tag:blogger.com,1999:blog-12591286421133984262024-03-05T22:54:32.483-08:00OpinionMoneymattershttp://www.blogger.com/profile/00882923218314958782noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-1259128642113398426.post-43398437013316429572017-04-17T02:48:00.001-07:002019-09-02T05:22:59.202-07:00FINANCIAL PLANNING: A MYTH<div dir="ltr" style="text-align: left;" trbidi="on">
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<a href="https://www.blogger.com/null" name="_GoBack"></a><b><span style="color: #76923c; font-size: 28.0pt; line-height: 115%;">“FINANCIAL PLANNING: A MYTH”</span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">Mr.
Sudesh was working with an IT firm. He was doing well for himself and his
family. He was part of the middle management team and was working on a decent salary
with an annual bonus. He used to plan for everything, be it vacation or admission
of his two daughters at school. In his group, he was known as a disciplined person
who manages everything well on his own. But when it came to financial planning,
his approach was as orthodox as it can be, as he also believed that financial
planning and wealth management is for wealthy people and he doesn’t need such
services. </span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">He
used to save his money in different asset classes like many people do but
without any classification of “purpose “and “need analysis “. After a few years,
Mr. Sudesh found himself being forced to leave his job as his industry was
going through a bad phase. Now he was struggling with finances. After working
for 20 years, he was unable to fund his new business and neither he was able to
fund his family expenses. For him, Equity was risky, term insurance was
an unnecessary cost and investing in the mutual fund was all about picking top one-year performing funds. </span></b></div>
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<b><i><span style="color: #76923c; font-size: 36.0pt; line-height: 115%;">Was his approach
right?</span></i></b></div>
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<b style="text-align: justify;"><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">Financial
planning is a very important aspect of today’s life. Like a doctor cannot do his
own operation, the same way we cannot do everything on our own. The most dangerous things
in any financial planning are mainly 2 things time and the right product.</span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">There
are 5 important “Myth” about financial planning, they are:</span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b><i><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">1.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant-numeric: normal; font-weight: normal; line-height: normal;"> </span><span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></i></b><b><i><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">It is
only for wealthy people: </span></i></b><b><span style="line-height: 115%;"><span style="color: #76923c;"><span style="font-size: 12pt;">The
the biggest myth about financial planning is that it is only for wealthy people
because these services are available to them only who have a large chunk of money.
It is totally wrong, if you have a financial goal then you are eligible for a
financial </span>adviser<span style="font-size: 12pt;">. A financial </span>adviser<span style="font-size: 12pt;"> is the right person to choose the right mix of
products which caters to each aspect of financial goals be it investments or
risk management. </span></span></span></b><b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">A financial planner always understands your needs and goals
with a certain time limit then he chooses the right product mix for your needs.</span></b></div>
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<b><i><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">2.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant-numeric: normal; font-weight: normal; line-height: normal;">
</span></span></i></b><b><i><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">I
know everything as I know how to earn then I know how to manage: </span></i></b><b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">You cannot be a jack of all trades. Yes, that’s right that
you know how to earn but not necessarily how to manage by looking at the future
prospects. The biggest problem in this is that we intend to go bias and give
wrong priority to wrong investments or risk management. But a financial advisor always looks things
with the right future prospect and helps you in achieving financial goals with a high
level of risk management.<i></i></span></b></div>
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<b><i><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">3.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant-numeric: normal; font-weight: normal; line-height: normal;">
</span></span></i></b><b><i><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">It is
too early: </span></i></b><b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">At 25 age, we think it
is too early to think about financial planning, at 30 age we start thinking
about and actually start financial planning at age of 35 and sincere efforts we
take after 40 only. This is the biggest blunder we do in our life. When
liabilities are less we invest nil or less and when liabilities arises then we
start thinking about it but actually by the time we have lost 10-15 most
precious year where we can get a cheap term plan ( for lifelong ) or Longer
period for a small amount of investment. We take the burden of lump-sum investment
after age 40 for a better multiplier on investment. Which we should have avoided
by doing small investment at the starting age of 25 when we entered in the job. The
basic principle of investment is the principal of financial planning, which is “sooner
the better “. <i></i></span></b></div>
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<b><i><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">4.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant-numeric: normal; font-weight: normal; line-height: normal;"> </span></span></i></b><b><i><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">I own
my mistakes why should I trust anyone else: </span></i></b><b><span style="line-height: 115%;"><span style="color: #76923c;"><span style="font-size: 12pt;">Like you can go wrong, your financial planner can also go
wrong in some planning but the core essence of financial planning is an evaluation
which allows the financial </span>adviser<span style="font-size: 12pt;"> to review asset class or risk management tools
time to time. It helps in changing the product mix and to reshuffle the
mechanism. Financial planner generally keeps a target of 110% so that if the error
possibility of 10% arises still you achieve your desired goals.</span></span><i style="color: #76923c; font-size: 12pt;"></i></span></b></div>
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<b><i><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">5.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant-numeric: normal; font-weight: normal; line-height: normal;"> </span></span></i></b><b><i><span style="line-height: 115%;"><span style="color: #76923c;"><span style="font-size: 12pt;">Anyone
who knows tax or banking can be financial </span>adviser<span style="font-size: 12pt;">:</span></span></span></i></b><b><span style="line-height: 115%;"><span style="color: #76923c;"><span style="font-size: 12pt;"> Trust me this is the biggest myth about financial planning
that anyone who knows tax planning or his liquidity position; he can do his
financial planning. Banking is all about money management through saving bank account,
fixed deposit, loans not beyond that. Similarly, a tax consultant can always
advise you based on taxation. But a Financial </span>Adviser<span style="font-size: 12pt;"> covers everything,
starting from liquid money management like you should always keep up to 3
months of salary in the bank account, and 3 months’ salary for emergency funds in
some fixed deposit or liquid funds which can be accessed immediately when needed.
Then he will come to investment and risk management. Financial </span>adviser<span style="font-size: 12pt;"> always
works with cash inflow analysis to cash outflow analysis. He always talks about
short term goals to midterm goals and midterm goals to long term goals.</span></span><i style="color: #76923c; font-size: 12pt;"></i></span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">Much of disaster happens in financial planning when we
take advice from relatives who invested in different asset class. He may yield
good return but that doesn’t mean that his financial planning will help you.
Financial planning is not only about generating good returns, it covers each
aspect of financial health.</span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">As I stated earlier, we need a special person for
a specialist job. Like an ENT specialist cannot do the job of a heart surgeon. Same
stands for self-financial planning. We are bound to get bias and product-oriented. We need a specialist who understands the needs of financial goals and
understands how to achieve them. </span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">“Financial planning is the core essence of today’s risky life
it helps you in achieving important goals of life “</span></b></div>
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<b><span style="line-height: 115%;"><span style="color: #76923c;"><span style="font-size: 12pt;">(Author
is Mr. Rohit Khandelwal; He is a certified Mutual fund and IRDA </span>adviser<span style="font-size: 12pt;">. He is
associated with </span></span></span></b><a href="http://www.moneymatters.co.in/"><b><span style="font-size: 12.0pt; line-height: 115%;">www.moneymatters.co.in</span></b></a><b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">) </span></b><b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">Disclaimer:
These are the author’s personal views.</span></b></div>
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Moneymattershttp://www.blogger.com/profile/00882923218314958782noreply@blogger.com0tag:blogger.com,1999:blog-1259128642113398426.post-39853652095882752682017-04-11T02:45:00.000-07:002019-09-02T05:27:24.824-07:00Choose your financial adviser wisely <div dir="ltr" style="text-align: left;" trbidi="on">
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<b><span style="color: #76923c; font-family: "arial black" , "sans-serif"; line-height: 115%;"><span style="font-size: 18pt;">“CHOOSE YOUR FINANCIAL </span><span style="font-size: 24px;">ADVISER</span><span style="font-size: 18pt;"> WISELY”</span></span></b><br />
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<b><span style="color: #76923c; line-height: 115%;"><span style="font-size: 12pt;">Mr.
Deepak is a wealthy person based out of New Delhi. He has been investing in
different asset classes for 10 years. In the last 10 years, he had 5 financial </span>advisers<span style="font-size: 12pt;"> including insurance agent, banker, wealth manager, individual
financial advisers</span>, <span style="font-size: 12pt;">and relatives. He has been investing in ULIPs, mutual funds,
real estate, and fixed income plans apart from normal FDs and saving bank
account. But now when he needs cash outflow for his requirement, he feels that his money is stuck in every investment.</span></span></b><br />
<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b><i><span style="color: #76923c; font-size: 18.0pt; line-height: 115%;">“Was Mr. Deepak’s approach towards Investment Planning right?” </span></i></b><br />
<b><i><span style="color: #76923c; font-size: 18.0pt; line-height: 115%;"><br /></span></i></b></div>
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<b><span style="color: #76923c; line-height: 115%;"><span style="font-size: 12pt;">I may
be sounding very conservative in the investment approach but it’s my opinion that
one should choose financial </span>adviser<span style="font-size: 12pt;"> first before anything. You have certain
financial goals and liabilities to take care of in the future. If your financial </span>adviser<span style="font-size: 12pt;"> doesn’t ask or know about it, then it would be like driving on the highway
without knowing your destination. There is a major gap between product </span>adviser<span style="font-size: 12pt;"> and a financial </span>adviser<span style="font-size: 12pt;">.</span></span></b><br />
<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b><span style="color: #76923c; line-height: 115%;"><span style="font-size: 12pt;">Who
is product </span>adviser<span style="font-size: 12pt;">? Product </span>adviser<span style="font-size: 12pt;"> is a person who comes to you with a prefixed
mindset with a single product offering to you. He may or may not be interested
in your goal. He will be the right candidate to sell the product but does that
product full fill your future financial goals, maybe or may not be.</span></span></b><br />
<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b><span style="color: #76923c; line-height: 115%;"><span style="font-size: 12pt;">Who
is a financial </span>adviser<span style="font-size: 12pt;">? Financial </span>adviser<span style="font-size: 12pt;"> or you can say financial planning
manager is a person who asks three most important questions from you before any
product offering, which are:</span></span></b><br />
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<b style="text-indent: -0.25in;"><span style="color: #76923c; font-family: "arial black" , "sans-serif"; font-size: 12.0pt; line-height: 115%;">“Why”:</span></b><b style="text-indent: -0.25in;"><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;"> He
understands your profile and asks why you need financial planning. With patience, he
understands the need for your financial goals. He adds a valuable point of view
with the right prospects with you. He makes a profile for you while understanding
your goal set.</span></b></div>
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<b style="text-indent: -0.25in;"><span style="color: #76923c; font-family: "arial black" , "sans-serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></b>
<b style="text-indent: -0.25in;"><span style="color: #76923c; font-family: "arial black" , "sans-serif"; font-size: 12.0pt; line-height: 115%;">“When”:</span></b><b style="text-indent: -0.25in;"><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;"> His second
question comes “when”, to understand your time limit for each financial goal.
He designs and draws a plan according to this question. He determines all cash inflows
and outflows with a particular time limit. He makes sure that your plan of
investment should deliver your desired financial goals in the desired time frame.</span></b></div>
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<span style="text-indent: -0.25in;"><span style="color: #76923c; font-size: 12pt; line-height: 115%;"><b>"</b></span><span style="color: #76923c; font-family: "arial black" , "sans-serif"; font-size: 12pt; font-weight: bold; line-height: 115%;">How Much risk”:</span></span><b style="text-indent: -0.25in;"><span style="color: #76923c; line-height: 115%;"> I
maybe at the age of 30 but I am conservative in my approach and I am looking for a limited risk, so my portfolio will be designed accordingly. Equity is a very good
tool for investment but it may create volatility in my portfolio. Am I ready
for this? It should be understood by
a financial adviser. At above-mentioned age, I am looking for a 12% return for next
20 years then my planning will be different but someone who is looking for 18%
return will be having different planning as mine and others risk appetite is
different. A financial adviser<span style="font-size: 12pt;"> should
always advise on risk hedging tools like “Insurance” to you. Insurance is not
an investment but it is a fantastic tool of hedging the risk if something
happens to you in your long term goal planning. </span></span></b></div>
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<b><span style="color: #76923c; line-height: 115%;"><span style="font-size: 12pt;">The
differentiation between product </span>adviser<span style="font-size: 12pt;"> and a financial </span>adviser can affect your
return in the long term. Knowledge of financial advisers is always the key. He
estimates each aspect of your financial goals, risk, and cash outflow
requirement before making investments. A financial plan without a certain
financial goal is like buying grocery which expires after a specific time and
may not fulfill your desired needs in the future. Financial adviser<span style="font-size: 12pt;"> is a
relationship that goes for the long term with multi-product advisory. Financial </span>adviser<span style="font-size: 12pt;"> always reviews the portfolio in a specific time frame to evaluate the
result after a specific time and helps in the achievement of the desired result.</span></span></b><br />
<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">Plan
your financial goals wisely with the help of a financial planning manager who can
understand your requirements and can suggest you on different avenues of financial
products. </span></b><br />
<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;"><br /></span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">“A
need for financial goal is certain but risk planning and assessment of
financial goals is also important. Don’t go directionless, plan, implement and
execute with a proper financial planning manager”.</span></b></div>
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<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;">(Author
is Mr. Rohit Khandelwal; He is a certified Mutual fund and IRDA adviser. He is a<a href="https://www.blogger.com/null" name="_GoBack"></a>ssociated with www.moneymatters.co.in)</span></b><br />
<b><span style="color: #76923c; font-size: 12.0pt; line-height: 115%;"><br /></span></b>
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