HOW MUCH DO YOU PAY?
Though Prashant made his decision to hire a financial planner, there was another aspect to consider: the fee to be paid to the financial planner. After some research, he was surprised to find out that there is a wide range of fees that a financial planner could charge.
The fee of a financial planner is based on their credentials and experience, along with the number or scope of services they offer and the market that they operate in.
Neelgund said that there are financial planners who charge anywhere between ₹5,000 and ₹1 lakh per annum. “While quoting a fee, a professional is clear about how much time will he be spending on the client and what is the value of that time and also that they do not want every client,” he said. Some planners, depending on their experience level, maintain a certain level of fees even if it means limited clients, said Mudholkar. The services could range from only suggesting investments for tax saving to regular monitoring along with periodic reports on how those investments are performing. A detailed financial plan will also talk about your assets, liabilities and restructuring required from time to time not just vis-a-vis your investments but also restructuring of your loans.
Under the fee-only model, some planners charge a flat fee, while others charge a percentage of the assets under advice, which is your investment corpus. Here you must understand that if someone agrees to pay 1% of their assets under advice as a fee, this would look very comfortable at the start of their investment journey when the corpus is small. “But as their investment corpus grows bigger over the years, the 1% of the corpus will look bigger. So suitability of a planner also depends on an individual’s comfort level with the planner,” Neelgund said.