FINANCIAL PLANNING TOOLS & CA PRACTICE
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Transcript of FINANCIAL PLANNING TOOLS & CA PRACTICE
CA ARVIND A. RAOARVIND RAO & ASSOCIATES
FINANCIAL PLANNING TOOLS & CA PRACTICE
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“Trends and Insights into Financial Goals of Indian Consumers”
A study that examines attitudes and behaviors
of a new class of upwardly mobile Indian
professionals towards financial planning ~ by
Ameriprise India : 2nd edition in 2013
Identifying leading financial aspirations of a
fast-emerging population
Growing demand for professional advice to
help them achieve their goals12/01/2014CA Arvind A. Rao
Key Findings
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140 % increase in respondents rating retirement as a key goal
48% respondents mentioned family as their top financial priority
A 22% drop from 2012Approx. 24% say retirement is their key priority (only
10% in 2012 said this)
Retirement given precedence over large-ticket family spendings like:Buying secondary homes / carsTraveling around the world
Youngest age-group 28-33 years are giving increased importance to retirement
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Single women are focused on managing their
money but marriage may change the dynamics
Single women feeling financially confident (70%) than
single men (56%)
Invest earlier than men (25 years v 26 years for men)
despite joining the workforce at the same age (24 years)
Marriage – shifts the trend ~ mens financial confidence
increases, wife’s financial confidence decreases as they
get dependent on their husbands for their financial
decisions
Different approaches to investing
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Measuring financial intelligence
Do investors think about goal-based planning or
investments made without aligning them to goals
Is investment portfolio diversified or focused on 1
instrument
Do respondents think long-term with their
investments
Do they start investing early (avg age 26 years)
Do they take professional advice on financial
planning
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Investors with higher income pay for
advice and ensure a diversified portfolio
Follow a structured approach to managing
money in long run
Higher risk appetite but believe in following a
plan
Goals important ~ no compromise on current
living standards
Invest less in deposits, more in gold, insurance,
shares and bonds
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What does this mean for CAs?
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Focus on saving / better planning taxes – implies saving money - implies making money for clients
Our advice helps people save additional money – means greater resources at disposal to achieve their objectives or fulfill aspirations
The process of financial planning helps to fill this gap!! – additional value-add for clients
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Traditionally the function of financial planning
was typically driven by the following factors:
CAs ~ seeking advice for tax-planning w.r.t.
investments and insurance for tax planning
Insurance distributors ~ for life and general
insurance needs
Post-office / brokers / mutual fund distributors
~ for investments needs
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Dynamics of the game ~ now changing
Product-pushing by banks and distributors have made clients wary of the ‘Sell’ model
Increasing emphasis on advice from ‘Trusted circles’ and ‘Professionals’
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SEBI – RIA : Game changer
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Most commonly understood as a sales service relating to financial products ~ provision of strategic advice
SEBI RIA ~ means only serious and professional people stay in the financial advisory business
The regulations is only one of the reasons why CAs should consider providing financial advice
Trends discussed earlier in the slides point out to the next emerging discipline in personal finance
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Knowledge and In-depth understanding of client’s financial situation ~ CA well placed to offer services
Adding another dimension to your service lines to make it more comprehensive ~ financial planning
Additional source of revenue ~ fee-based advice is the future
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What is financial planning?
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Making money available when clients need it
Focus on customer needs and not product baskets
Focus on customer objectives and their life patterns
Anticipating the problems in life and strategizing for the same
Making sense of long-term, short-term and medium-term
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Prioritizing between needs, wants, aspirations
and life-style needs
Balancing between saving for present and future
Balancing between spending for present and
future
Meaning and context of financial planning
changes with the client and his situation
ROI v. HOI
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TOOLS OF FINANCIAL PLANNING
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SETTING UP AN INSURANCE PORTFOLIO
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Life insurance ~ protection
Disability insurance
Critical illness
Medical policy
Health insurance ~ not sickness insurance
Pruning client’s insurance portfolio
Decision making ~ when to exit or retain
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LETS TALK ABOUT YOU
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Creating personal net worth
Distinct from business needs
Making way for expansion and new partners
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MASTER PLAN
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Setting up goal sheets
Mapping investments to goals
Maintaining life-cycle of investments
Creating dashboards for goals and client
fulfillments
Getting discipline ~ is it about returns?
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SUCCESSION PLANNING
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Why plan for succession ~ Raja Harinder
Singh case
Important for businesses:
Taxes
Risk
Control
Value
Designing and implementing the succession
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RETIREMENT PLANS
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Setting up the retirement nest-egg
Planning milestones
Post-retirement corpusStrategies for maintenance of the corpus:
Systematic withdrawalAnnuity model ~ capital preservationTime-segmented allocation model
HOW TO BEGIN?
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Joint venture with an established professional ~ to work with the firm on a regular basis
Self-education
Referral ~ formulated agreement
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QUESTIONS
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