How to become a financial planner

The future presents ample opportunities to financial planners and advisors to launch themselves into various corporate and entrepreneurial assignments.

The last decade has seen financial planning emerge as amongst the most respected and fastest growing professions worldwide. The huge demand for personal finance services propels the young in India plan a bright lucrative career in financial planning.

Financial planning has gained credence as a holistic and client-centric advisory in the field of personal finance. The whole exercise helps clients in the appropriate allocation of financial products in accordance with their risk profile and risk tolerance as well as in synchronisation with their chosen financial goals.

Financial planning is simply a process of helping households meet their life goals through proper management of their finances. The financial goals such as buying a home or a car, children's marriage and education, funds for medical treatment, retirement, vacation etc. are intricately provisioned in a financial plan which is monitored periodically so make adjustments in the resource and asset allocation. This is to keep the focus on achieving financial goals with ease and certainty. 

The writer is working with Financial Planning Standards Board India (FPSB India) in the capacity of Vice Chairman and Chief Executive Officer. The views expressed here are personal, and do not necessarily represent that of the organisation. FPSB India is the sole marks licensing authority for the CFP marks in India, through agreement with US-based FPSB Ltd. 

Financial planners -- The growing need

The recent estimates aver India having over three million financial advisors who serve around 188 million investors holding financial assets. More than 90 per cent of these financial advisors are engaged in selling specific products. There is need for a comprehensive approach focussed on advisory over all domains of personal finance, viz. insurance, investments, retirement solutions, tax planning etc. Such approach places clients' interests in the centre with products falling in line with the financial goals and suitability.

The number of investors seeking comprehensive need based advisory is rising exponentially. The growing need of financial consumers as the products become more complex requires advisors to upgrade skill sets to serve clients better. Currently, financial institutions like banks, mutual fund houses and wealth management firms are also employing the services of financial planners to serve their customers comprehensively. As per estimates, India would need nearly 1.5-2 million financial planners, considering the expected increment of over 200 million additional investors in the next decade.  

The need for certification

The investors today with broad awareness and growing affluence demand sophisticated services: portfolio risk management, dynamic asset allocation, et al. Also, knowledge and skill elements, trustworthiness, adherence to ethical and professional standards require a credential in the form of a certification rather than mere mouth referrals. This also induces greater personalisation, sensitivity and competence in managing clients' money.

Today, with the evolution of financial planning, Certified Financial Plannercertification or the CFP credentials has come to be recognised as the global mark of excellence in financial planning. The professionals who meet the stringent requirements of education, examination, experience and ethics are awarded this credential by Financial Planning Standards Board India. In the era of specialisation, this professional certification is helping financial intermediaries with confidence to add value in their advisory and expand their base.

Financial planning as a career

Financial planning is fast emerging as a promising career option. A recent survey by Career Cast, a premier career web site offering a listing of targeted career opportunities in US and Canada, rated financial planning amongst the top 5 Jobs in 2012 in terms of job work environment, physical demands, job outlook, income levels and stress. A significant improvement from a similar survey conducted in 2011, which rated financial planning amongst the top 15 jobs. Currently over 1,40,000 individuals across 24 countries in the world have already embraced CFP marks.

With the increasing hiring outlook, financial planners are now amongst the highest paid professionals globally.

For financial planners the income depends on a variety of factors: expertise, experience, the type of clients, geographic location, etc. which is earned through the prevalent models as follows:

• Fee-only model: A financial planner may opt for just rendering service and charge a flat hourly fee or plan fee.
• Commission model: A financial planner may earn from only the commissions from product manufacturers for the sale of products to clients. This may be the easiest model but suffers from conflicts of interest and lack of transparency.
• Fee and commission model: A planner may charge a combination of both fees and commissions based on client's comfort level and the planner's operational systems.
• Fee-offset model: To provide a better value and transparency to clients, a financial planner may fix yearly fee with clients and may offset it against commissions received from product manufacturers.
• AUM model: A financial planner may also charge on the basis of percentage of total financial assets of the clients. The limitation in this model is when the asset size is very large or very low.

For financial planners seeking career opportunities a wide range of career opportunities are available.

These are:

Corporate career

Financial planning is becoming an integral part of financial services sector in India with job opportunities increasingly available with private banking, wealth management, insurance sector, broking outfits and mutual fund companies. They are employing financial planners to provide value added services to clients and infuse an element of advisory in their distribution channels. In India, promoters (Charter Members) of FPSB India have unanimously passed a board resolution that they shall give first preference to CFP professionals in recruitments.

Other options

As the opportunities for financial planners are increasing at a fast rate, financial planners are also getting into new avenues.

Some of them are:

Columnists

With the growing demand of focused literature in financial planning space, newspapers, magazine and television channels are looking for financial planners as expert advisors and panelists.

Seminars/talks

Financial planners are sharing the platform with industry experts in panel discussions and forums addressing varied issues relating to retirement solutions, insurance needs besides educating investors.

Training/faculty

There is also the choice for taking up faculty assignments for various entities including corporate. Planners are also popular amongst publishers to come up with material on financial planning and wealth creation.

Financial planning is an ideal career for one who extends the broad understanding of personal finance in helping clients through the challenge of meeting financial goals and in wealth creation while managing risks adequately.