Future of the financial planning

“The future’s so bright, I gotta wear shades” goes the 1989 song by a pop group called Timbuk 3. Sounds a little over the top, but it could be true.

Financial planning in India has no past. Today, the seeds for the future of financial planning in India are being sown by the financial planners in the country.

The future has never been brighter for this profession, in India. The primary reason for this is that people are slowly and steadily getting over the concept of ‘agents’ who would not charge a fee and often even pay kickbacks to the investor.  The investor is becoming smarter and is looking for smarter options to plan his future. They are no longer satisfied with buying a ‘retirement plan’ and storing it away in the locker, to be opened twenty years from now. The process has already begun, albeit in a small way, and it is up to the financial planners how they can seize the opportunity and open up the floodgates.

2008 was a watershed year for the profession. The crash and burn in every possible sector opened up a number of opportunities. People lost jobs or had to face huge pay cuts. This financial knock actually brought clarity in the minds of many investors. The next game changers were the drastic amendments in the mutual fund and insurance guidelines, which altered a lot of rules both for the benefit of the financial planner and the investor. It has been a win-win for both parties. The investor is now looking for a thorough professional who can take care of the financial needs and requirements of his family and guide them down the path to financial security.

There are certain key points which would define the financial planning profession in the years to come.

Knowledge

Knowledge and financial literacy will be the key differentiators – knowledge of the financial planner and the literacy level of the customer. For the latter, it is the financial planner who is largely responsible. It is up to them to educate the public about the advantages and necessity of financial planning in everyone’s lives… whether one has tons of money or are trying to create a corpus for various goals, financial planning is imperative.

Planners will have to carry the message and educate the masses about the positives of financial planning. There is a necessity to separate the wheat from the chaff. Financial planners who wish to succeed in the future will have to raise the bar for themselves through continuous self-learning and by maintaining high professional standards and ethics.

Remuneration

We are slowly moving away from the ‘free’ era and entering the ‘fee’ era. People are realising that there are no free lunches in life. In future, remuneration will be service driven. Once the client derives perceptible value from the service, they will continue to be loyal as they will find themselves better placed and financially more secure. The revenue model of the financial planner may be ‘fee only’ or ‘commission only’, or maybe even a mix of both.

Transparency

Financial planning is a service that is rendered to the community that we live in. Openness and transparency are fundamental attributes. Financial planners will have to raise the bar further to serve client’s best interests, especially when the client trusts them to act on their behalf.

Technology

Today, embracing technology to provide immediate and up to date advice to the customer is an essential part of our deliverables. Tomorrow, it could well be merging of platforms to provide the customer with ease of transaction and reporting of the entire investment basket on one page.

However, no matter what technology or platform is being used, no matter what regulations come, no matter what theories and formulae are used to reduce risk – one thing will always remain constant — every financial planner will always have to hand-hold the client as they walk the path of financial wellness.

Planners have to move up the value chain in the profession through  continuous education and adopting best practices from their own internal interactions as well as from other professionals like doctors, lawyers and teachers. The profession is evolving. Financial Planners are no longer just “good to have” accessories for the well-endowed. They are even more critical for the regular middle class persons with limited resources. They are the architects to your financial future… afterall, would you want to construct a house without preparing a blue print, to save money?