Choosing your financial planner: Check if age and investment philosophy match

Start your search by asking your friends, colleagues or family members for references. Databases could have many names, but you wouldn’t be familiar with those mentioned in those or others that show up in search engines results. Names that come up through recommendations mean that someone has already done some due diligence on the planner.

But if you do not have any recommendations, then you can search in any of the databases listed above and shortlist some names.

You need to do a lot of homework before you zero-in on your chosen planner. For instance, only about 20,000 of the distributors mentioned in the AMFI site are active as per industry estimates. Similarly, of the 2,000 CFPs listed on the FPSB website, only about 350 are practicing financial planners.

Ajit Menon, Chief Executive Officer, PGIM Mutual Fund says that it is better to shortlist 3-4 names to begin with. “Go talk to them, interview them. If you’re a couple, then it’s important that both the husband and the wife have a detailed chat with the financial planner and select someone who is a good match,” he says.

Network FP’s founder Sadique Neelgund advises spending some time with the shortlisted planners to get a sense of their investment philosophy. Does she offer too many new funds? Does she talk too much about expected returns or, worse, promise them? “Ideally, the planner should map your financial goals with the solutions that she offers, and offer to meet your goals in a timely manner,” says Neelgund.

Digital or a human advisor

In the past few years, digital platforms have made investing easy. Investing in a mutual fund or starting a systematic investment plan has never been so easy. The question is: Do you want a robot or a human advisor?

Deepak Chhabria, chief executive officer and director, Axiom Financial Services, says that online platforms are good if you know the instruments you want to invest in. “If you are young, early in your career and beginning your investment journey and aren’t really looking for any be-spoke solutions, then online platforms are fine. But you should know what you’re doing, which schemes to invest in, when to buy, when to sell and so on,” says Chhabria.

Online is also convenient when the portfolios are small and manageable. “But once your portfolio grows larger over time, you may like to have somebody to talk to, for guiding you through market volatility and complex products,” adds Chhabria.

How long has your planner been in the business?

Experience counts. Chhabria says that it helps if your advisor has seen market cycles. He says that many distributors and registered advisors do come with high qualifications, but nothing counts as much as experience in tackling the market ups and downs over the years. Whether it was the information technology sector crash of the year 2000 or the massive 2004-07 bull-run that ended with emergence of the global finance crisis, or the COVID-19 market crash and the subsequent rally, experienced advisors can understand markets and guide you better.

Is my planner too old or too young?

What’s age got to do with financial advice? Plenty, says Menon. “If your financial planner is of your age group, then she would empathize with your goals and needs. Empathy is a necessary factor for success in a relationship of clients and advisors – it builds trust,” he says. Menon gives an example. If you are 25 and your adviser is 60, you might end up with someone who might prescribe solutions that he/she thinks is best for the younger generation.

But that may not be what you want. The same holds the other way round as well; that is, if the age profiles are swapped.

Why do you need a financial planner?

What type of financial adviser you need also depends on your requirements. When you are young, your needs are simple. And your investment size, even if monthly, is typically small. But if you are the sort who, for instance, wants to invest in shares and mutual funds, needs help in re-structuring your loans, making a will, and buying an insurance policy, then you need a planner who offers advice on multiple products.