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Financial Planning
Session 1 & 2
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Need for Financial Planner
40 year old concept in developed countries
Personal finance consumer in more than25countries depend on Financial planners
An emerging profession in India
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Confidential
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.
Dont 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.
Why Financial Planning?
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Financial decisions form the basis of much of what we doin our lives. Poorly thought out personal finance decisions
can at best cause great anxiety and at worst lead tobankruptcy, whereas well thought out, sound financialdecisions can lead to a prosperous lifestyle.
Financial Planning is the process of identifying a
persons financial goals, evaluating existing
resources, and designing the financial strategies that
help the person achieve those goals.
Financial Planning
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Confidential
Michael Gerard Tyson
Former American world heavyweight boxing champion.
Youngest man to have won a boxing world heavyweighttitle belt.
Made US$30 million during his career.
Declared bankrupt in 2003
Reason:
Indiscriminate Spending
No Financial Planning
What if no Financial Planning?
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Kapil Dev
Captained India to their maiden and only Cricket WorldCup in 1983.
His businesses: 5% stake in Zicom Electronics
Invested money in his own Kapil's Eleven restaurantand Kaptains Retreat Hotel.
Established a company Dev Musco Lighting Pvt Ltd
Result He is living comfortably even after retirement.
What if sound Financial Planning?
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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 isdelayed
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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Financial planningcomprises
Insurance Planning
Investment Planning Tax Planning
Estate Planning
Retirement Planning
Components of financial planning
InsurancePlanning
Financial
Planning
InvestmentPlanning
TaxPlanning
EstatePlanning
RetirementPlanning
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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 passesaway, it is for those who survive.
Why insurance planning ?
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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-retirementlife if you wish to retain your financialindependence and maintain a comfortable
standard of living even when you are no longerearning.
Why Retirement planning?
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All of us work for money. It is equally important toensure 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.
Why is investment planning ?
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Investment Vehicles
STOCKS
BANKDEPOSITS
PRECIOUSMETAL
REALESTATE
DEBTS
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Selecting the Right Investment
1. Rate of Return
2. Risk3. Length of Investment
4. Marketability
5. Tax shelter
6. Convenience
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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?
Paying tax
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Three ways used by the taxpayers are Tax evasion Tax Avoidance Tax Planning
Tax Evasion means trying to reducetaxes by concealing income, inflationofexpenses, falsification of accountsand wilful violation of the provisions of
the Income-tax Act.
.
TaxEvasion
Taxpayers
TaxAvoidance
TaxPlanning
Ways to reduce tax liabilities
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Estate is the total property, real and personal,owned by an individual prior to distributionthrough a Trust or Will.
Estate Planning distributes the real and
personal property to an individual's heirs.
What is estate planning?
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Example:
Parveen Babiconsidered to be one of the mostsuccessful Bollywood actresses in the 1970s.
She did not leave a will.
Result.
Fights amongst relatives on her property afterher death.
Why estate planning?
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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 turnoverof Rs. 75,000 Crore orUSD $15 Billion at the time ofhis death Had not done properestate planning. His will was not clear.
ResultArguments between his sons forReliance.
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What is expected of a financial planner?
Money Skills
Interpersonal Skills
Knowledge of financial products available inthe market
Empathy to Consumers 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 cardholders = 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 + CAs
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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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Consumer
Optimization
of Insurance
Premium
Manage Debt
efficiently
Distribute Wealth
according to his
wish and not
according to laws
Implement
Budgeting
and
Spending
Plans
Identify Goals that have
financial implications
Home,Childrens
education,Marriage,
Vacation,ManageLife
Style after retirement
Identify
Investment
Options to meet
goals
Take maximum benefit
of tax laws and
regulations to create
additional surplus for
investment
What does the Personal Finance Customer wants ?
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Gaining the Trust of the Customer
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Ethics
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Integrity
Objectivity
Competence
Fairness
Confidentiality
Professionalism
Diligence Compliance