All about Financial Planning In India


Financial Decisions are critical decisions, which decide how monetarily comfortable we stay in life. Poorly planned financial decisions can cause, at best, great anxiety and at worst lead to insolvency, whereas well thought out decisions can lead to prosperous lifestyle.

Becoming a successful investor doesn’t happen by magic or in a day – it happens by setting goals and working to achieve them. The question then is how to go to about it. How to achieve the financial goals in life? What should be the 1st step towards it? How should I plan the available resources to achieve the goals?

Initially people don’t realize they need of financial planner or nobody knows there is thing (concept) like of financial planning. For some people financial planning simply means short term Cash Flow Planning or buying an insurance or investing in few mutual funds or fixed deposit or for some it may be restricted to Tax Planning. So what is financial planning & how it is helpful to achieve your financial goals? Let’s understand……

What is Financial Planning?

Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a home, savings for your child’s education, planning for your retirement or estate planning. In other words financial planning is not just investing, it is process which helps you to manage your finances in such a way that you link it to your life goals.

Who is Financial Planner?

As discussed earlier some people feels their insurance agent or mutual fund advisor is financial planner & they blindly trust & buy product suggested by them for some their neighbor or friend Or in some cases people want product (Mutual fund & Insurance ) just because their friend or neighbor buy or invested in that product. They don’t even bother to understand the product (mutual fund or insurance) which is suitable for him because his risk appetite, time horizon or goals are different from his friend.

A financial planner is someone who uses the Financial Planning process to help you figure out how to meet your life goals .The planner can take a big picture view of your financial situations and make financial planning recommendations that are suitable for you. Planner can look at all your needs including budgeting and saving, taxes, investments, insurance and retirement planning. Or, the Planner may work with you on a single financial issue but within the context of your overall situation. This big picture approach to your financial goals sets the Planner apart from other Financial Advisors, who may have been trained to focus on a particular area of your financial life.   — Source FPSB
In India Financial Planning Standard Board India is the authorized board to award CFP certification to an individual. CFP Is exactly like how doctors or CAs will get after going through desired skill in their respective filed. This process of awarding certificate involves education, examination, experience and ethics set by the board. Also there exists the condition that one must have a continuing education requirement. This makes a professional to be up to date in knowledge about personal finance.

Benefits of Financial Planning:

There are many advantages of following structured financial planning process which can have far reaching positive effects on one’s life. Creating financial plan helps you see big picture and set a short term and long term life goals, a crucial step in mapping your financial future.

It Provides direction and meaning to your financial decisions:- Financial Planning allows you understand how each financial decision you make affects other areas of your finances. It help you to understand Where are you today ,that is your current financial position ,where you want to be tomorrow ,that is finances linked to your goals and what must do to get there, that is asset allocation and investment strategy.

Family Security: – Providing for your family’s financial security is an important part of financial planning process. Financial Planning helps to provide protection for you and your family by having right insurance in place if something goes wrong.

Helps in Tax Savings:- Financial planning helps you to invest smartly as certain funds provide dual benefit. One, getting good returns & secondly, helping you in savings taxes where you can save up to Rs 1.5 lakh under section 80C of the I-T Act. Various options like ELSS mutual funds, PPF, tax-free bonds, etc provide both tax benefit and capital appreciation.

Standard of Living: The savings created from good planning can prove beneficial in difficult times. For example, you can make sure there is enough insurance coverage to replace any lost income should a family bread winner become unable to work.

Discipline in managing money: Financial planning brings in discipline. Also, there are subtle behavioural changes when you undergo financial planning. For example, when you run a systematic investment plan (SIP), your expenses are automatically curtailed and this goes t owards investments. Similarly, when you do financial planning, you become aware if your lifestyle expenses are above or below what you can afford. If it is the former, you can take necessary steps to cut back on unnecessary expenses.

6 Steps of Financial Planning

Financial Planning is a comprehensive and ongoing process that can help you to achieve your financial goals. Financial Planning Standard Board India has developed 6 steps that is widely use by Financial Advisor when meeting with client. The FPSB develops education programs for financial planners.

Below the six-step process is set out in brief.

Establish & define the relationship with client.

This is where the financial advisor will introduce him or herself and typically explains about what financial planning is, its process, information about company and services provided as well as fees & charges .Advisor may also ask questions like your family background as well as check your knowledge about financial products & market.

The purpose of establishing the goal or relationship is to form the foundation or purpose of planning itself–to begin the financial journey with the clarification of a financial destination.

Gather the client’s relative data.

During the second step of the process, the advisor will collect the client’s qualitative as well as quantitative information.

Qualitative provides general information like your financial goals, lifestyle, family’s medical history or health, and investment-risk tolerance level.

Quantitative provide basic but specific identifying information concerning details of current financial status. Examples include info about your total family income, expenses, investments, insurance coverage’s, and present liabilities or other obligations.

Analyze the Client’s data:

In this step financial planner analyzed all the information collected in 2nd step. He will analyses clients current financial status, his investment, insurance policies, and liabilities to determine the strength and weaknesses. He also analysis the clients objectives, needs and priorities.

Develop the Financial Planning recommendations and present them to the client.

The financial planner offers financial planning recommendations that address the client’s goals, based on the information the client provided. The planner reviews the recommendations with client to allow the client to make informed decision. The planner listens to clients concerns and revises recommendations as appropriate.

Implement the Financial Planning Recommendation.

Once client agreed to recommendation, next step is put plan into action. Based on the scope of the engagement, the financial planner identifies and presents appropriate products and services that are consistent with the financial planning recommendations accepted by client. Financial Planner also guides you what needs to be done, complete any relevant paperwork. Also if needs to be coordinate with meeting with other specialist.

Review the client’s situation.

Financial Planning is ongoing process.  The client and financial planner agree upon terms of reviewing and revaluating the client’s situation, including goals risk profile, lifestyle and other relevant changes. If there is any change the financial planner adjust recommendations as needed.




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