Why financial planning is much larger than investment advice: Krishan Mishra of Financial Planning Standards Board, India

bl.portfolio recently caught up with Krishan Mishra, CEO of Financial Planning Standards Board, India, over a web meeting. Excerpts from the conversation:

FPSB did research in 2023 on the ‘Value of Financial Planning’ globally, including in India. The report, put out in October last year, clearly indicates that people have actually started understanding the benefits of financial planning. Clients of CFP professionals have indicated that they have more confidence and less stress in money matters and financial planning helps them fulfil unmet financial needs.

In India, while many people have indeed burnt their fingers from unstructured and unregulated advice, regulatory bodies — be it IRDA, PFRDA, RBI or SEBI — have been working on measures so that not everyone is able to give advice and that it should come from only the right person — a certified or a qualified professional. Most of the unstructured advice comes from those who put their interest above the client’s interest.

On the other hand, CFP professionals look at the process of preparing a financial plan in a very scientific, systematic way with a long-term view. This plan is a robust document, which is easily 80-100 pages long. They will look at goals across various age and life cycles with everything — beginning from contingency funds, insurance and retirement to tax planning, estate planning — being covered.

As investments in financial assets increase, financial literacy is gaining prominence. Thus, while the number of CFP professionals in India is low today, the number is only going to grow.  We are in a situation where we have got more jobs and less number of people to apply for those jobs. As people understand the value we bring to the table, our professionals are able to command a premium.

Initially, people who are on the verge of retirement or people who have already retired and have a lot of money in their hands  or someone who has some inheritance which has come suddenly and looking for help to manage it, were the ones who approached financial planners.

However, when you retire, you are actually late for the financial planning exercise. In the last few years, the younger generation has been more prudent and they know they have to plan reasonably early. This aspect has come in our recent research too. It shows people who have spoken to financial planners, taken a plan and, most importantly, executed the plan, felt that they are more secure, confident and know how to navigate their lives beyond retirement. 

There is no competition. Most times, people confuse financial planning with investments. The universe of financial planning is much larger than investment advice. That is why this certification is a professional one. The right comparison for us is a CMA, CFA, CA, etc. While about 50 per cent of the CFP professionals in India are independent practitioners, they also have wide opportunities in the industry. BFSI is the largest recruiter, especially in the private banking space where these professionals act as consultants to customers throughout their life cycle.

Apart from that, family offices, securities markets, FP&A (Financial Planning & Analysis) roles in treasury department of multinationals as well as content writing to spread financial awareness are areas where CFP professionals work.

I recently met a CFP professional who is in Australia. A client came to him for a 4,000 AUD advisory and he had to pay a fee of 3,000 AUD!. The fee there is regulated and compulsory.

In India, it is not similar, though different regulators for different products have rules. The services of a CFP professional here are fee-based.  Some of them have a very large AUM to the tune of ₹300-500 crore. And there, they can charge between ₹1 lakh and ₹3 lakh depending on the client and the portfolio. A per a recent study, the annual earnings, on an average, for independent professionals have gone up from ₹30 lakh to over ₹1 crore. Though salaried professionals, especially in areas such as private banking see good earnings, independent practitioners are thriving too.

The course covers, one, investment planning and insurance; two, retirement and tax planning, and thirdly, estate planning and risk management. After this stage, we ask people to prepare a real life financial plan — known as financial planning assessment. Then, we have a final CFP examination where we cover all the stages discussed above as well as standards. The rigour of the course is like any other professional course —none of them is easy.

But it is flexible. In the first three levels you have a choice — you can start from investment planning or if you are comfortable with estate planning and risk management, you can start from there too. You can take the exam at your own pace. Exams are conducted frequently.

As regards cross-border movement, it is seamless from India to the UK. People wanting to practise in other countries take a letter of good standing from us and write examinations separately for regulations, tax rules, etc., in those nations. So, 70 per cent of qualification is global. 30 per cent is local as the local laws may differ.

COMMENT NOW