Q. 1 Why Should I do Financial Planning?
Q. 3 I have already burnt my hands in equity market. What are the other investment avenues you can offer?
Q. 4 I don’t have time to take care of my finances. Should I hand over the money to PMS?
Q. 5 How can you help me save my taxes?
Q. 7 What are the fees you charge? Is it one time or every year?
Q. 8What is the justification for charging your Fees?
Q. 9 Who will take care of my investments? Is there a review system?
Q. 10 How can I earn quick money?
Q. 12 I would like to pass on my money to my children? How can I do that legally?
Q. 14 I am a professional and I don’t want to retire? How can you help me grow my profession?
Q. 15 I want Funds for investment? Can you assist me in arranging for funds?
Q. 17 If I give you my portfolio, how much return would you guarantee?
Q. 18 What do you think about the market, how will it perform?
Q. 19 I think that the best investment is in real estate. What do you think?
Q. 20 Will the data collected from me kept confidential?
Q. 21 How are your services better than other financial institutions?
Q. 22 What you will suggest during the high volatile markets?
Q. 1 Why Should I do Financial Planning?
A. Financial Planning is a ‘PROCESS’ in which we assess:
- Where you are now?
- What you may need in the future? And
- What you must do to reach your goals?
Simply stated Financial Planning is a process to fill the gap between your 'Current' position and your 'Future' position. Financial Planning gives you a road-map for your future financial goals and objectives. It is like a Map or Guide which helps you reach the exact destination in the desired time by properly utilizing the adequate resources.
It is also important to note that Financial Planning is customized for individual needs, wants and dreams vis-à-vis their available and future resources. It is a myth, that Financial Planning is restricted to Investments. As a matter of fact investment is only a minute aspect of Financial Planning. The above explanation answers the question as to why you should be doing Financial Planning and also shows a holistic and need based approach which is used in Financial Planning to achieve your future goals and objectives.
A. It is very important to understand the difference between Insurance and Investment. Premium of insurance products having investment element are heavily loaded and also the return from these are lower than a bank F.D. The smarter way would be to segregate insurance from investments and accordingly built a corpus for your retirement to generate higher returns on your investments and to pay minimum amount of premium for your insurance protection.
Thus, insurance should be taken only to cover the risk part of your life. God forbid anything happens to you, your family should not fall into trouble waters in financial sense. This could be well taken care by taking ‘Term Insurance’ policies.
Q. 3 I have already burnt my hands in equity market. What are the other investment avenues you can offer?
A. There are avenues which ensure capital protection and lower returns. Also, there are avenues, like equity, with no capital protection but with a potential to deliver better returns. The avenues which we offer are basically in conjunction with your needs, prioritized life goals, time horizon of for life goals, your risk profile, liquidity requirements etc. Thus we need to get an answer to these questions to advise you proper investment avenue suitable to you.
Q. 4 I don’t have time to take care of my finances. Should I hand over the money to PMS?
A. ‘Portfolio Management Services’ is a service which is provided to individuals who have lump-sum money but don’t have time to monitor the same. PMS would be a better option if you don’t mind their charges. There are certainly advantages attached to it however there are also a few disadvantages like:
· Active churning of portfolio which would ultimately result in high brokerage charges.
· Clients have to share the upside profits along with the PMS Managers however the loss is for the investor to accept.
· Also, even if the portfolio performs negatively, the client has to pay the annual fund management charges for managing his portfolio.
Alternatively you could opt for professionals like us who are ‘Certified Financial Planners’ and are in a better position to give appropriate and unbiased advice relevant for you. They generally charge a professional fees for their advice however compared to the charges of PMS this turns out to be lot more cost effective. Also you are aware of what transactions are taking place and at the same time it is under your control.
Q. 5 How can you help me save my taxes?
A. We have a qualified panel of professionals including ‘Certified Financial Planners’, ‘Chartered Accountants’ etc. who would guide you with the tax saving aspect. Only after understanding your current income and expense details, we can recommend you sound tax planning strategies that would not only help you save your current taxes but also help you plan in advance to save future taxes. Thus, effective ‘Tax Planning’ is a part of Financial Planning process.
Q. 6 All my investments are in place. I am satisfied with the investments. Most of them are in PPF, Term Deposit and risk free investments. What you have to say about it?
A. Satisfaction comes when you achieve your financial goals and objectives. Satisfaction of investments that they are safe and are growing at nominal rate is usual and a feel good factor for every individual. However, we would only recommend you to ensure that:
§ Are your investments able to meet your life's future goals and objectives?
§ Are they in a position to beat inflation?
§ Will you be able to have the money at the time it is required?
All your investment are in debt, so it means that you are either conservative investor who does not believe in taking any risk even at the cost of generating very little post tax return or you have had a bad investment experience in the past. We recommend you to align your investments with your future goals and objectives.
Q. 7 What are the fees you charge? Is it one time or every year?
A. Our professional fees that we charge varies based on an individuals goals and objectives, their current situation in which they are and the number of hours which our 'Financial Planners' will have to put in preparation of an individuals Financial Plan. The same can be known only once we have understood your case and discussed the same with the Planners. You would be informed about the 'Professional fees' and only after your approval and receipt of 50% of fees in advance, our planners would start working on the plan. The balance would be payable after the presentation of the plan.
However, to give you a range of our fees, we could tell you that for a 'Comprehensive Financial Plan' the fees could range from Rs. 15, 000 to Rs. 30, 000. Review of Financial Plan for a period of first year is free. From second year the review charges are around Rs. 5, 000.
Q. 8 What is the justification for charging your Fees?
A. Doctor charges fees, Architect charges fees, Lawyer charges fees and accordingly professional Financial Planner charges fees. The fees are charged for the competent and unbiased advice which our Financial Planners give you by using his/her expertise and experience.
Q. 9 Who will take care of my investments? Is there a review system?
A. We have two types of reviews. One is the review of Investment Portfolio after the Financial Plan is implemented with us and the other is the review for the Financial Plan. The investment portfolio reports are mailed to the clients every quarter. The client is also welcome to speak or consult us at all the times.
We review your ‘Financial Plan’ on yearly basis, so that we can see whether your plan & your investments are performing according to the recommendations we had given to you.
Q. 10 How can I earn quick money?
A. There is no shortcut to earn quick money and the concept of 'quick money' only exists on paper. Warren Buffet, the richest and the most successful investor in the world, made his first investment when he was 16 and he realized it was late.
People try to earn quick money through gambling, it may be in casino, race course or stock market speculation. However it is a universal truth that speculators never win. Systematic disciplined investments over a period of time can help generate huge corpus for you. For eg. Rs. 1,000 invested monthly over 40 years will result in a corpus of Rs. 3.10 crores @ 15% returns p.a.
Q. 11 I have no finance background. I want to start investing, but I am afraid of taking risk. What would you suggest me?
A. When you have a disease you have no idea about it because you may not have not studied medicine, hence you approach a qualified doctor. Similarly we are experts in personal finance and we understand our clients may or may not have finance background. We ensure you that as professionals we adopt a systematic and step by step approach toward planning your life’s financial goals and objectives. You could trust qualified professionals like CFP Certificants who would be in a better position to give you unbiased advice.
Q. 12 I would like to pass on my money to my children? How can I do that legally?
A. We advice our clients on ‘Estate Planning’ which includes advice on creating trusts, making wills, giving gifts to relatives, etc. We could upfront give you some recommendations for your questions on how to legally pass on money to your children.
Q. 13 My savings are too low. I hardly save any money for investment? All my income goes in family expenses and repayment of loans EMI. How can you plan for my future?
A. ‘Debt Management' and ‘Disciplined Investing’ - both are the most important aspects of financial success. You may be currently not saving, however if you are aware about your future needs and objectives, you would start monitoring and budgeting your income and expenses.
Through proper management of your finances we can help you indentify cost efficient ways of investing also. Through budgeting and tax efficient planning we can help you reduce your expenses, and save your taxes thus putting more money in your pocket to invest/save. Also you may have to look at the probability of earning additional income, to meet your goals.
Q. 14 I am a professional and I don’t want to retire? How can you help me grow my profession?
A. You are the best judge of your profession. However we could certainly help you plan for your finance to generate additional passive income to generate wealth.
Q. 15 I want Funds for investment? Can you assist me in arranging for funds?
A. SRE FP provides all aspects of Financial Planning services; however as of now we are not providing the services of loan syndication. We can certainly guide you with information such as cheap interest rates and good institutes which give out loans.
Q. 16 I am an NRI and am not quite sure about which all investment avenues are available for me to make investment?
A. An NRI is eligible to invest in Equities, Mutual Funds and deposits. He is basically not eligible to invest in PPF, RBI Bonds and some other government bonds. We can help you identify suitable asset classes based on your investment goal, time horizon, risk profile and liquidity requirements. An NRI can invest in deposits and other avenues through NRE/FCNR accounts.
Q. 17 If I give you my portfolio, how much return would you guarantee?
A. We guarantee unbiased advice. If I guarantee returns I could have my license cancelled, because SEBI strictly disallows anyone to guarantee returns from equity investments. However, without my guarantee even if you look at the past performance of equity markets they have average returns of around 18-20% p.a.
There are Debt products which guarantee returns. Also, there are Schemes available which guarantee capital protection and also certain insurance schemes which guarantee returns. However, if you are looking at invest returns from equity, mutual funds etc. the returns can not be guaranteed. However diversification and several other strategies could help you prevent loss of capital and generate above average returns.
Q. 18 What do you think about the market, how will it perform?
A. This is something which cannot be predicted as such but you could always assumptions could be derived based on past history. Also, all investments have their cycles and their allocations in total portfolio. Understanding different assets and their allocation is far more important than considering an investment on the criteria of returns. In the short term equity markets always remain volatile however in the long run equity markets have always emerged as the best performing asset class.
Q. 19 I think that the best investment is in real estate. What do you think?
A. As we know excess of any thing is harmful in life, similarly excess exposure to any asset class is also harmful. Every asset class has its own place in overall asset allocation which is determined by individuals life goals, risk profile etc. The same should be first determined and subsequently we can shortlist on the asset class relevant for you.
If you have had prior successful experience in real estate definitely you can continue to invest, however it is never wise to put all your eggs in once basket. It is always smart to diversify across asset classes based on your risk adjusted asset allocation.
Q. 20 Will the data collected from me kept confidential?
A. We are professionals like lawyers and doctors and as CFP Certficants are bound by code of ethics published by Financial Planning Standards Board, India. You can be assured of the confidentiality of your data with us.
Q. 21 How are your services better than other financial institutions?
A. We are ‘Certified Financial Planners’ with the right expertise in personal Financial Planning to cater to your needs. We are not here to promote any products, like the other financial institutions, we purely give advice that is relevant for you and benefit you. You could compare for yourself the services of a Doctor and a Chemist, when you are suffering from pain.
Q. 22 What you will suggest during the high volatile markets?
A. We would recommend you stick to your ‘Financial Plan’ and follow the systematic strategy recommended by your Financial Planner. Stick to liquid and short term debt for short term investments; consider equities only for a horizon of 5 years or more. Over a long term, stock markets show high positive returns.
