Financial Planning

Session 1

Learning Objectives
Background/ why Role of Financial Planner Financial Planning Process Contract and documentation Client data collection Client data analysis Life cycle Wealth cycle Systematic approach to investing

Is it needed?
Needs and aspiration are ever increasing Clients need to be counseled between needs(essentials) and wants(desires) Prioritization of expenses is critical for people who are strruglling to make both ends meet. Joint families are giving way to nuclear families The period of earning for individual is reducing and life span is increasing( need for retirement planning)

Contd..
Income levels are going up with higher investible surplus, for some individuals, hence planning advice is required Financial assets and liabilities that are available in the market for various needs are more complex for a layman on the street. Tax provision keep changing, so it is better to avail the tax concession. Increasing complexities in the family structure can create problem in bequeathing the wealth to next generation , so estate planning is required.

Role of a Planner
Preparing the financial bluye print for clients future Advice on investment in share market Advice on investment in small savings schemes Advice on investment in mutual funds Suggesting a suitable asset allocation Management of loans and other liabilities Insurance planning and risk management Tax palnning Estate palnning

1.Client Planner Relationship

6.Monitoring the Financial Planning Reccomendation

2.Gathering Client Data including goals 5.Implementing the Financial Planning Recommendations
3.Analysing and Eva3luating Clients Financial Status

4.Presentating Recommendations /Alternatives

Contract and Documentations

The parties involved Key deliverables and other services to be rendered Assurances Limitations (Market Vagaries) Remuneration for the planner and how these will be collected

Client Data Collection

Client name/ Family Status Family Structure(Age, dependents,independents, who stay with the client or for whom who is responsible) Residence(ownership/Rented) Bank Accounts/DMAT Ac/PAN Income of every individual,stability and growth of that income.

Contd..
Life style including expense break-up and how they are expected to grow. Major financial goal like childrens marriage and higher education Assets owned, ownership details( their market value and how it fluctuates and any problem in reselling it, held in whose name, any specific purpose for which it is held in others name)

Contd..
Purpose, amount outstanding, tenor and monthly outflow for various loans that may have been taken. Life expectancy based on mortality history of ancestors, and details of life insurance coverage for each earning member of the family. Medical history of the family, medical expense policy of employers and details of medical insurance coverage Other risk client is exposed to like fire theft in family shop and details of general insurance coverage. Clients psyche regarding risk and return.

Life Cycle.
Young and unmarried Young and married, but no children Married and having young children Married and having older children Retirement

Wealth cycle
Accumulation Distribution Transition Windfall gain Inter Generation Transfer

Risk Profiling
Extremely Risk Averse Moderately Risk Averse Risk Neutral Moderately Risk Oriented Extremely Risk Oriented

Systematic Approach to Investing

SIP
Month 1 2 3 4 5 6 Total Investemnt 10000 10000 10000 10000 10000 10000 60000 NAV 12 12.05 12.20 12.15 12.25 12.30 No of Units 10000/12=833.3 10000/12.05=829.876 10000/12.20=819.672 10000/12.15=823.045 10000/12.25=816.327 10000/12.3=813.008 4935.261 Avg Cost=12.16

Systematic Approach to Investing

SWP
Month 1 2 3 4 5 6 Total Redemption (Rs) 5000 5000 5000 5000 5000 5000 30000 NAV(Rs) 12 12.05 12.20 12.15 12.25 12.3 Units Redeemed 5000/12=416.667 5000/12.05=414.938 5000/12.20=409.836 5000/12.15=411.523 5000/12.25=408.136 5000/12.3=406.504 2467.431 Avg Reed Price=12.16