Tag Archives: financial planning

Plan your investments like how you would plan for that much awaited holiday.

Protaras beach at Paralimni holiday destinatio...


The holiday season is around the corner with the schools about to break for summer vacations. Most families are ready to embark on that much awaited trip which has been eagerly and meticulously planned. Believe it or not, managing your finances which is perceived to be a complicated affair in fact requires just the same kind of planning!


  • What should be the destination?

Your investment objective – First you have to decide what are the milestones you have to save for – like buying a house, childrens’ education and marriage or retirement.


  • How long should your trip be?

 Your investment horizon – This would mainly depend on the investment objective and factors like the age of the investor, details of his dependents etc.


  • What should you pack?

 The type of investments you should make in various avenues like equity, debt schemes, govt. securities. This would be determined by the person’s personal risk appetite, his age, current job profile and the investment horizon. Any investment plan you choose is a trade-off between risk and reward. Greater the risk you are willing to assume, higher the reward.


  • How much would this trip cost?

 How much money would you have to save regularly/set aside to reach your desired investment objectives.


  • How much cash should you carry along with you?

 Your short term liquidity requirements – Though liquid investment schemes like a savings a/c is very convenient as cash can be withdrawn immediately, these have a much lower yield compared to less liquid investments. Hence it is advisable to just keep the amount which you might require in an emergency as cash.


  • Is your holiday likely to get extended for some reason?

 Most people form a rough idea of how long they are likely to live based on the average life span. It is important to keep in mind and provide for the risk of running out of savings if one lives too long.








Your banker as your financial planner – Pros and Cons

Further to the previous article (Emergence of banks in India as financial planning outfits), whom should you hand over the task of managing your investments??

Your bank – with whom you have been dealing for  years for your banking transactions and which now has a full-fledged wealth management division too (which they also keep aggressively advertising about every time you visit them).


One of the Wealth Management/Broking firms or independent financial planners who specialize in this area.

Pros and cons of having your bank as your financial planner


  • Higher credibility/accountability The relationship/wealth manager dealing with you represents the organization which has a good brand visibility and is perceived to have more accountability compared to an independent advisor/agent as the client can always approach the organization in case of a problem/grievance.
  • Ease of transacting – The Relationship Manager usually act as a one stop shop for the client and goes an extra mile and even take care of  the banking related issues of the client.
  • Greater comfort level – The client feels more comfortable revealing his financial health to an employee/ representative of the bank with whom he has been banking for a long time.
  • Better logistics support – Financial planning divisions of banks are equipped with a good research team, financial planning tracking software, infrastructure etc. which makes the process simpler and ensures smooth functioning.

Now, the concerns –

  •  Increased competition among banks has resulted in Relationship Managers being given stiff sales targets by their employers due to which they may be forced to be more sales focused than customer focused.
  • They have to function within certain guidelines set by their seniors/ organization which could sometimes come in the way of their exercising their independent professional judgment while working on the client’s portfolio.
  • Most of the financial planning exercise in banks is more person driven than process driven and the client usually looks upon the Relationship Manager  as a trusted advisor .High attrition rates among them, with all banks trying to acquire the best of the lot leads to the clients having to deal with a new relationship manager frequently, causing  customer dissatisfaction.

Why do I need a Financial Plan ??

Since this is my first post on my blog, I’ll start with the basics..Why does one need a financial plan ?? Most of us save on a regular basis anyway!

What is the difference between saving and financial planning??

Saving is regularly investing the surplus accumulated from the regular household income after meeting all the expenses in to various investment avenues.But this may not ensure that you will be able to meet all your future financial goals.

Financial Planning is nothing but PLANNED savings .The process starts with identifying specific financial goals like buying a new house, childrens’ education and marriage, providing for retirement etc.This is followed by an estimation of the amount required in future to meet each of these goals.Finally suitable investment schemes are identified and regular investments are done to accumulate this amount.

Why is it so necessary to have a financial plan??

1. Higher salaries due to the economic boom and globalization – Higher disposable income and investible surplus which requires prudent planning.

2. Availability of a vast (and ever increasing ) number of investment options today – choosing the right and suitable investment avenues is not an easy job!

3. High income taxes significantly reduce the post tax earnings – need for identifying tax efficient options.

4. High inflation – eroding the purchasing power of the rupee- need to take calculated risks to earn a positive real rate of return.

5. Rising cost of education and medical facilities.

6. Increased life expectancy and the lack of a social security net in the country- saving enough for retirement becomes essential.

7. The nuclear family trend – people prefer to be independent rather than depend on children during their retirement years.

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