Financial Planning and Wealth Management – A Comprehensive Guide

Financial Planning and Wealth Management – A Comprehensive Guide

Ways by which Financial Planning can be undertaken?

1. Cash Flow Management

Incomes and expenditures can be better matched through the Plan. It assists in identifying whether borrowings are within prudent limits.

2. Insurance

It usually takes care of unpredictable needs and as these needs can arise at anytime, insurance is extremely important.

3. Investment Planning

With increased volatility in capital markets, there is a surge in demand for small saving schemes as a safe haven. Schemes like PPF, NSC, KVP, RBI bonds, Senior Citizens Savings Scheme, Post office MIS need to be part of asset allocation for investors. Although, it is good to keep some risk free investment in the portfolio as a part of overall asset allocation.

4. Retirement Planning

Due to increase in longevity in life and growing expenses due to inflation sustaining the living standard during post retirement stage is a difficult task, so a wise investment of a nest egg during working life helps in lining comfortably during retirement stage

5. Taxation

The financial plan should help client in minimizing its tax liability and also maximizing its after-tax returns from your investments.

6. Estate Planning

Estate planning is arranging for the transfer of property to legal heirs and to other beneficiaries, in a way that will, as much as possible, achieve its objectives.

Who requires Financial Planning?

It is useful to everyone. Since every one has dreams and goals to be fulfilled, so even people earning small amounts of income should get their financial planning done, so that their limited income can be used more efficiently.

How is it different from Wealth Management (WM)?

Wealth management sounds similar to Financial Planning (FP), it differs in the sense that Financial Planning is for one and all while WM is only for a select few. It relates more the management of plenty i.e. taking care of the needs of affluent clients as part of a long-term, consultative relationship, while FP aims at getting the most out of limited resources.

What is a financial Plan?

Financial plan provides direction and meaning to financial decisions. It helps to understand how each financial decision can affect other areas of finances. For example, buying a particular investment product might help client save adequately to finance for its child’s higher education or it may provide enough for a comfortable retirement.

It includes a review of net worth, goals and objectives, investment portfolio, retirement planning, tax planning and insurance needs, as well as a plan for implementing client’s goals.

After a plan is developed, what next?

The best plan is useless unless it is put into action. Hence the plan should be implemented in said manner, and review the plan when there is a lifestyle change such as marriage, death or divorce. The review also considers changing goals and circumstances.

The entire process for a financial planner can be summed up as follows:

• Initial meetings with client and answering its queries if any.

• Receiving the Letter of Engagement

• Handing over a detailed questionnaire.

• Getting answers to those questions

• Plan preparation

• Getting the “Authority to Proceed” Letter enabling you to carry out the recommendations contained therein

• Plan Implementation

• Periodic Plan Review