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 To fight / hedge against inflation Growing dependency on savings with time Meet the goals / objectives of life Three R’s of Money Reality – money is limited Responsibility – use it wisely Restraint – think of Future Consumption Cash Saving Income Household Exp. Repay Liability Asset Purchase Running Exp. Emergency Needs Physical Assets Financial Assets Interest /Rent /Dividends Capital Appreciation

Why Plan ?? Life Cycle of Client – Income Age Birth & Education Earning Years Retirement 22 yrs 60 yrs Marriage Child birth Child’s Education Child’s Marriage Housing 38 yrs Over 25 - 30 yrs

Why Financial Planning ?? 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 Helping know what they are really wanting Helping them to achieve them Making Sure 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 Every person has a unique personal, family and financial situation. Their decisions depends on this uniqueness. Each investment is coupled with certain risk element and each person responds to risk differently. 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. 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 Risk tolerance is the risk-taking ability of an individual. ‘Risk Profiling’ is a method used for determination of risk tolerance of an individual. Risk Profiling includes a questionnaire with weights attached to the answers selected. The sum of weighted answers shows the risk tolerance of the client. Chief determinants of Risk Profile are – Age Group – younger the person, higher risk taking Investment horizon – higher risk for long term plans (LIC) Purpose of investment – capital growth, regular income etc Volatility – market fluctuations affect investor behaviour

Financial Planning Process Financial planning is the process of establishing personal and financial goals and creating a way to reach them Establishing & Defining Relationship Data Collection, including goals Evaluation & Preparation of Plan Presenting & Finalizing Plan Recording / Implementation of Plan Regular Monitoring

Financial Planning Skills Traits: Trust Knowledge Products & options Tax & estate planning Understanding Life & Wealth cycles Judgment Balanced thinking Organised Relationship building Focus on Financial well-being of client Principles Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence Compliance Terminology