Do it Yourself Vs. Hiring a Financial Planner

Through this article I made a case for individuals to manage their money themselves. Yes, I know we are Financial Planners and will need to earn our living from charging a fee to clients. But that does not mean we can stop the way this profession is bound to evolve. There would be enough people in this world who think and would like to be “Do it Yourselfers”. Take for example living a healthy life. If a proper diet, a routine exercise and an adequate relaxation is part of your daily lifestyle, it can keep you away from doctor for most part of your life.
Now there are two things to be considered here. One, all of us know these simple mantras of living a healthy life, but how many of us follow it? Second, can a doctor stop encouraging this kind of a disciplined lifestyle to patients and public in general fearing he will be out of business?
I feel consumers should be given a fair chance by financial planners, media and the regulators to manage their money themselves. The idea is to get them started, let them subscribe to the concept of financial planning and start appreciating the importance of money management.
Having said that, I think the same people will approach you for professional help either when they feel they can afford your services or need a second opinion and most importantly refer people around them who are not doing it themselves.
Also please carefully read the situations under which I am in favour of “Do it Yourself”. They look easy to fulfil but practically are very hard to follow. But if someone is disciplined enough, works hard and has an inclination to get things moving, it should actually be no rocket science.
I am not trying to underestimate the existence of this profession, but I am trying to highlight the importance of embracing the financial planning process by consumers - either ways.
looking at this from another angle, I also think there can be many business models built by financial planners (maybe in collaboration) to cater to Do it Yourselfers. Like blogging, conducting trainings & workshops, robust & transparent distribution of financial products, writing in media, publishing ‘how to’ books, developing calcultors, money management softwares, portfolio trackers etc.
These are not times to conclude, but times to start discussions on important topics, so I request the fraternity to take this in the right spirit.
Below is the transcript of article along with the comparison chart. I am publishing the comments and replies from LinkedIn and Mint Money, they make a good reading too.

Start

Be it gymming, dieting, curing simple health problems, building a house, tax filing or money management – there are two ways of getting them done, either hire a professional for guidance or do it yourself.  In each case, the decision to hire a professional is based on many factors which vary for every individual. Like for example if you are building a house on a plot, you may decide to hire an architect based on the size of the project, what kind of interiors you want, your budget, etc. Else you may simply give briefing to a local contractor and supervise the construction yourself.  
Financial Planning is no rocket science; it is combination of simple financial strategies, few calculations and most importantly discipline. You may not have written plan and a second opinion given by a professional financial planner, but can still do fine doing it yourself if the following five factors are in your favour and you are disciplined & self-motivated to take charge of your money.

Time

You have to commit ‘time’ if you want to manage money successfully. You will first need to start by educating yourself with personal finance matters and products. The best way to do this is by reading money magazines or money sections of your daily newspaper. You may also spend time watching TV shows or surf the internet. There is too much of information floating around, you need to get used to terminologies and products on insurance, investments, banking, taxation etc.
You will also need ‘time’ to understand your needs, set financial goals, learn to use financial calculators (most of them are available on internet), compare products, take a decision and execute it. Getting a grip over your money is a continuous affair and doesn’t happen overnight; it will take at least 2-3 years. Spending 6-9 hours a month over weekends should serve this purpose.
If you are not able to make this commitment, it’s a good idea to hire financial planner who will do the handholding, advice and maybe even execute the plan. Even in this case you will have to spend 2-3 hours month in meeting the planner, understanding the plan, executing and reviewing the plan.

Affordability

Hiring experienced & professional financial planner costs money. In India currently, CFP practitioners charge anywhere between Rs. 10,000 to 30,000 to make plan, execute & monitor it. It’s no point having a plan done from self-proclaimed planners who are actually insurance agents or mutual fund distributors doing it for free and in the end recommending the products they want to sell.
‘Willingness to pay’ is best left to you. But ‘ability to pay’ can be quantified to some extent. In general if you are earning more than Rs. 6 lakhs a month or have an investment portfolio of Rs. 5 lakhs and above, you should be in a comfortable position to pay up the fees. You can use this as a benchmark for deciding whether to hire a FP or DIY. It’s a simple tradeoff – you pay fee to save your time, efforts and get professional advice, but let this not be the only deciding factor.

Availability

This may be a non-factor after some years, but as of now it is huge factor. Currently more than 1,500 are qualified as Certified Financial Planners in India out which not more than 200 are practicing. And even these handfuls are seen in bigger metros. With growth in demand from consumers, this situation is changing fast. So if a qualified and practicing FP is available in your city and is offering the services which you require, you may think of hiring one. Also check on the background, fee structure, references etc. It’s better to DIY if planner’s offering doesn’t suit your requirement.  

Knowledge

There are a number of questions which you should be able to answer by yourself. How much corpus do I need for a comfortable retirement? What are various tax benefits available? Am I saving enough or spending too much? Should I be taking home on loan or is it better to rent for some more time? How to invest in equity markets? How will be impact of inflation on my finances? You should also be able understand present value and future value of money.
This knowledge is currently made available by print, TV and web media in abundance. So it’s not difficult to find answers to these questions. You just need to take time out from your busy schedule and have an inclination to go through it.

Complications

And finally the decision can depend on the complications in your financial affairs. Is your income from single source or multiple sources like double salary, rent, investments etc? How is your current portfolio spread out – if you have been investing in mutual funds, stocks and insurance policies on an ad-hoc basis the chances are your portfolio is widely scattered and needs to be consolidated. If you are in such a situation a professional can give you a holistic view and help bring harmony in your investments and map them to future goals. If things are simple, take charge of it yourself.
After evaluating all the above factors, you may decide and try o do it yourself or seek a planners help. Alternatively you may try yourself for sometime before turning on for external help. But, start somewhere & take the first step towards having a plan in place!