ca arvind a. rao arvind rao & associates financial planning tools & ca practice 12/01/2014...

CA ARVIND A. RAOARVIND RAO & ASSOCIATES

FINANCIAL PLANNING TOOLS & CA PRACTICE

12/01/2014CA Arvind A. Rao

“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


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


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


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


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


What does this mean for CAs?


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


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


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’


SEBI – RIA : Game changer


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


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


What is financial planning?


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


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


TOOLS OF FINANCIAL PLANNING


SETTING UP AN INSURANCE PORTFOLIO


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


LETS TALK ABOUT YOU


Creating personal net worth

Distinct from business needs

Making way for expansion and new partners


MASTER PLAN


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?


SUCCESSION PLANNING


Why plan for succession ~ Raja Harinder

Singh case

Important for businesses:

Taxes

Risk

Control

Value

Designing and implementing the succession

plan 12/01/2014CA Arvind A. Rao

RETIREMENT PLANS



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?


Joint venture with an established professional ~ to work with the firm on a regular basis

Self-education

Referral ~ formulated agreement


QUESTIONS


THANK YOU

ARVIND RAO(M) 98700 33370

[email protected]


ca arvind a. rao arvind rao & associates financial planning tools & ca practice 12/01/2014...

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