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How to choose a financial planner in India?

NRIs can come across hurdles as certain INVESTMENTS may have restrictions if not planned in advance

It could be an unnerving experience when it comes to choosing a FINANCIAL planner in India if you stay abroad and wish to INVEST in India. Here are a few things that a non-resident Indian (NRI) investor should check before selecting a financial planner in India.

Taxation laws

It’s important that your financial planner knows the taxation laws that are applicable to NRI investors. Though capital gains taxation for most instruments are the same for Indian as well as NRI investors, there could be provisions that are specific only to NRIs. “Not just about the Indian tax laws, it is also desirable to have some idea about taxation in the country where the NRI resides. Maybe not detailed but a cursory idea,” says Gaurav Mashruwala, a Mumbai-based financial planner.

It’s not just on the taxation front that an NRI investor can come across hurdles, even certain INVESTMENTS have restrictions. For instance, according to the Foreign Exchange Management Act (Fema), NRI investments in Indian companies that are listed on Indian stock exchanges cannot exceed 10% of the company’s paid-up share capital. This ceiling, though, can be raised to 24% subject to the approval of the general body of the company passing a resolution. “Understanding Fema guidelines, how the NRI’s money can or cannot be repatriated back to the country where the NRI is residing at the moment, are crucial things to know for a financial adviser,” says Gautam Nayak, a Mumbai-based chartered account.

Products and more

After taxation, it’s crucial to see whether your FINANCIAL planner has knowledge about options available. And we don’t just mean about Indian products; it helps if your planner understands international products. “An NRI investor is often exposed to a greater variety of products than an Indian investor. For instance, if oil or commodity prices are on the rise, there are hardly any products that an Indian investor can invest in. But a NRI investor can invest in oil-based financial products abroad or invest in COMMODITIES,” says Aashish P. Somaiyaa, chief executive officer, Motilal Oswal Asset Management Co. Ltd.

Planning skills

While some NRIs aim to settle in a foreign land forever, others have plans to return back to India after spending a few years abroad. Your financial planner should be able to help you make that transition smoothly. In such cases, it also helps if your financial planner has the ability to research on the taxation laws of various other countries as well if your INVESTMENTS across countries need to be brought back to India eventually.

Suresh Sadagopan, another Mumbai-based financial planner, faced a similar situation about a year-and-a-half back when one of his clients moved to India from Singapore. The couple’s daughter still continues to remain in Canada where she was studying at the time the parents moved back to India. “Since this client had INVESTMENTS in various countries, we had to do a lot of homework, a lot of studying of taxation laws of the countries where his money was. There was significant money to be brought in here and from various countries. It was a complex case, but we did it”, he says.

“Also it is an added advantage if the adviser has a tie-up with a local adviser in that country for cross-border practice”, says Sadique Neelgund, a certified financial planner and founder, Network FP, a firm that trains aspiring financial planners.

Communication and service standards

Living abroad and in different time zones can make it difficult for you to reach out to your financial planner when you need him or her the most. If you’re in India, you can telephone, or if possible, you can also go to your planner’s office. But frequent international phone calls can burn a hole in your pocket. What do you do? “We use Internet phone calls using Skype, frequently, with our NRI INVESTORS. Accessibility is important because it gives our clients comfort”, says Mashruwala.

Neelgund, infact, goes a step ahead and suggests that financial planners should also consider going abroad to meet their clients at times.

What should you do?

Akshay Gupta, chief executive officer, Peerless Asset Management Co. Ltd says that NRI investors who have INVESTED “heavily in gold and real estate” prefer to go to chartered accountants, while others who have conventional investments such as mutual funds and equity prefer to go to bank distributors. These banks, Gupta adds, are preferably foreign banks that are also present in counties where the NRI investor stays.

A third, and a potent, avenue, that has opened up in recent years is the independent FINANCIALadviser, many of whom already service a lot of NRIs. “Many NRIs prefer to choose their bankers for the sake of convenience and an established relationship. But this is the most inappropriate way of selecting one’s financial advisor as many bank’s relationship managers tend to misuse the trust reposed by clients by pushing wrong INVESTMENT and insurance products to meet their targets”, says Neelgund.

Try www.fpsbindia.org, the website of the Financial Planning and Standard Boards of India—the Indian branch of the global body of certified financial planners—to get a list of certified financial planners, as a start.

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