Class1 FP Process

8/8/2019 Class1 FP Process

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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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Confidential

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.

Case II


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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

Documents

Class1 FP Process