According to the Financial Planning Standards Board Ltd. (FPSB) press statement issued on February 15, the global count of Certified Financial Planner professionals (CFPS) has increased by 5.1 per cent compared to the prior year, as more than half of individuals who have never received financial planning guidance plan to seek it within the next three years.
Meanwhile, in India, The CFP professional community has reached a record high of 2,731, a surge of 8.5 per cent. The increase is attributed to the escalating demand for professional financial planning guidance in the country.
"The surge in the number of Certified CFPs in India reflects a growing awareness among individuals regarding the importance of professional financial planning. Factors such as increasing financial literacy, a complex financial landscape, changing demographics, and regulatory changes have contributed to this rise,” says Nita Menezes, Founder and CEO, Financially Smart & MoneyPrastha.
Hrishikesh Palve, director & deputy head, product, Anand Rathi Wealth, elaborates on the reasons why there is an increase in demand for professional finance advice and CFPs.
Rising Disposable Income:
"The number of ITRs filed by people earning between Rs 10 lakh and Rs 25 lakh has increased by 291 per cent. Further, in the range of gross total income up to Rs 5 lakh, 2.62 crore returns were filed in AY 2013–14 and 3.47 crore forms in AY 2021–22, representing a 32 per cent rise. The country's growing economy and higher disposable incomes have empowered individuals to invest and seek guidance for effective wealth management," says Palve.
Increased Financial Product Complexity: Complex financial products require expert guidance for informed decisions. There is a vast range of products to pick from for example in equity we have mutual funds, direct equity, portfolio management services (PMS), etc and under debt as a category, we have fixed deposit (FD), bonds, debt mutual funds, etc. Apart from these we also have asset classes such as real estate, gold, commodities, etc, and picking the right of these asset classes can get overwhelming for the investors.
Demographic Shift:
"With a young and aspirational population seeking financial security and early retirement planning, the demand for Certified Financial Planners (CFPs) has surged. The consistent increase in SIP numbers depicts how the investors are focusing on planning for the long term," adds Palve.
Lack Of Financial Literacy: A significant portion of the population lacks sufficient financial knowledge and skills, leading them to seek professional assistance from CFPs.
Who Typically Seeks Financial Advice From CFPs?
Individuals with growing incomes and complex financial needs are one of the segments who seek financial planning advice. People approaching retirement who need investment and estate planning. Individuals facing major life events like inheritance or career changes, also feel the need for a financial planner. Finally, high-net-worth individuals seeking asset management and tax planning.
What To Look For When Selecting A Financial Planner
“While selecting a financial planner you should consider that he is comprehensive - not just talking about investment but also cover insurance, taxation, estate planning and also focus on your goals,” says Hemant Beniwal, certified financial planner and director at Ark Primary Advisors, a financial planning firm.
Further, the planner should be independent, having his own firm or working for a trusted small firm. “People who are working with banks or bigger institutions are sometimes forced to do things that are not in the best interest of clients. Finally, he should be competent - a CFP is a great validation of competency,” says Beniwal.
It is even more important to make the right decision when choosing a financial planner because nowadays there are a lot of finfluencers dishing out financial advice, something without being adequately qualified to do so.
A few days ago Securities and Exchange Board of India (Sebi) took action against Zee Business guest experts who were allegedly making gains by taking opposite positions in the market compared to their on-air recommendations, which shows that financial advice may not always be unbiased.
In the context of financial planners, CFPs must act as fiduciaries, which means that they must act in the best interest of the client.
“Information and content is available in plenty. Recognizing the true essence of unbiased, unfiltered financial literacy done in the right manner and then having media share the information in the right manner is crucial to investor decision-making, protection, and growth of the industry,” says Dilshad Billimoria, a Sebi-registered investment advisor (RIA) and Managing Director and principal officer, Dilzer Consultants, a financial planning firm.
Hence it is crucial to exercise caution when it comes to finfluencers.” While they may offer financial advice, they often lack the expertise and regulatory oversight that CFPs adhere to. It's important to verify their credibility and seek personalized advice from qualified financial planners,” says Menezes.
