Currently more than 1,500 are qualified as Certified Financial Planners in India out which not more than 200 are practicing. And even these handfuls are seen in bigger metros. With growth in demand from consumers, this situation is changing fast. So if a qualified and practicing FP is available in your city and is offering the services which you require, you may think of hiring one. Also check on the background, fee structure, references etc. It’s better to DIY if planner’s offering doesn’t suit your requirement.

Knowledge

There are a number of questions which you should be able to answer by yourself. How much corpus do I need for a comfortable retirement? What are various tax benefits available? Am I saving enough or spending too much? Should I be taking home on loan or is it better to rent for some more time? How to invest in equity markets? How will be impact of inflation on my finances? You should also be able understand present value and future value of money.

This knowledge is currently made available by print, TV and web media in abundance. So it’s not difficult to find answers to these questions. You just need to take time out from your busy schedule and have an inclination to go through it.

Complications

And finally the decision can depend on the complications in your financial affairs. Is your income from single source or multiple sources like double salary, rent, investments etc? How is your current portfolio spread out – if you have been investing in mutual funds, stocks and insurance policies on an ad-hoc basis the chances are your portfolio is widely scattered and needs to be consolidated. If you are in such a situation a professional can give you a holistic view and help bring harmony in your investments and map them to future goals. If things are simple, take charge of it yourself.

After evaluating all the above factors, you may decide and try o do it yourself or seek a planners help. Alternatively you may try yourself for sometime before turning on for external help. But, start somewhere & take the first step towards having a plan in place!

End

 

 

Upcoming Workshop

3 Day Workshop by Sadique Neelgund on “Comprehensive Financial Plan Construction – By building & using an excel-based financial planning software” from  June 24-26, 2011 (Fri-Sun) at Ramee Guestline Hotel, Dadar, Mumbai. Interested candidates may contact Priti Neelgund on  9892218582 or priti@networkfp.com. Click here for details

 

Authored by,

Sadique Neelgund

Founder
Network FP
Mumbai

27 Thoughts to “Do it Yourself Vs. Hiring a Financial Planner”

  1. Krishna Gopal Gupta on Mint Website writes:

    Though u r a CFP, even then u r recommending individuals to plan financial matters themselves after reading some finance sections of newspapers and magazines. It really needs a lot of courage. But will u permit to ask a simple question? If there is any health problem, will u recommend to read health section of newspapers and magazines and carry on the surgeries yourself instead of consulting cardiologist, gyanecologist, oncologist etc.? The life would be very simple if one goes with your suggestion and do each and every work himself/herself with the help of “Do it yourself” books and simultaneously would be able to save a lot of money as there would be no need of any professional of any sort on this earth. KG Gupta: krishnagopalgupta111@gmail.com

    • Ronak Hindocha says:

      I only partially agree with Mr.Krishna here. We definitely need a cardiologist, gynac etc. if we have some health problems as we cannot do it ourselves. Because that is a profession which requires a lot of hard work to get there (ie to become a doctor).

      Now, ask yourself (or for that matter, ask any body out here) – How easy it is to become a financial doctor here – ie a CFP in our case.

      A 10th degree is all you need and anywhere between 50,000 to 2.5 Lacs. And you become a CFP. I have interviewed at least 50 CFPs in the last two years. And 80-90% of them are not fit to be CFPs (sorry to say this in an open forum). My point here is that it is very easy to become a doctor here but than most of these doctors do not know how to perform a surgery. Even a basic surgery.

      So, let the doctor community raise their quality standards if they are to start commanding fees. People will not pay you fees in the garb of a CFP degree.

      And regarding do it yourself in FP, my personal opinion is that all you need is time commitment. This is not a rocket science at all. An average investor will do a far better job in managing money than an average CFP will do for him.

      Ronak Hindocha
      Founder, Futurewise
      +99874 12342

      • Yes, we should start drawing a line between doctors and planners somewhere. Doctors take 5-10 years to be called doctors. Planners role is no less importance but efforts to become one is comparatively very less. I feel 1-2 year of rigorous education combined with around 3-5 years of on-the-job training will make an average student a good financial planner. But still we dont have the right education system for becoming a financial planner.

  2. Jiza on Mint Website Writes:

    I Agree with what Mr.Neelgund says except that No matter how much self study a person does, there are still some situations when and expert advice is needed. Specially when there are many products in the market which can fool a client, like hidden costs, wrong way of calculating in front of the client just to show him, he is going to benefit by so and so ways. The truth is sometimes the agents also dont know how the calculations are misleading. Eg; client being told CAGR is compounding monthly. It cannot be coz CAGR is annual.

    So, in my opinion, one needs a good certified planner no matter what.

    • Without any doubt, a good financial planner is the biggest asset of anyone’s financial lives. What i am trying to say is let consumers start somewhere. And when they feel they can afford the services and they have enough options to choose amongst the FPs, hire one.

  3. Akash Damniwala on LinkedIn commented:

    FP is no rocket science… our father and forefathers where doing planning and have been successful too. But these days number of product for investing as multiplied making it difficult to keep track.. may be for this FP is a useful.

  4. Krishnakishor Tiwari on LinkedIn commented:

    I think time has drastically changed from our father & forefathers time. During thier time, needs were limited, interest rates were fixed, there was no economic globalisation,steeply rising costs of education,marriage etc. Under these cercumstances without financial planning, you will be no where & it is very difficult to achieve your goals of life.

    Therefore, for achieving financial goals & peace of mind, you must go for financial planning.

    • But still there are many smart investors who have the time and inclination… so why not… And moreove in a situation when there are not many competent financial planners in the country?

      And once again I feel… any DIYers will also seek an second opinion from the expert once every 3-4 years.

  5. Suchita Ambardekar on LinkedIn commented:

    If one has a good working knowldege of all the financial asset class, a good judgement, medium risk taking capacity with in bulit discipline…Then yes he/she can successfully create wealth as most uncommon in financial planning is again common-sense…I feel…

  6. Badarisha M N on LinkedIn commented:

    Hey Sadique,

    Firs and foremost it is not a big deal the information have been flowing to the customers…

    Based on my experience the following are realities…
    1.Customer knows financial planners suggests Insurance and MF SIP investments to reach any of clients goals: For the same many customer are getting information flow directly from AMC e.g. FT Family solutions…etc….and even Many AMC offers online calculators which any novice investor can login know how much one should save etc…
    Insurance many customer would login to any insurance website buy online term insurance like religare icici pru i-term etc……
    2. If we want to add value beyond simple excel strategies …. Many Excel Formats available in google search download and know….
    3. Tax Advice-Are available free of cost…..

    Now Big Question Comes:
    1. How should one add real value to customers and demand fee for the services provided….

    Need your valuable feed back….

    • Sadique Neelgund on LinkedIn replied:

      Hello Badarisha

      Financial Planners play a much bigger role than what a consumer can do with knowledge available in public domain. The main areas which I can think of where we justify our fees are;

      1. Giving a holistic advice. We do not look at any goal or particicular area of finances in isolation. And most of things in FP are inter-related

      2. Look at the past investments and map them to future goals & clear-up the mess

      3. Second opinion from our experience & knowledge

      you can list more. And whatever said and done when it comes to managing money people fall into 2 categories 1. Busy 2. Lazy 🙂

      FPs are required. Its just that this profession will take time to evolve.

  7. Joel Lionel Fernandes on LinkedIn commented:

    All said and done.

    Do remember in this country to incubate/ execute an idea of computer too a
    decade, yeah I am talking about Late Rajiv

    Fee based might take time!!!! But how much it will be god knows!!!!
    Secondly to sustain one has to have to have bandwidth, rest all is easy
    pessy

  8. Rishu Kumar on LinkedIn commented:

    Financial planning may not be rocket science, but just think why do people go to doctors even for the smallest of diseases, even if the advice and cure is available free online,

    Why do people go to restaurants to enjoy a recipes even when they can learn the process of cooking that recipe online, free of cost and cook it @ home,

    Why do people take their vehicles to garage and mechanics, why do people take services of plumbers, engineers, and others professionals.?

    and the biggest of all questions ” WHY HAS BPO/KPO BECOME SUCH A HUGE INDUSTRY IN SUCH A SHORT PERIOD OF TIME.?” I believe the best results can be achieved by getting PROFESSIONAL, SPECIALIST & CUSTOMISED services in those areas where u don’t specialise.

    The internet is full of info. about everything in this world but few know what to rely upon and believe to implement in their own case and personal life. there is something called as professional advice and specialised & customised services for which people pay and trust.

    NO profession is easy to aquire and practise be it medical engineering, or any other for that matter. it need hard work, grooming and various other essentials.!

    “FP has to emerge as same for which people will have trust and will not be free for long, in the time to come.”

    • People still have home remedies for common ailments
      People still can learn & cook at home
      People still can fix their small gadgets with simple problems
      People still have inhouse service centres.

      Same way people can still manage money themselves. Yes its anyday desirable to hire an expert and in the article that what is mentioned… beyond certain situations… one should go to a financial planner.

  9. THIAGARAJAN GOVINDARAJAN on LinkedIn commented:

    we have to analyse this discussion from two angles, one from financial professional and the other from clients .

    we, professonals suggest to go for hiring financial planner depending on the asset size. not mainly because that we get fees and commision but it is the scientificway of doing thereby doing justification to our profession .

    From clients angle we have to create more awareness for the need of a financial planner.

    most of the clients think fnandial professional as insurance agents or amfi agents canvassing co products and interested only commissions.Also they demand part of the commision as though they have won the deal without realising what is the outcome of their investment.Educated clients go on shopping the agents for getting the maximum kickbacks.

    only few clients in HNI group, software group come to realise the importance of engaging a financial planners. some of the clients who are shrewed in getiing profits think that they know everyyhing and they need no assistsnce without knowing their risk profile,diversification,assesing portfolio etc. So job of planners become more difficult first to convince them the need for FP and how to go about it .

    Hence this forum should start discussing ways and means to spread FP

    • I appreciate the positive way of looking at this discussion. When we are talking about the need for financial planner… we cannot be pushy and say “Only a Financial Planner can be your messiah”. I think the best way for consumers to realize the importance of hiring a financial planner is to help them appreciate the concept of financial planninf and adopting it. And give them various options of going about doing it.

  10. Sadique, may be you forgot to include a (important) part in your interesting matrix : Ability and willingness to discover personal goals , to investigate in which are the real personal fears and to recognize personal limits/contradictions …this is something difficult to do , honestly, when one is alone ….but it is true that not all the People appreciate to do this and some People prefer to close eyes and ears and to have low awareness (this People could have strong difficulties to work with a planner and vice-versa )

    • Yes Giorgio… rightly said not everyone is open to financial life planning or the behavioural finance aspects. And many a times… it is simply good make a start somewhere than to wait for hiring the right financial planner. And also for many of the youngsters adhering to right savings and investments can also do wonders.

  11. Sadique.. From a global perspective..world is changing fast..regulations are changing fast. .we have more young affluent individuals across the world who now have access to technology and some of them are quite smart when it comes to finance..

    For eg..it is possible to completely do financial planning and investing on your own with almost no or marginal cost, thanks to internet..self directed and disciplined investors in U.S. have been doing it for years now.. Because large firms till recently would not take any clients who have less than $ 1 million dollars to invest. The need to create wealth made the citizens to learn on their own and some great people like John Bogle , Sir John Templeton and others have helped them through their books and floating firms like Vanguard, Franklin Templeton etc..
    Additional services like advice or execution at almost nil or marginal cost are provided over phone by great asset management firms like vanguard and fidelity..
    Alternatively, as you mentioned they can meet a financial planner for second opinion and pay fees on an hourly basis pioneered by Sheryl Garrett and Financial Tune Up etc..

    It is just a question of time that this concept will take shape in our country too and firms like Investment Yogi ,Funds India etc are already making a good progress by reaching out to the young Indians..

    On a deeper level on how we could differentiate ourselves and be relevant, can be explained through the analogy of a professional doctor[ which I think we should stop associating ourselves with this term called’ financial doctor’ till we have developed deep knowledge and become more humble]..

    Today doctors have to be up to date on their knowledge levels because patients and their care givers are more aware due to access to information. Patients and care givers respect doctors who are not only learned but passionate in helping people, have humility and walk through with patients and care-givers in a gentle manner. Most important, that re-assurance and confidence they give to patients and care-givers during the crisis plays a huge role.. I have been a personal witness to this.. Believe me..It works..

    I think we need to develop these skill sets quickly because the way the world is moving from one crisis after another, investors would need us all the more to re-assure and give confidence that they would be able to reach their goals…May be with little adaptations in their life styles and tweaks in their plans..

    To conclude, we need to upgrade our skill sets in terms of knowledge, soft skills like listening to clients more frequently – whats going in their mind and life – fears and concerns , what are their life priorities, life transitions etc. hold their hands frequently [ technically dynamic asset allocation, portfolio diversification and communicating frequently] motivate and help them stay the course /adapt to changing times/ circumstances etc..

    The numbers could always be performed by the software by the client or advisor..No big deal..

    I would recommend every one to buy and read this beautiful book by Rick Thaler ‘Nudge’ . It would be a good gift to clients too!

    • Hello Partha

      Thanks for these excellent views. I concur with you on many of the points. As you rightly said- the role of being a guide and a coach to client’s financial lives will create value for our services, and more so in times of difficulties. I think some of us can come out with a business model based entirely on “second opinion services” down the line. There will be enough DIY takers.

  12. Anil Gaur on Facebook commented:

    It is easier said than done. just think…..One can find all the medicines in the world at a chemist shop where even the chemist can recommend certain medicines. Then how come people still go to a doctor? You have all the books in the world…

    • Anil, I have not ruled out the importance of going to a financial planner, if you read the article I make a case for individuals under certain circumstances in their favour to manage money themselves.

  13. Stephanie Farber on Linkedin Commented

    Most brokers, bankers, or insurance agents can give good advice for financial planning for free as well as help you specifically in their specialty!

    Stephanie Farber on Facebook Commented

    Hiring a financial planner is great, but you will never really learn how to handle it all yourself unless you do it yourself! So it just depends on your personal goal!

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