A few years ago, Prashant Dhamale, 27, an as­sis­tant pro­fes­sor of statis­tics at NMIMS Uni­ver­sity in Navi Mum­bai, at­tended a cou­ple of fi­nan­cial plan­ning work­shops. He was ex­plor­ing the idea of hir­ing a fi­nan­cial plan­ner for him­self and was puz­zled that the ser­vices be­ing of­fered af­ter the work­shop like plan­ning and prod­uct rec­om­men­da­tion were free of cost. “I be­gan look­ing for an an­swer to how this was pos­si­ble. I re­alised that one of the work­shops was or­gan­ised by a dis­trib­u­tor of a mu­tual fund com­pany and the other was by a fi­nan­cial ad­vi­sor who would earn a com­mis­sion from the prod­ucts that I would buy,” he said.

He set out to find out the com­mis­sions that an in­sur­ance and mu­tual fund dis­trib­u­tor could be earn­ing and ar­rived at the con­clu­sion that he would be bet­ter off with a fee-only plan­ner, who would only charge for the ad­vice and not earn prod­uct com­mis­sions. “I did some cal­cu­la­tions and re­alised that the com­mis­sion outgo over the years would be much higher if I went with some­one who is earn­ing com­mis­sions on my in­vest­ments. Also, I wanted the ad­vice to be free of any in­flu­ence from a com­pany,” he said.

Be­fore you avail the ser­vices of a fi­nan­cial plan­ner, it is im­por­tant to un­der­stand their broad busi­ness model. As Prashant dis­cov­ered, there are fee-only plan­ners who charge only for their ad­vice and there are fee-based plan­ners who would also earn a com­mis­sion out of the prod­ucts that their clients pur­chase based on their ad­vice.

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