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Financial Planners Save Lives

Lovaii Navlakhi CFP IndiaBy Lovaii Navlakhi, CFP

Last week, I heard about my friend’s colleague who passed away in an accident – he used to be a client of ours. He had done some investments through us a few years back and we had also done a financial plan for him, but before we could discuss execution he moved away and then didn’t follow through with us. He would have been 46-47 years old now. The first thing that struck me when I heard about his death was that I hoped he had gotten the insurance cover we recommended. He was short of some 60 lakhs of cover, at that time.

The thought that has been plaguing me since then is: should I have been more forceful with this client to ensure he had protected his family with adequate insurance from a situation exactly like this? What if he didn’t take the required insurance cover from some other place either? Then, how is his family going to survive and fulfill their aspirations without his income – and how much am I to blame for their state of affairs?

In my mind, whether one becomes a financial planner by accident or design, the reason they should continue to be a planner is the difference they can make to a client’s financial well being. Financial planners ensure clients’ families are safe from the financial aspect of unpleasant surprises that life throws at us such as accidents, illnesses, losses or death. At the same time, financial planners ensure that clients’ savings are put to good use to enable them to accomplish their goals.

Fulfillment is the Reason to be a Planner

The thrill you get on sorting a client’s finances, on charting a course of action for them to attain their objectives, and on seeing these objectives being fulfilled one-by one-is comparable to nothing. Further, every client is a unique situation; each has their own sensibilities and situations. So dealing with each client is different, irrespective of them sharing common features like age, background etc. Getting each new client to understand what financial planning is, how it applies to them specifically, how it can help them, and getting them to execute and adhere to the plan on a continual basis is an interesting challenge and a constant motivation.

As the financial planner of a client, you are responsible for the financial health of this individual and their family. You have to get the client to write their goals down and prioritize them. You have to make a balance sheet that gives them a complete financial picture with their assets, liabilities and cash flow. Then, you have to match their balance sheet to their goals to see how their current situation can be leveraged to enable them to achieve their goals. If the goals and the balance sheet don’t match up perfectly, you’ll have to help the client adjust their goals or financial habits. I had one client  who needed me to show up at their doorstep every Friday evening to take away his credit card and return it back to him on Monday mornings! Sometimes you have to be a disciplinarian to your clients. I have some clients who I call or visit towards the end of every month and judiciously make them put their excess savings into a fixed deposit fund or a long term investment, depending on goals and requirements coming up.

Your clients need you most when the markets are volatile. Often, you’ll have to reassure clients  about the action or inaction you are taking with their portfolio. This is particularly true when you are stopping a client from investing in a supposedly hot scrip that has been heating up for some time. Some days, you just have to caution clients from investing in unsuitable investments or getting impatient with a long term investment that hasn’t given a good return yet.

Building Client Trust 

Doubt, lack of faith, censure and outright admonishment are also things that you may have to face from a client. At the end of the day, planners aren’t clairvoyant and we make mistakes, such as staying in an investment too long or not long enough. But, what matters is whether your intentions were correct and if the spirit behind your decision was “client’s interests first”. If you are a financial planner in a country, like India, where planners make commissions off of product sales, then your clients might wonder about the real motivation behind your recommendations. Your integrity and ethics will win clients over though. If you feel strongly about your duty to the client and are just and fair at all times, people will notice and it will only be a matter of time before they trust you.

Managing one’s personal finance  in a simple manner while using common sense can get complicated for a lot of people. The ultimate high of being a good financial planner is when you see your client understanding the rationale behind your recommendations and asking you insightful queries and clarifications. An important part of a financial planner’s role is not only taking good care of a client’s finances but making sure the client and their family, including their children, understand personal finance. Financial education is the real remedy to many common financial problems such as debt, mismanagement of resources, over-leveraging oneself etc. Clients don’t have to understand everything but they should understand basics like the different asset categories, risk and return profiles, good investment habits, good banking practices and so on.

As a successful financial planner, you help people understand personal finance, guide them with a financial plan and watch them attain their life goals. What could be a more fulfilling career?

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