Do not shun your adviser’s questions

Have you ever been with a financial planner or an investment adviser who you feel asks too many questions in the first meeting itself? There used to be a time when you went to a distributor to invest your money and the talk would eventually come down to where you should invest.

But as financial planning started in India more than 10 years back in 2004, the conversations became more in-depth. This was when the first batch of financial planners in India were certified by the Financial Planning Standards Board (FPSB) India, which has an agreement with US-based global parent body to conduct qualification exams. Today financial planning is no longer just about picking the “best mutual fund (MF) scheme” or a basket of stocks that “is sure to outperform every other thing”. It is not just about investing anymore. Your spending—sometimes necessary, other times futile—and managing money is just as important. Financial planning as a field or life’s necessity, has been evolving in recent years. The focus over the years has moved from where to invest to how to manage your money box; from which is the best product to what you want to do with your money.

Writing a cheque can wait; the background information is gaining precedence. It’s about getting to know you, the person, and not just you, the investor.

It’s like when you decide to go for a surgery and the doctor wants to first know your cholesterol level, blood sugar and blood pressure.

Similarly, if you want to plan your money life, your financial planner will ask you questions. And lots of them.

It might take days or even a few months for you to answer them. But they are important. All of them. Because only if you lay bare your past, can the planner design your future.

Devil is in the detail

Different financial planners ask for different sets of details, apart from basic information like Permanent Account Number (PAN), source of income, annual income and financial goals. Current investment details are important.

You could either send your planner a tabulated list, which you may have been maintaining. Or, if you have a demat account, your depositories, National Securities and Depositories Ltd and Central Depository Services (India) Ltd, send a Common Account Statement (CAS). This CAS shows holdings across equities, mutual funds and insurance policies that have been dematerialised. If you haven’t been receiving your CAS regularly, you could also visit the websites of your registrar and transfer (R&T) agent like Computer Age Management Services (Cams) Ltd and Karvy Computershare Ltd. These days, the large R&Ts like these two give you a consolidated holding statement of all your MFs.

Besides investment details, including those of fixed deposits, bonds and other avenues, most planners would also ask for real estate details—agreements of all the properties that you own, or rent receipts and agreements.

So much for your income and assets. But how you spend your money is equally important. Details of monthly savings and expenses are just as necessary. Some planners like Dilshad Billimoria, director, Dilzer Consultants Pvt. Ltd, ask you details of expenses like fixed and discretionary spends.

Planners like Gaurav Mashruwala, who recently authored a book called Yogic Wealth, too, asks for granular details like food and grocery expenses, child-related expenses such as on toys or fees, utility bill payments such as telephone, house help charges, dependent parent expenses and a few more.

In short, you need to account for your assets and liabilities. Any loans such as for a car or house must also be listed. It doesn’t stop here. If you have an existing Will, some planners ask for that too.

Is it really necessary?

“Yes,” said Billimoria. “Because the objective of a financial plan is to provide the client’s current financial status as on date. So, information and data collection is the most critical stage. We spend roughly 10-25 days on this exercise, since many clients are digging out old data, which they have shelved over many years,” she added.

Typically, a distributor or a plain-vanilla investment adviser who focuses just on investments doesn’t look at your entire money box.

But financial planners, who also look at various channels other than your financial instruments, insist on asking the details.

Mashruwala says that some of his clients have multiple bank accounts that are inoperative. But when he digs deeper, he says it sometimes adds to a substantial sum. This, he says, is important information.

Kiran Telang, a Mumbai-based Securities and Exchange Board of India-registered investment adviser says that if any data given is incomplete or not up-to-date, it impacts plan recommendations.

“Let us say that I work on the estimates of spending given by the client, and the actual spending is much higher, then there will be an anomaly in the surplus funds figure. That will impact investments. If I say that you need to invest 4 lakh annually, based on the surplus, when actually there is no surplus, then the investment will not happen and the goals will not be achieved,” said Telang.

Some planners feel that data collection should be done gradually. Kavitha Menon, a Mumbai-based financial planner, is wary of asking for too much information, too soon.

“Asking clients for too much data about their existing assets puts them off the process even before they get started. This could be because of time constraints, documents not maintained or sheer inertia. As a financial planner, my goal is not to create an accurate net worth statement, but to help my client be free of money worries. Financial planning is after all only a process followed to achieve that goal,” said Menon.

But why all this prying into private lives? Is this a bit too personal?

“We go out of our way to convince our clients that the information gathering is done with the best of intentions. When you go to a doctor to get treatment for a particular ailment, you also tell her about your medical history, correct? Only then can you expect the doctor to give you the best possible medical advice. Financial planning works the same way,” said Suresh Sadagopan, founder, Ladder7 Financial Advisories.

Is the data in order?

Most planners we spoke to said that while most clients give all the details that are asked for, the problem comes when they have to furnish documents.

“A lot of times, people have invested years back and have no records of the current status of the investment. If the company has been taken over or the schemes have been withdrawn, it takes time to get the latest data,” said Telang.

Mashruwala said documentation is important and he insists on his clients putting their documents in order during on-boarding. For instance, he insists that the original copies of property agreements and other such important documents be kept in a locker and copies kept at home.

According to Sadagopan, the format of the data is not as important as the details. He says it is rare for clients to have lost documents. “It could be that they have shifted residences, and misplaced the documents. They might have to try and find it, but most do, eventually,” he said.

What should you do?

Most planners say that on-boarding a client, a big part of which is data collection with supporting documents, takes 3-6 months. But the financial plan is usually prepared only after you submit all the relevant data and documents.

Putting your money box in order can seem difficult in the beginning. But eventually it’s a good exercise as it not only helps you unearth lost details, it also helps your financial planner diagnose your financial condition as accurately as possible and prepare an appropriate financial plan. As they say, you start on a clean slate.