Financial Planning

Session 1 & 2

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
40 year old concept in developed countries

Need for Financial Planner

Personal finance consumer in more than 25countries depend on Financial planners

An emerging profession in India

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Why Financial Planning?
Only permanent thing in life is change!
 Life is uncertain. We do not know what may happen
tomorrow. All of us hope for a better future ahead.

 Don’t we all want to lead a worry-free and financially

secure life?

 We should be able to deal with all kind of risks in life.

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 Financial Planning

Financial decisions form the basis of much of what we do

in our lives. Poorly thought out personal finance decisions
can at best cause great anxiety and at worst lead to
bankruptcy, whereas well thought out, sound financial
decisions can lead to a prosperous lifestyle.

Financial Planning is the process of identifying a

person’s financial goals, evaluating existing
resources, and designing the financial strategies that
help the person achieveConfidential
those goals.
 What if no Financial Planning…?

Michael Gerard Tyson

• Former American world heavyweight boxing champion.
• Youngest man to have won a boxing world heavyweight
title belt.
• Made US$30 million during his career.

Declared bankrupt in 2003

Reason:
• Indiscriminate Spending
• No Financial Planning

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What if sound Financial Planning?

Kapil Dev

Captained India to their maiden and only Cricket World

Cup in 1983.
His businesses: 5% stake in Zicom Electronics
Invested money in his own Kapil's Eleven restaurant
and Kaptain’s Retreat Hotel.
Established a company Dev Musco Lighting Pvt Ltd

Result… He is living comfortably even after retirement.

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Economic Purpose of Life

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 The Six Steps

Financial Planning Process

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 Step 1

Gathering Information

Unless you have gained the trust and

confidence you will not be able to
gather information from the
customers

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 Step 2
Analyze
The data you have gathered
In discussion with the customer, try to create a short
term and long term goals which are SMART
– Specific
– Measurable
– Achievable
– Realistic
– Time Bound

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 Step: 3
Finding Solution
• Do remember that there is no single solution
which is ideal.
• Solutions can be many
• Identify best possible solution based on the
information you have

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 Step 4:

Recommendations
• Provide recommendations of your alternatives
to the client
• Discuss and agree on suitable solution which
customer feels comfortable

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 Step: 5
Implementation
• Implement the chosen alternative
• More often than not implementation is
delayed
• It is your job to follow with the customer that
chosen alternative is implemented

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 Step 6
Monitoring
• It is important that the plan that is
implemented is also monitored.
• The plan should be ideally reviewed once in a
Quarter or if there is a major change in
economic situation.

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 Your
Financial Planning Domain

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Components of financial planning

Financial planning Insurance

comprises Planning

• Insurance Planning
• Investment Tax
Investment Financial
Planning Planning Planning Planning
• Tax Planning
• Estate Planning
Retirement Estate
• Retirement Planning Planning
Planning

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Why insurance planning ?

Needing insurance is like needing a

parachute. If it isn't there the first time,
chances are you won't need it again!

Insurance is not for the person who

passes away, it is for those who survive.

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Why Retirement planning?

Some may like it and others may not! But

retirement is a reality for every working
person.

It is important to plan for your post-retirement

life if you wish to retain your financial
independence and maintain a comfortable
standard of living even when you are no longer
earning.

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Why is investment planning ?

All of us work for money. It is equally important to

ensure that money works for us.

Investment refers to a commitment of funds to

one or more assets that will be held over some
future time period.

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 Investment Vehicles

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Selecting the Right Investment

1. Rate of Return
2. Risk
3. Length of Investment
4. Marketability
5. Tax shelter
6. Convenience

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Paying tax

It would be great if all of us could pay

our taxes with a smile on our face,
but unfortunately, this is not so

Therefore, the question arises

“How to minimize our tax liabilities?”

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Ways to reduce tax liabilities
Three ways used by the
taxpayers are
• Tax evasion Tax
Evasion
• Tax Avoidance
• Tax Planning
Tax Evasion means trying to
reduce taxes by concealing Taxpayers
income, inflation of expenses,
falsification of accounts and
wilful violation of the provisions Tax Tax
of the Income-tax Act. Avoidance Planning

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What is estate planning?

Estate is the total property, real and personal,

owned by an individual prior to distribution
through a Trust or Will.

Estate Planning distributes the real and

personal property to an individual's heirs.

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Why estate planning?

Example:
Parveen Babi considered to be one of the most
successful Bollywood actresses in the 1970s.

She did not leave a will.

Result.
Fights amongst relatives on her property after
her death.

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 Case II

Dhrubhai Ambani

• started the Reliance Commercial Corporation with a

capital of Rs. 15,000
• passed away on July 6, 2002.
• Reliance Group had a gross turnover of Rs. 75,000
Crore or USD $ 15 Billion at the time of his death
• Had not done proper estate planning. His will was not
clear.

Result…
Arguments between his sons for Reliance.

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What is expected of a financial planner?

• Money Skills
• Interpersonal Skills
• Knowledge of financial products available in the
market
• Empathy to Consumer’s needs
• Ability to execute Fiduciary responsibilities

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Role, Scope and Opportunities for
Financial Planners

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Some Statistics from Income Tax dept
• Rs. 200,000+ in mutual funds by 320,000+
investors.
• Rs. 100,000+ in primary issues by 60,00,000
investors.
• Rs 495,000Cr Invested in Gold
• Rs. 200,000+ spent by 300,000+ credit card
holders = Rs. 6400Cr.
• 1000,000 cars sold = Rs. 5000 crores

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Retail Financial Services Industry Overview

• Over 100 Million Retail investors and still growing

• 70,000 + Bank Branches in the Country

• 5000+ Insurance Services Branches

• 10000+ Brokerages Service Branches

• 100,000 + CA’s

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 Retail Financial Services Industry Overview

• Growing number of Financial Products

• Growing complexity of Financial Products

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Mutual Fund Products

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Life Insurance Products

                    
 
       
     

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Health and Property Insurance

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Banks

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Abundance

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 What does the Personal Finance Customer wants ?

Implement Identify Goals that have

Budgeting financial implications–
Optimization and Home, Children’s
of Insurance Spending education, Marriage,
Premium Plans Vacation, Manage Life
Style after retirement

Identify
Investment
Manage Debt Consumer Options to meet
efficiently
goals

Distribute Wealth Take maximum benefit

according to his of tax laws and
wish and not regulations to create
according to laws additional surplus for
investment
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Gaining the Trust of the Customer

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 Ethics
• Integrity
• Objectivity
• Competence
• Fairness
• Confidentiality
• Professionalism
• Diligence
• Compliance

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