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Three life insurance policies, SIPs in five mutual funds, and a high balance in the Provident Fund-Alok Ranjan always thought his finances were in a healthy condition. This was before the Mumbai-based software engineer met a professional financial planner and discovered how woefully underinsured he was. Ranjan, 39, also saw how his investments were not aligned to his financial goals and didn't match his risk profile. He wasn't really a case for the ICU, but he needed a financial doctor real fast.


So far, Ranjan has invested through agents and brokers who charge nothing for the advice they dole out. Now, he will pay about Rs 20,000 for a financial plan made by a professional. That's not all. He will follow it up with a Rs 15,000 renewal fee every year. Ranjan believes it is money well spent. "Only a qualified professional financial planner can guide me to the right investments by taking a holistic approach," he says.

Not many people see it this way. For most investors, paying for financial advice is still a no-no. Why should you have to pay money for something that financial experts are falling over each other to give you for free? Don't you already have an overload of it through TV channels, websites, magazines and newspapers such as the one you are reading?

Yes, and no. As it turns out, the free advice churned out by agents, brokers and other financial 'experts' often proves costlier than going to a financial planner. Listen to what your friendly insurance broker has to say and you might end up pouring good money into a low-yield endowment insurance policy. Go by the advice of the chirpy relationship manager at your bank and you may buy your third Ulip or your tenth mutual fund.

In comparison, a financial planner takes a holistic view of the individual's finances and accordingly suggests an asset mix that matches his profile.

"A professional adviser will take a detailed view of the client's financial status, his goals and expenses and then give the right advice," says Rajesh Bhojani, CEO, International College of Financial Planning.

This expert help comes with a price tag. Financial planners have different fee models for the services they render.

Some charge only a flat fee, others also earn from the commission on the investments, while still others get paid on the basis of the assets managed by them. Each arrangement suits a different wallet size and type of investor.

No charge, only commission

Of course, not everyone needs to hire a financial planner. If your finances are not complex and your portfolio size is not very large (Rs 2-3 lakh), you could get by without the help of a planner. A couple of well-chosen equity funds, a child Ulip and a term plan for insurance cover, and the PF and PPF for debt investments will be more than sufficient to meet your goals. For such investors, it still makes sense to take the agent-broker route and save on adviser fee.