Transcript Financial Planning

Financial Planning
Financial Planning ??
• Financial Planning is the process of meeting
your life goals through proper management of
your finances.
• Goals may include buying a house, business
setup, higher education of children, retirement
planning etc.
• Financial Planning provides direction & meaning
to the financial decisions. It helps to evaluate
the impact of financial decisions on other areas.
Financial Planning – Overview
Need for Savings
Three R’s of Money
• To fight / hedge against inflation
• Reality – money is limited
• Growing dependency on savings with • Responsibility – use it wisely
time
• Restraint – think of Future
• Meet the goals / objectives of life
Interest /Rent /Dividends
Income
Capital Appreciation
Consumption
Cash
Saving
Household Exp.
Running Exp.
Physical Assets
Asset Purchase
Emergency Needs
Financial Assets
Repay Liability
Why Plan ?? Life Cycle of Client –
Child’s Marriage
Income
Child’s Education
Housing
Child birth
Marriage
22 yrs
Over 25 - 30 yrs
38 yrs
Birth & Education
Earning Years
22 yrs
Age
Retirement
60 yrs
Why Financial Planning ??
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Multiple goals / needs / desires
Limited resources at disposal
Increased uncertainty and complexity in life
Increased complexity in investments and presence of
multiple products
What
How
Making Sure
Helping know what
they are really
wanting
Helping them to
achieve them
Ensuring that the
client reach goals
Financial Independence / Self Reliance /
Peace of Mind
Financial Planning Services
As Wealth Managers you offer Financial
Planning services to your clients –
 A ‘real’ financial advisor
 “Value-added” + “Differentiated” services to the
clients
 Additional business mobilisation
 Customer Acquisition
 Customer Loyalty & retention
 Differentiation & Branding
 Customer References
Financial Planning Scope
Inheritance Planning
Capital Management
Charity Planning
Life Insurance
Cash Flow / Budgeting
Non-Life Insurance
Liability / Credit Planning
Investment Planning
Risk Management
Tax Planning
Goal Planning
Disability Planning
Retirement Planning
Business Capital Planning
Risk Profiling
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Every person has a unique personal, family and financial
situation. Their decisions depends on this uniqueness.
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Each investment is coupled with certain risk element and
each person responds to risk differently.
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The amount of risk a person is willing to take depends
on several factors such as his age, education, income,
number of dependants, personal/ family goals and his
mental attitude towards money.
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The mental tolerance of a person in his mid-30s with a
working wife and a kid would be much higher than a
person who is retired and has dependant wife and aged
parents. Hence, judging the risk tolerance of a client is
an important step in financial planning.
Risk Profiling
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Risk tolerance is the risk-taking ability of an individual.
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‘Risk Profiling’ is a method used for determination of risk
tolerance of an individual.
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Risk Profiling includes a questionnaire with weights
attached to the answers selected. The sum of weighted
answers shows the risk tolerance of the client.
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Chief determinants of Risk Profile are –
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Age Group – younger the person, higher risk taking
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Investment horizon – higher risk for long term plans (LIC)
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Purpose of investment – capital growth, regular income etc
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Volatility – market fluctuations affect investor behaviour
Financial Planning Process
Establishing & Defining Relationship
Data Collection, including goals
Evaluation & Preparation of Plan
Presenting & Finalizing Plan
Recording / Implementation of Plan
Regular Monitoring
Financial planning is the
process of establishing
personal and financial goals
and creating a way to reach
them
Financial Planning Skills
Traits:
Principles
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Trust
Knowledge
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Products & options
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Tax & estate planning
Understanding Life &
Wealth cycles
Judgment
Balanced thinking
Organised
Relationship building
Focus on Financial wellbeing of client
Integrity
Objectivity
Competence
Fairness
Confidentiality
Professionalism
Diligence
Compliance
Terminology