Financial planning is one of the most important aspects of managing your personal or professional finances. Whether you’re saving for retirement, planning to buy a house, or simply trying to manage your monthly budget better, having a well-thought-out financial plan can make all the difference. But where do you start? And once you’ve got a plan, is it really necessary to hire a financial advisor—and pay them 1% of your assets—to manage it?
In this blog, we’ll cover the five key steps in financial planning and then dive into the much-debated topic: Is it worth paying 1% to a financial advisor? Let’s begin by understanding the foundation of any sound financial strategy.
Step 1: Set Clear Financial Goals
The first step in financial planning is defining your short-term, mid-term, and long-term financial goals. This could be anything from building an emergency fund, saving for a child’s education, buying a home, or planning for retirement. Your goals should be Specific, Measurable, Achievable, Relevant, and Time-bound (SMART).
Clarity in goal-setting provides direction to your entire financial plan. It helps in understanding your priorities, which in turn affects how you allocate your resources.
Step 2: Gather and Analyze Financial Information
Once goals are set, the next step is to take stock of your current financial situation. This includes:
Income from all sources
Fixed and variable expenses
Debts and liabilities
Assets and investments
Gathering this data helps in creating a realistic snapshot of where you stand financially. It also helps identify any gaps between your current position and future goals. This analysis becomes the groundwork for the planning process.
Step 3: Develop a Financial Plan
After analyzing your financial status, the next logical step is to design a financial plan tailored to your needs and goals. This plan typically includes:
A savings and investment strategy
Budgeting and cash flow management
Tax planning
Insurance coverage
Debt reduction strategies
This stage may also involve scenario analysis—like planning for a job loss, market downturn, or unexpected health expenses. A well-developed plan acts as a roadmap, guiding your decisions and helping you stay focused on long-term outcomes.
Step 4: Implement the Plan
A plan is only as good as its execution. This step involves taking real, actionable steps:
Opening and funding investment accounts
Automating savings
Purchasing insurance policies
Paying off specific debts
Implementation may also require collaboration with professionals such as tax consultants, investment managers, or financial advisors, depending on the complexity of your plan.
Many people stop at the planning stage, but execution is what brings results. Being consistent and disciplined during this phase is key to success.
Step 5: Monitor and Review the Plan Regularly
Life changes—and so should your financial plan. Reviewing your plan at regular intervals ensures that you stay on track. Major life events like marriage, the birth of a child, a new job, or retirement can significantly impact your financial goals and priorities.
Regular reviews allow you to:
Adjust goals and timelines
Rebalance investments
Modify strategies based on market or life changes
This ongoing process keeps your plan dynamic and aligned with your evolving needs.
Is It Worth Paying 1% to a Financial Advisor?
Now that you understand the five essential steps in financial planning, you might be asking: should I manage all this myself or hire a financial advisor?
And more importantly, is it really worth paying 1% of your portfolio value as a fee?
Let’s break it down.
What Does a 1% Fee Mean?
Most financial advisors charge a fee based on assets under management (AUM). A 1% AUM fee means if you have ₹10 lakhs invested, you’ll pay ₹10,000 annually.
This fee covers:
Personalized financial planning
Investment strategy and portfolio management
Tax planning and optimization
Retirement and estate planning
Ongoing support and check-ins
So, the real question isn’t just about the cost—it’s about the value you’re getting in return.
When Paying 1% Might Be Worth It
Paying 1% to a financial advisor can be worth it in the following situations:
You have a complex financial situation
If you have multiple income sources, business revenue, debts, or tax complications, an advisor can help simplify your decisions and avoid costly mistakes.You lack time or financial knowledge
Not everyone has the time or interest to research mutual funds, insurance products, or tax-saving strategies. An advisor provides both expertise and peace of mind.You need behavioral coaching
Financial advisors often act as behavioral coaches—helping you avoid emotional decisions like panic selling during market downturns or overspending during good times.Long-term portfolio growth
Research suggests that investors who work with advisors often see higher returns due to better allocation, diversification, and consistent rebalancing.
When You Might Not Need to Pay 1%
That said, paying 1% may not be necessary for everyone. If you:
Have a simple financial life
Are confident in DIY investing
Use low-cost index funds or robo-advisors
Regularly educate yourself about finances
…you could potentially manage your money well without the additional cost.
With growing access to free financial tools and online education, more people are choosing to handle their own finances and save on advisor fees.
How to Decide If It’s Worth It
Here are a few key questions to ask yourself:
Do I feel overwhelmed when making financial decisions?
Do I consistently follow my financial plan?
Do I procrastinate or make emotional investment choices?
Is my portfolio underperforming or unmanaged?
If you answer “yes” to most of these, paying 1% may be a worthwhile investment in your financial future.
Conclusion
Financial planning is a structured, five-step process that can help you achieve both short-term goals and long-term financial security. While many aspects of financial planning can be managed independently, a professional financial advisor may offer clarity, structure, and expertise—especially when your situation becomes more complex.
Whether paying a 1% fee is worth it depends on your personal preferences, financial literacy, and the value you place on expert guidance. For some, it’s a smart move. For others, a well-disciplined DIY approach could be equally effective.
No matter which path you choose, the most important step is to start planning now—because your financial future begins with the decisions you make today.