1. Should a DIY (Do-It-Yourself) investor engage with a Fee-Only Financial (Advice-Only) Planner?
- A significant majority of my clients were quite knowledgeable about personal finance and investing, even before they contacted me
- If you are not able to correctly answer all the questions in this quiz, then you are likely to benefit from engaging with a competent Fee-Only (Advice-Only) Financial Planner
- While I have answered many of those quiz questions in various articles, if you have dedicated less than 10,000 man-hours (i.e. 5 man-years) to studying investing & personal finance, then it is not possible to correctly answer all the questions in that quiz
- If you are in the less than 0.001% of (i.e. one in one-lakh) people who are able to correctly answer all the questions in that quiz, then you are in a good position to decide for yourself whether to engage with a competent Fee-Only (Advice-Only) Financial Planner. There is a high probability that you will benefit from such an engagement (there are aspects that you may not have thought through, for example mitigating 'sequence of return risk' during retirement)
- The suggestions above deal with an initial engagement of one-year. They do not deal with the more subjective question of whether or not you will gain from continuing the engagement beyond one-year
2. Should I engage with a Fee-Only (Advice-Only) Financial Planner instead of relying on a robo-adviser?
- The most important question in asset allocation is whether you are taking too much of risk. This is a complex question. Hence, I have not yet come across a robo-adviser (in India / the US) that uses the most important variables to determine asset allocation for a particular couple
- Further, there are many aspects that a robo-adviser does not cover. For example, it does not tell you to minimize bad investments, in the flavor-of-the-decade, such as crypto-currencies, structured products, peer-to-peer lending and most angel investment opportunities
- Finally, the quality of the robo-adviser depends on the competence / judgement of the human-adviser who provided the approach / algorithm. For example, if that human-adviser believes the myth that equity is safe in the long-term, then the robo-adviser is likely to provide wrong recommendations. So you still have to find out which human-adviser provided the approach / algorithm to the robo-adviser and whether you trust that person's competence / judgement
3. Should I engage with a Fee-Only (Advice-Only) Financial Planner who is in the same city?
- There are only 13 established Advice-Only Financial Planners in India. And most of them conduct almost all their work over audio / video calls and email i.e. they rarely meet clients face-to-face. So being in the same city is not relevant. More tangibly, I have pointed a few potential clients in Bangalore (where I am based) to another Advice-Only Financial Planner who was more suitable for them, in some other city.
- Further, if you are in the top 0.1% of people in terms of competence in financial planning and investing, then limiting your search to the advisers in your city may make it difficult to find an adviser who is more competent than you are and is in the top 0.01% (and more so if you are in the top 0.01% and are looking for someone in the top 0.001%)
4. Are there any objective factors to indicate that you as an adviser may be more competent than I am?
- I have been as an investor for 14 years including a decade as a Partner and one of the five members of the founding team at a top 5-10 independent Indian Private Equity & Venture Capital fund
- Further, I have a two-year full-time (i.e. the flagship course) MBA in Finance from Indian Institute of Management Bangalore (IIMB) and I have been a practitioner / student of finance and investing for more than three decades. This provides me with an advantage in understanding theoretical aspects of finance e.g. why it is a myth that equity is safe in the long-term or why smart-beta is just smart-marketing
- Finally, all my working hours are focused on financial planning and investing. So, I can focus on aspects that my clients don't focus on e.g. mitigating 'sequence of return risk' during retirement
5. Are there really only 13 established Advice-Only Financial Planners in India?
- This list is the only authoritative list (for the last 5+ years) of established Advice-Only Financial Planners in India, including myself (Note: It uses the term 'Fee-Only' but it means 'Advice-Only'. Accordingly there is an asterisk against the last name in the list because he is not 'Advice-Only')
- If a person is not listed on this list, it is because:
- They are not a Advice-Only Financial Planner (e.g. their fees are primarily a percentage of the client's assets under management; there are many nuances about fees that a layman may not understand but this list filters for) or
- They are in the process of getting established (which is a subjective threshold by the person who maintains this list)
6. Are you open to an engagement with a reduced scope and lower fees?