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Healthcare Planning for Retirement in India: A Healthy Future

Hemant Beniwal
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Healthcare Planning for Retirement in India: A Healthy Future

A comprehensive healthcare plan and a long-term retirement plan are two important aspects of a balanced financial plan.

A healthcare plan is required to meet urgent medical expenses. While a retirement plan is for the longer term to secure one’s financial standing post-retirement. It requires meticulous planning and execution over a long period to build a formidable retirement corpus.

Healthcare Planning for Retirement in India

Must Read-Facts About Retirement Planning You May Not Have Known

But healthcare planning for retirement in India is something that most people tend to ignore. They implicitly assume their retirement funds will also serve their medical needs later. This is not a wrong assumption, provided you have an adequately funded corpus.

As people age, their healthcare needs and associated expenses increase exponentially. We inherently extrapolate our current state of health long into the future. In many cases, we assume to be in the best shape. Forever!

The goal is to design a healthcare plan today that is aligned with your retirement needs for long-term financial planning.

Before You Start! Healthcare Planning for Retirement

Visit the Family Doctor

A family doctor is hard to find but if you still have one, then do visit them. With your family’s medical history, they may help identify the risks you might face without going in for costly tests.

Even if you don’t have a family doctor, talk to the doctor who is attending to you and find out more about your health going forward. Get a comprehensive medical report to dodge future shocks.

Healthcare Planning for Retirement in India: A Healthy Future Click to Tweet

Start Early

It is never too early to begin planning for healthcare, retirement, or healthcare during retirement. If possible, start allocating a part of your retirement savings to fund your future healthcare needs.

Involve Family

One thing that the pandemic brought to the fore – and quite frighteningly – is that we do not share! Especially about our incomes, expenses, debts, and even health. It owes to a deep-rooted culture of protecting our loved ones from the burdens we carry.

In most cases, the families are not prepared to face the challenges when they come knocking.

Start having meaningful conversations with your spouse and children about your retirement healthcare needs and plans. They might retort with “Hey, nothing will happen to you.” Or “Papa, we’ll take care of you forever.”

Make them understand that even if they want, they cannot foresee the future and be there for you every time you might need help.

Must Check – What To Do After Retirement in India?

A Comprehensive Retirement Healthcare Planning

You must consider the overall healthcare facilities in the city/state that you choose as your last home. The plan must give you the flexibility to travel, move, and live stress-free wherever you go.

Let’s explore different facets of a comprehensive HealthCare Planning for Retirement.

Make Conservative Estimates About

Current Healthcare Costs

On comparing the current cost of any common procedure, including post-procedure care, for persons in different age brackets, you will find that they escalate dramatically with age. It is because of the additional care and complications involved with increasing age.

Rising Medical Inflation

The next issue is the increasing cost of medical services every year. Even though the published inflation figures seem to be getting under control, you cannot apply them to medical bills. Depending on the place of residence, from a small town to a metro, you can easily assume medical inflation between 10 and 20 percent, respectively.

For example, a rupees one lakh medical bill today would cost you at least rupees eight lakhs, in fifteen years at 15% annual inflation!

Uncovered/Hidden Expenses

There are many out-of-pocket expenses associated with healthcare that are not covered by your medical insurance. These include OPD visits, OTC medications, precautionary tests, many daycare procedures, and long-term home care. Add to this the costs of transportation and the caregiver accompanying you for each visit.

Health Insurance

Now with a realistic cost estimate, start zeroing in on the medical insurance plan that offers value for money. You do not need (and cannot have) two separate plans for today and the future. Continuing the same plan and increasing the cover every few years is what you need.

You need separate medical cover for your family, even if it is covered under an employer-provided health insurance plan. These plans cease to be effective during employment transition and may reduce the cover significantly post-retirement. By the time you retire, it is quite likely that you will be denied insurance by most insurers.

Therefore, carefully evaluate different policies offering adequate coverage for your present and future healthcare needs. If you do not make a claim against it, you will get the benefit of a no-claim bonus. Most importantly, you will cross the biggest roadblock of the waiting period for pre-existing illnesses.

Contingency Fund

As not everything will be covered by medical insurance, building an emergency fund for healthcare expenses is imperative to supplement insurance coverage.

Open a separate joint savings account for this purpose and keep on adding to it regularly. As, hopefully, you will not use this fund very often, you can invest it in less volatile asset classes like a fixed deposit or a more tax-efficient liquid fund.

Long-term Care Planning

As you age, the need for a permanent caregiver becomes a necessity. So, planning for long-term care or assisted living is something you cannot ignore. Long-term care includes day-time in-home assistance, home nursing services, daycare facilities, and even full-time assisted living facilities.

You can start by setting aside a regular amount to meet this need. Some life insurance companies offer long-term care insurance riders for seniors above 65, people diagnosed with a critical ailment, or having a disability requiring regular management. Though not the ideal solution, it can still make sense for a specific set of people.

Update and Review

The most ignored aspect of a long-term plan is that it may remain frozen in time.

A periodic review would help you assess assumptions in the plan against your present state – medically and financially. This way, you can update the plan before it is too late.

Retirement Healthcare Planning for Indians

Must Read – Retirement Rules of Thumb

Beyond Financials

There are many things beyond financials that you must not overlook. The following are some of the most important ones.

Healthy Lifestyle Choices

Your lifestyle today will decide your life tomorrow.

A healthy lifestyle with a balanced diet, sleep, work, and workout in addition to spending quality time with family and friends helps you become anti-fragile. You can also add annual health checkups to the list if you have a family history of a critical illness or are above 40.

Emergency Folder

Having a plan and not letting anyone know about it is not in the best interest of anyone. Make an emergency folder (physical or online) with the following updated details:

  • List of emergency contacts – including specialist doctor, family members, financial advisor, and lawyer.
  • All prescriptions with diagnostic reports.
  • Health insurance information with policy details, and agents’ phone numbers.
  • Living will.
  • A durable power of attorney for healthcare decisions.
  • Copies of any specific medical orders, forms, or cards – like, a do-not-resuscitate order, or body/organ donation cards.

Do share this folder with your spouse, kids, or primary caregiver.

Build a Support Network

A circle of friends and peers is crucial for a fulfilling retirement experience and keeping at bay age-related ailments. Retirees with strong family ties, friend circle, social connections, and community involvement tend to live a healthier life.

Yoga, walking, playing with grandchildren, and laughing out loud with friends in city parks are nature’s own medicines! Join cultural organizations or clubs and participate in community activities to keep active.

Seek Expert Advice

Seeking advice from financial planners can get you personalized guidance for your specific situations. They help you create and integrate a comprehensive retirement healthcare plan with your other short- and long-term goals.

As You Go!

Retirement can be a wonderful time in life. By planning, you can ensure that you have access to the care you deserve, when you need it.

Prepare for the worst, hope for the best, and enjoy the present!

Things to Consider Before Buy an Electric Car In India?

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Things to Consider Before Buy an Electric Car In India?

Plug-in electric cars (EVs) are the latest “IN” thing, and everyone wants one. EVs are popular, especially among the woke and tech-savvy next-gen professionals. As responsible global citizens, we are all in for going electric in all personal and public transport. The benefits of EVs like low-carbon emissions (they are not zero-actually), little noise, and their technological superiority are well-documented.

Things to Consider Before Buy an Electric Car In India?

But as financial advisors, we are also pragmatic and realists. Even if one is totally convinced of their features and benefits, not everyone is going to demand an EV on their next showroom visit. The financial costs to own an EV car are not well-known. Therefore, let us discuss if it makes sense to own an EV from a purely financial perspective.

Must Read – How you benefit from long term orientation in Life

Total Cost of Ownership Electric Car In India

The purchase cost of a car is not its true cost. A car with better mileage and less maintenance may be economical in the long run compared to a cheaper car. Therefore, you must find the total cost of ownership (TCO) of the car. It includes:

  • Upfront costs – purchase price, registration, and road taxes.
  • Running costs – fuel cost and insurance.
  • Maintenance costs – service, spares, and repairs.
  • Import duty (if applicable).

It excludes:

  • Subsidies by central governments
  • State government incentives

Upfront Costs

The table shows the ex-showroom prices (as of November 25, 2021) for all the EV models available for sale in India. The most popular models have an average price of ₹20 lakhs. The comparable average price for comparable ICE (internal combustion engine) cars is in the range of ₹8 lakhs

buy electric cars in india

For most of the middle-class an EV is out of range or requires a big commitment. The economic distress caused in the wake of the pandemic has made owning a car costlier than before, even after factoring in historically low-interest rates.

Must Read- Aligning Investing with Life Goals

Running Cost You Should Know Before Buy an Electric Car In India

Fuel Costs

Considering the recent gradual bur regular price hikes for petrol and diesel, the running cost for an ICE car giving 20kmpl mileage is between ₹4.75/km and ₹5.5/km (for petrol and diesel respectively). For a more powerful sedan or SUV, it can be up to ₹7.5/km to ₹9.75/km.

The cost of running an EV is dependent on the power tariff in your city. For example, in Delhi, the average power tariff for domestic consumers is ₹7/kWh for a household consuming above 600 units/month. The same prices for Mumbai are near ₹11/kWh, and for Jaipur, they are around ₹8/kWh.

The largest-selling EV in India, Tata Nexon EV takes 8 hours and 30 units to charge from 0-100% and gives a range of 312 km. If we assume a realistic range at 70% or 218 km, then even at ₹11/kWh it will cost only ₹1.5/km. This is a savings of at least 65 to 80 percent on the fuel costs at present prices. If the differential increase with time, the savings could be much higher.

The cost of charging can go up significantly if you use commercial charging stations or battery swaps. After a time as the battery loses efficiency, the savings also reduce.

Things to Consider Before Buy an Electric Car In India

Must Check – Everyone Should Know What is Financial Planning?

Insurance

The insurance for an EV is costlier because:

  1. Higher purchase price.
  2. Costlier and difficult to procure genuine spares.
  3. Longer towing distance to a limited number of authorized service centers.

Maintenance Costs

Compared to an ICE car, an EV has very few moving parts and therefore has a negligible maintenance cost. There is no need for air and oil filters change, engine oil change, spark plug replacement, carburetor, fuel tank & pipes, and many such parts. Some independent estimates put the annual maintenance cost for an EV between ₹10,000 to ₹15,000 compared to ₹25,000 to ₹40,000 for a comparable ICE car.

The batter is the biggest factor of concern as its range, efficiency, charging time, and life all reduces exponentially within a few years of running. If your battery is not working, then you may be left stranded at off-road and remote locations.

The repair and replacement of ICE car components take only 2 to 3 days while for EVs it may take weeks. The cost of rental cars or taxis during such periods is not accounted for.

Import Duties

The Indian government offers tax breaks, incentives, and subsidies on India-made EVs but adopts a protectionist view on imported EVs. The average import duty for EVs in India is upward of 100% compared to the global average of 22%. This puts the best affordable EVs out of reach of the middle class.

Central Incentives

The central government incentivizes the use of EVs by offering the following major benefits:

  1. Waiver of Registration Certificate charges for all EVs.
  2. The GST on the EVs is charged at 5%, which is less than the 18-28% GST plus up to 22% cess on ICE cars.
  3. First-time individual EV buyers are allowed up to ₹1.5 lakh deduction u/s 80EEB of the IT Act, 1961 against the interest paid on EV car loan.
  4. The FAME-II scheme gives a one-time subsidy of ₹15,000 per kWh and is open till March 31, 2024.

Must Read – My Favorite Investment Movies And Lessons Learnt

State Incentives

In addition to the central schemes, many state governments also offer incentives and subsidies to promote the purchase and use of EV cars. The table below lists such schemes state-wise as of November 2021 (some states that offer benefits on other types of EVs are not listed here).

State Incentives for buy electric cars in india

Most states have put a cap of up to 10,000 units on EV cars to be eligible for subsidies or additional benefits, making it short-term hype rather than a significant driver for demand. Another limit is on the ex-showroom price cap at ₹15 lakhs, making only the EVs from Tata Motors to be eligible under the scheme.

Finally

Considering all the factors, the current total cost of ownership for EVs is almost the same as that for an ICE car over 1.50 lakh km. One can cover the difference in the upfront costs in 12 months (approximately) with a daily run of 150+ kilometers. This is normal for corporate fleet operators and cab operators, but not for most individuals with up to 50 km/day commute. Since EVs are bought as a second car in the household, the cost of owning and parking an additional car are also important factors.

With the current price structure and lack of reliable infrastructure for EVs in most cities, we do not find EVs a financially viable option. If more state governments extend subsidies and other benefits, for more units then the EVs may become a financially viable option.

Top 5 Important Questions to Ask Financial Advisor 2022

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Top 5 Important Questions to Ask Financial Advisor 2022

5 Important Questions to Ask Financial Advisor

It is great that you have availed of the services of a financial advisor to manage your investments and financial planning. But that does not mean you wash your hands off financial planning. You have to check in with your advisor regularly. Here are some questions to ask the financial advisor so that your check-in helps you in getting a good overview of your financial plan and its performance –

Top 5 Important Questions to Ask Financial Advisor 2022

Must Read – What Are The Other Roles Of Financial Advisor?

1. What is my current net worth, and am I on track with my financial goals?

The advisor must have the net worth figure, a summary of your net worth, and a detailed view of the assets and liabilities readily available for you to view, save, download, and analyze. You should be able to access all this information without going to the advisor each time. They can be sent via regular emails or accessed via a website or app.

It is important to keep an eye on the net worth as it gives you an indication of how you are faring towards achieving your goals and whether you will have a smooth transition to retirement. 

Red Flag – If the financial advisor is not able to give you an accurate update or does not check with you regarding financial information regularly, they might be neglecting their tasks and will not have a timely and comprehensive view of your financial status.

Important Questions to Ask Financial Advisor

Must Read – How to Setting SMART Financial Goals?

2. How is my investment portfolio performing?

Check with the advisor how the investments are doing as a whole. It may not be possible that all investments are doing well at all times. So, ascertain if your portfolio is earning money and the overall value has risen. The portfolio should keep up with the market or beat the average market returns over time. Remember to look at performance numbers at a gross level and net off all costs. Ask the financial advisor for his views on non-performing investments and their view on how to manage them.

Red Flag – If your financial advisor only concentrates on the performance of investments doing well, you may want to raise it with them.

3. What are the different investment opportunities available as of now, and are there alternate investment options or financial products for your recommendations?

Various investment opportunities crop up. New bonds, IPOs, investment products, etc. Discuss them with the advisor to understand if they are suited to your investment portfolio and current circumstances. Understand the returns, risks, etc. of the recommended products. If you suggest a product, discuss the reasons for selection or non-selection of it.  

If the advisor suggests buying a top-up health plan, explore why they are suggesting the same and why not a new health plan. This will help you identify the rationale behind the financial decisions and validate the feasibility of the decision. New information may be uncovered by either of you or the advisor, which may help optimize financial decisions further.

Red Flag – The financial advisor should recommend products with a low expense ratio and should take time and effort to explain various investment options and the justification for the choices made. If you do not find this happening, you may want to reconsider the decision of continuing with the financial advisor.

Best questions to ask your Current financial advisor

Must Read – Is it the right time to rebalance your portfolio?

4. Should I rebalance my investment portfolio?

The investment portfolio is never a static item. It changes as per market conditions, personal situations, etc. Moreover, as your investment grows, the allocation gets changed. You may have overallocated in a specific type of asset or realize that you need to reduce your allocation to some non-performing funds. Verify if the investment portfolio needs tweaking such that all your financial eggs are not in one basket.

Red Flag –If you feel uncomfortable with the responses to your questions or the way the financial advisor handles your money or your personal information, you may want to end the relationship.

5. What is missing from my financial plan?

Ask the financial planner if they have all your information (e.g. your address might have changed). Life changes too. For example, you have additional financial responsibilities, or you lose your job.  They should be aware of the changes that affect your financial life and take steps to manage the financial plan based on those changes. By discussing your financial plan with them routinely, both of you can identify gaps in the financial plan and optimize it to get better returns and a greater appreciation of value.

Red Flag – If your meetings with the financial planner are irregular and the financial planner is not up-to-date with your financial information, they are not the best fit for your financial life.

It is important for you to know what to ask your advisor so that you are on track with your financial plan. If you are looking to hire a financial planner, find out how to select a competent advisor.

Everything You Wanted to About the Fixed Deposit Sweep in Facility

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Everything You Wanted to About the Fixed Deposit Sweep in Facility

In a Nutshell

  • By linking one or more of your Fixed Deposits to your savings and current accounts you can enjoy better returns.
  • Surplus funds above the threshold are transferred to the linked FD account under the Sweep-in facility.
  • No need for manual intervention – the whole process is automatically triggered.
  • Define your threshold depending on your liquidity needs.
  • When funds beyond the threshold limit need to be withdrawn from the linked savings or current account, automatic sweep-out happens.

Must Check – Why Fixed Deposit & Debt Returns will always be Negative

There are no charges to avail of the sweep-in/out benefits.

The fixed deposit sweep-in facility allows the depositors to link their savings accounts with their fixed deposits accounts. Once the linking is complete and the threshold limit set, any balance above the limit is automatically transferred to the linked FD account and earns higher interest.

This automatic transfer is called the sweeping-in of the excessive balance, and hence the name Sweep-in FD facility.

Need for Fixed Deposit Sweep-in Facility 

The current subdued interest rates on bank deposits are eating away at your returns. In these uncertain times, you also need a sizable balance in your savings accounts to meet any contingencies. As we always say, a balance to cover a minimum of six months’ living expenses is necessary.

But even with a modest monthly expense of Rs. 30,000/month, this sum turns out to be Rs. 1.5 lakhs. The prevailing savings account interest rates of around 2.5 to 3.0 percent give you negative returns. And the prevailing FD rates of 5.25 to 6.5 percent are barely above the inflation.

So, if you keep the funds in a savings account, you get the benefit of instant liquidity, but lose the interest income. While depositing funds in an FD gives you higher returns but robs you of the liquidity.

Investors often wonder, is there anything in-between that can offer you the best of both worlds – instant liquidity and higher returns?

Everything You Wanted to About the Fixed Deposit Sweep in Facility

Must Read – Fixed Deposit Vs Fixed Maturity Plan

It turns out there is – the Sweep-in Fixed Deposit schemes offered by most banks.

If you earn higher returns even on a portion of your cash/bank balance, it is not going to hurt you. That too without compromising any of the advantages of your savings account – instant liquidity for transfers, cheques, online/card transactions, and ATM withdrawals.

There are many instances when you suddenly get a liquidity infusion from one or more sources – the sale of assets, bonuses, and cash gifts. You may park any such one-time cash surplus about which you do not have immediate plans.

Features of the Fixed Deposit Sweep in Facility

1. Bank Account Linking

You must either link an existing current or savings bank account with a sweep-in FD account or open one at the home branch to avail of the sweep-in facility.

2. Minimum Transfer

Most banks transfer the surplus over the threshold limit in multiples of INR 1,000. Only a few banks allow such transfers below INR 1,000. You must check with your banker to get the exact details.

3. FD Tenure

The FD linked to the savings account has a minimum tenure of 1 year and can go up to 5 years.

Must check – 10 Questions if you are on the Path of Do It Yourself Investing

Fixed Deposit Sweep-out or Withdrawals

Just like your excess balance is transferred to the FD, if you need to withdraw funds more than your current balance in the linked savings account, a sweep-out occurs. The transferred surplus up to the limit of such transfers and accrued interest is available for withdrawal.

Remember, you cannot withdraw the original principal of the FD, or interest accrues on it, in a withdrawal. To utilize those funds, you will have to break the FD. If the linked savings account has a requirement of minimum balance in the savings account, then also a sweep-out may occur to meet it.

Interest rate

The sweep-in FD gets the same rate of interest as offered for a regular FD of similar tenure. However, as sweep-in comes with sweep-out, you will earn higher interest only for the duration of the balance being in the FD. Because of automation, the interest calculation is automatic and is credited to your savings account at each sweep-out.

Eligibility

Most banks require a depositor to open a sweep-in FD with a minimum value of INR 20 to 25 thousand. Once you have this FD in place, you can then link this FD to your savings bank account.

Features of the Fixed Deposit Sweep in Facility

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Fixed Deposit Sweep-in: Explained by an Example

Let us say that you open a sweep-in FD at your bank with a tenure of 3 years and deposit INR  25,000 in it earning 5.75% annual interest. You can instruct your banker, online or offline, to link your savings account with this FD and define a threshold of, say, INR 30,000. It means any surplus in your savings account above that limit would be automatically swept into the linked FD.

When you receive a salary, bonus, or sale proceeds, in your savings account your balance may go up to, say, INR 1,05,250. The surplus, in multiples of INR 1,000, or INR 75,000 would be automatically transferred to the FD.

You can then continue to utilize your balance in the savings account as usual. If your balance drops to INR 11,000 and you need to make a payment for INR 25,000 then, a sum of INR 19,000 would be swept out from your FD.

19,000 + 11,000 = 30,000 = 25,000 + 5,000 (for minimum balance)

You will also get a credit for the accrued interest on the INR 19,000 for the period that it was in the FD. So, if your sweep-in happened on the 2nd of the month and the sweep-out on the 11th, then you will get INR 29.90 as interest in your savings account (the interest calculation by each bank may result in a slightly different value).

Advantages of Sweep-in Fixed Deposit

As is clear from the above illustration there are many advantages of opting for a sweep-in FD facility. Let us summarize them here:

  1. The benefit of higher FD rates on the savings bank balance.
  2. Instant liquidity like savings accounts on an FD balance.
  3. Facility to link multiple FD with your savings account – if the bank permits. In such cases, the banks follow LIFO (last-in-first-out) for sweep-outs to let you earn more interest.
  4. Flexibility to choose the FD tenure and savings account threshold limit.
  5. Flexibility to reinvest the FD, once it matures.
  6. No additional charges to avail the facility as well as no penalty are levied for premature withdrawals.
  7. A better option for individuals running a small business or practice compared to an overdraft facility.

Are Sweep-in FDs the same as Flexi-deposits?

NO.

The Flexi-deposit scheme is a separate scheme where the depositor has to manually deposit excess surplus from their savings account. It means whenever they need more cash than their current balance, the depositor must manually request for withdrawal of the said sum from the Flexi-deposit FD.

Both facilities offer similar benefits of higher interest rates and liquidity at no extra charges. The sweep-in facility is more convenient from the standpoint of convenience due to automatic transfers between your savings account and linked FD.

How to Start a Sweep-in Fixed deposit?

Check your bank’s website or visit your branch to see if your bank offers the sweep-in facility and what are its conditions. If the facility is available, then follow these steps:

  1. Open a new FD if you already do not have one.
  2. In the FD opening form, select the sweep-in option, if provided. This will affect the tenure of the FD.
  3. You can also link your savings or current account with the FD later.
  4. While linking, define the threshold for transferring surplus to the linked FD. It must not be less than the limit set by the bank.

6 Common Money Fears and how to Conquer them

Hemant Beniwal
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6 Common Money Fears and how to Conquer them

Money brings up all kinds of emotions within us. But the one that is more or less constant throughout and among many people is ‘Fear’. We fear talking about it, earning too much, earning too less, etc. Fear is deeply seated in our genetic drive to survive – this cannot be speedily wiped away with facts and figures. 

We as financial planners understand that – also how these emotions influence our financial decisions. In the beginning of the financial planning process, we do a few exercises with our clients to understand these emotions & stories behind these emotions – our punch line says “understanding people before numbers”. 

Bill Bachrach started his famous book ‘Values-Based Financial Planning’ with these lines “In the grand schemes of things, money’s not that important. It’s significant only to the extent that it allows you to enjoy what is important to you. And not worrying about your finance is critical to having a life that excites you, nurture those you love, and fulfills your highest aspirations.” But fear holds you back – let us see what the 6 Most Common Money Fears are and how we can overcome them and live a contented stress-free life.

6 Common Money Fears and how to Conquer them

6 Common Money Fears & how to overcome

1) I will lose all my money

We work hard to earn money and always want to save more and earn more. Many of us lose money too due to a bad investment, wrong decision, or inflation. But this is something we are forever scared of and always have nightmares of investments going wrong or getting cheated of our money. We are scared to take money decisions as we are scared that the decision will make us lose all our money.

6 Common Money Fears and how to Conquer them Click to Tweet

Instead of having irrational fears, it is better to take small steps toward managing money. We can take the help of professionals to invest our money. This way, we will be more confident of our decisions and not make big mistakes/losses.

6 Common Money Fears and how to Conquer them

2) I will lose my job

Companies are very competitive and always look for ways to increase profits and reduce costs. One way to reduce costs is to ask employees to leave the company. During the recession and tough times, they might lay off people. We cannot be constantly scared of this as this might make us anxious and affect work performance negatively.

Instead of being worried about getting laid off, it is best to work efficiently. It is important to blend in the culture of the organization that one is working in. It is important to take up new responsibilities, and additional responsibilities and also upgrade one’s skills so that in case of extreme situations, one can get a new job or a different role in the organization. Building an emergency fund can also add some confidence.

3) I will never have enough money

We are always worried if we will outlive our wealth. We feel we will never have enough money considering increased life expectancy and medical emergencies of old age. But this is again irrational.

We should make a financial plan in which we set up the retirement goals. The retirement goals should be such that we know how much money we need to sustain the lifestyle that we need and other goals that we might like to achieve when we retire. We should then work on executing the financial plan so that we have enough money. The financial plan should be reviewed regularly and tweaked if necessary.

4)  I will make mistakes while managing my money

We work hard to earn money and therefore are very scared to lose it. We let the money lie idle in the savings bank account thinking that we might make bad investment decisions which will lead us to lose money.

Instead of worrying like this, we should take steps to increase our financial and investment knowledge. We should take small steps in investment. We should start off with zero or low-risk investments and then graduate to more risky (volatile) investments. At the same time, our investments should march our risk-taking ability from an emotional and financial perspective. We can also take the help of financial planners to make a financial plan and work with them to ensure that we do mismanage our money. Even if we make mistakes, instead of feeling sorry for oneself and blaming oneself, we should try to understand what happened and how it happened and what learning can one get from such an experience.

5)  My online financial identity will get stolen

Today we do a lot of money-based transactions online. We use credit cards often. This leads to the fear of getting our accounts hacked or credit cards duplicated. This is not irrational as the number of cybercrime cases is increasing but we can take steps to secure our online financial life.

We should not share usernames and passwords of online accounts with others. We should monitor financial statements regularly so that if fraud is committed, we can act quickly. We should update our contact numbers and address with the bank and not click on suspicious links. We can control the security of our online financial transactions.

6)  I am scared of talking about money

We are superstitious when it comes to money. We also don’t think rationally many times when it comes to money. We feel we will lose money if we talk about how much we have. We feel others have too much or too less compared to us and don’t want to talk about it. We feel ashamed to talk about bad investment choices.

But it is important to talk about money with people whom we can trust. Married couples should talk about money, money habits and money choices so that both are aware of how much money is there and how much is needed and what can be done to improve the finances. You can take advice from your parents about managing money as they may have gone through situations that you are facing at different stages of life. It is important to have frank and open discussions with your financial planner as only then can you both make and work on a financial plan that is realistic and allows you to achieve your financial objectives. (Start Budgeting & I can guarantee you will have meaningful financial discussions with your spouse)

Short Video – Fear & Your Investments

Fear is a strong emotion and too much of it can hurt your frame of mind. It is important to think about money and be aware of various possibilities that can happen to our finances but instead of being scared about them, one should plan the finances and take the right steps to be financially secure.

Let us know what are your main concerns regarding money and what steps you are taking to overcome them.

What Are The Other Roles Of Financial Advisor?

Hemant Beniwal
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What Are The Other Roles Of Financial Advisor?

Financial advisors have always played a crucial role in the development of the financial industry. Historically, we have seen individual advisors selling mutual fund units of Unit Trust of India, insurance policies of Life Insurance Corporation, bank and post office fixed deposits, NSC, PPF, public issue of shares of the company either directly or as sub-broker and the list goes on. The Advisor is not a new face, he is a trusted, old face, related, and closely knit. He has walked you through a lot of ups and downs in your life. Hence apart from only INVESTMENT & GENERATING RETURNS advisors also play an important role which helps in building a good financial life.

What Are The Other Roles Of Financial Advisor

Must Read – What is Financial Planning? 

10 Other roles of financial advisor

Most people lack knowledge of the financial market and don’t know how to invest and where to invest. They don’t have adequate time and resources to study the market and prepare their financial plans. Advisors help people meet their goals. They help people in selecting appropriate financial products and making investments in those products. Basically, this is a step backward as the advisor act as the coach first. So he helps in making available unbiased third-party guidance for taking various financial decisions in life which may include

  • Making a retirement plan.
  • Managing a financial crisis.
  • Managing an unexpected windfall gain (through lottery or inheritance).
  • Making financial preparations in case of marriage.
  • Making arrangements of funds for child’s education.
  • Coping financially in case of death of the earning member of the family.
  • Arranging the funds to purchase a house.
  • Getting suitable insurance cover against health and disability.

And the list goes on…

So, apart from Returns a Financial Advisor deals in:

1. Formulation of measurable financial goals

All want a big house, a luxury car, and a well-to-do retirement. But how much it will cost, no one knows. Advisors help investors in setting their financial goals which are realistic and measurable. One can do with a 3 bedroom flat instead of a mansion or a small car can suffice instead of a sedan and this is what a financial planner makes you realize. Clients often don’t have a complete idea of what their actual needs are and what are the realistic ways to accomplish those needs. An advisor helps investors in understanding their future needs both in terms of quantity and timing.

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2. Review and Adjustment of Financial goals

Financial goals require continuous review and monitoring through the various life stages of the investor. A small event in life can change the goals or additional goals are created. This can be accomplished better by none other than a professional financial planner. They help investors to stay on track to meet their goals and make necessary changes under required conditions.

What Are The Other Roles Of Financial Advisors

Must Check – Financial Planning Mistakes

3. Asset Allocation

It depends on which asset a person is in during what time. A judicious mix of assets helps in growing wealth and reduces controllable risks. The Advisor opts for a diversification strategy to manage the investment risk. They allocate the investments of the investors in various asset classes like equity, debt, liquid, gold, etc according to their goals. Each asset class has its own perks and threat. His job is to make you aware of rewards and pain in adding or reducing a particular asset.

4. Risk Management

A financial advisor aims at achieving the correct risk/return trade-off keeping in view the risk profile of the investor. A strategy may be beneficial & a financial advisor makes full utilization of tools available in the market to manage the risk associated with the portfolio.

5. Product knowledge

There are thousands of financial products available in the market which makes it difficult for an individual to choose the best products suitable for him. A financial advisor delves into the nitty-gritty of each investment product and helps the investors in choosing the appropriate products. Also, it is never bad to understand the product one is investing in for a long time. The financial advisor is the best person to get that understanding and even get the comparison.

roles of a financial advisor

Must Read – How to Setting SMART Financial Goals

6. Financial Control

A financial advisor sets an appropriate financial plan for the investor keeping the goals in mind. One of the key elements of a financial plan is to make adequate arrangements for the unforeseen financial crisis.  This is done by making a proper budget, understanding contingencies and buyers’ emotional responses of the client. Thus a financial advisor makes sure the investor’s family is protected from the financial crisis.

7. Tax Planning

The entire personal finance industry started from tax planning. This is still an embedded concept in investments. A good financial advisor provides the best approaches and products for dealing with taxes. As most investment decisions carry tax implications in the form of short-term/long-term capital gain/loss. The financial advisor plans the investment in such a manner that keeps that tax implication to a minimum level.

Must Read- Best Tax Planning for NRIs In India

8. Unbiased management of portfolio

Financial Advisors provides specialized services to investors as a neutral third party person. Investor generally tends to make emotional decisions when it comes to managing their investments. Thus an investor gets benefited from the balanced, unbiased perspective of the financial advisor. A financial advisor will give unemotional assessment of the needs of the investors.

9. Recommendation of experts

Not all work can be done by an investor or his financial planner. In due course including attorneys, accountants, property experts, commodity experts, currency advisors, and changers, art dealers, and other experts are required as per investors’ need. A financial advisor can be a source of recommendation for these requirements saving investors time and money. Can also work as a translator between client & expert.

10. Estate Planning

Proper financial planning through a professional financial advisor ensures that the estate passes on to the family members down the hierarchy in a smooth manner that protects as much as its value. A financial advisor can be an important person in this process and can be trusted as a trustee to the will.

Hence like a friend, a financial advisor can also have multi-role in your life, it all depends on how you respond to the relationship and mutually offer him space.

What has been your relationship level with your financial advisor? Share your story/views in the comments sections.

Role of Foreign Institutional Investor (FIIs) in Indian Stock Markets

Hemant Beniwal
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Role of Foreign Institutional Investor (FIIs) in Indian Stock Markets

Indian investors often fancy and try to predict the actions of Foreign Institutional Investors in India or the Role of FII in the stock markets. And this fancy is not without reason – the FIIs are after all hold a substantially large share of Indian capital markets. According to IBEF, a Trust under Ministry of Commerce and Industry, Government of India, FPIs/FIIs had invested ~Rs. 4,433 crore (US$ 597.94 million) in 2021-22 up to June 22, 2021.

Various research over the year since the Indian capital markets were opened for foreign investments, there have been a strong correlation between the FIIs activity and market movements. This not only includes the secondary equity markets (listed stocks), but also the primary markets (IPOs, private placements, qualified institutional buyers, anchor investors), and the debt and bond markets.

Role of Foreign Institutional Investor (FIIs) in Indian Stock Markets

Must Check – How and Why Stocks Price Change

For example, the US Fed’s taper-tantrum of 2013-14 caused FIIs to pull out from emerging markets, including India, causing the markets to go in a tailspin despite strong fundamentals. And the sustained bull run from 2015 was initially largely driven by FIIs coming in droves month after month. Today, the bull run seems to be sustained by the frenzy among local investors – both retail and institutional.

So, one needs to understand the depth and breadth of the involvement of FIIs – which is already very dense – in order to understand the factors that drive the Role of FII Indian capital markets.

What Is a Foreign Institutional Investor In India (FIIs)?

FIIs are investors or Foreign investment funds that are registered in a country and make investments in the stock and bond markets of other countries. The goal of the foreign institutional investor is to anticipate the movement of the markets in the target country and make investment decisions based on the analysis to benefit from such movements.

Investment by FIIs are regulated by the SEBI and the RBI defines and maintains the cap or ceiling on such investments. The different types of FIIs who are allowed to invest in India are:

Role of FIIs in Indian Stock Markets Click to Tweet
  • Asset Management Companies
  • Endowments
  • Foreign Mutual Funds
  • Hedge Funds
  • Insurance Companies
  • Investment Banks
  • Pension Funds
  • Sovereign Wealth Funds
  • Treasury Funds
  • Trusts – Private and Public
  • University Funds

FIIs Vs. FDI

Unlike Foreign Direct Investment, FIIs do not really invest in the economy for the long term. They are there only for investing in the capital markets and benefit from market movements in the prices of listed securities. Because of this they are overly sensitive to market movements, exchange rates, interest rates, and political scenarios, and can pull out money anytime.

Read – How to Select a Stock for Investment?

FII vs FPI

One should not confuse FII with FPI or Foreign Portfolio Investor, though the recent changes in definition by the market regulator has clubbed them. FPIs are investors that invest in securities for the long term to passively benefit from the regular stream on income that their investments bear. Usually, they do not churn their portfolio as fast as FIIs do and stay put for the long haul.

With these distinctions in mind let’s now focus on what FIIs are, how are they regulated and how do they affect the Indian capital markets.

The Heft of FIIs

For a long, the foreign institutional investors have swayed the Indian markets as they were one of the biggest blocks with an almost insatiable appetite and an unending reservoir of cheap money. Their funds ran into hundreds of billions of dollars and even a fraction of that huge sum was able to affect the market sentiments here.

Therefore, since the FIIs were first allowed in the early 1990s, in the Indian markets, till very recently, if they poured money into Indian markets they zoomed, and when they pulled the plug, the markets tanked. This made them an object of desire and envy at the same time for most investors, companies, market analysts, and even the government of the day.

Role of Fii

The people kept close track of the actions by the FIIs and external factors that could affect their decisions. Even a slight change in the interest rates in the US, the UK, or Europe could result in billions of dollars going in or out of Indian markets in a matter of days. This used to affect the exchange rate, making currency management that much more difficult.

Even today, after the enhance participation by retail investors and DIIs becoming almost as prominent as FIIs, they still hold sufficient heft to control the market movement. But over the years, their actions and movements have become more predictable.

Must Read –My Favorite Investment Movies And Lessons Learnt

Regulations Governing FIIs.

FIIs have been an important source of capital in emerging markets, but due to their volatile nature, India has placed limits of varying degrees – both in percent terms and absolute terms – on the total value of assets an FII can purchase.

These limits are not broad-based or blanket, but case to case -in some cases up to 100% foreign holding is allowed and is some others none. The purpose of such limits is to curb the influence of FIIs to an extent on individual companies and on the overall financial markets.

This way the potential damage that FII fleeing en masse might inflict can be curtailed and spread over a longer duration to help the retail investors.

FIIs can invest via the Portfolio Investment Scheme (PIS) by registering with the Securities and Exchange Board of India. According to SEBI data, over 10,000 foreign bodies are registered with it under FPIs and Deemed FPIs (the erstwhile FIIs/QFIs).

The rules governing FIIs are strictly followed. Generally, FII investment in a company is limited to a maximum of 24% of its paid-up capital. To allow investment beyond this limit, if it is approved by passing a special resolution passed by the company’s board. In strategic sectors, like public sector banks, the ceiling on FIIs’ investments is only 20% of their paid-up capital.

The RBI monitors the compliance of these limits daily. It does so by implementing cutoff points at 2% below the maximum investment limit thereby giving it sufficient time and headroom to caution the Indian company receiving the investment. Then only the final 2% is allowed to be purchased.

Read- Sensex PE Ratio – is Stock Market Overvalued?

Important Points to Remember

  • Although today FDI investments are clubbed with the FII and FPI. But remember that FII is now an umbrella term that includes active business owners (FDI), passive investors (FPIs), and speculators (FIIs).
  • India has seen substantial investment by FPIs and FIIs with close to Rs. 4,433 crore (or USD 600 million) in 2021-22 up to June 22, 2021 (Source: IBEF).
  • Foreign Institutional Investors route their money into emerging economies because of greater growth potential there.
  • Short-term investments in securities is also common among some FIIs – this can, on one hand, boost the liquidity in the market, but on the other hand can cause instability in the money supply.
  • FIIs act as both a catalyst and a trigger for the receiving markets. They can encourage better performance and corporate governance by voting by their feet. Also due to completely unrelated reasons can alienate a company or a market leaving the retail investors to fend for themselves.
  • Foreign institutional investors directly affect the stock and bond markets of the country, the exchange rate, inflation, and overall market sentiment.
  • The actions of FIIs are driven by many factors – external and internal – that may be too difficult to predict even approximately. Some of them are:
    • The US and European interest rates
    • The International crude and commodity prices
    • The international geopolitical stability or lack thereof
    • Performance of the international markets
    • Performance of the Indian markets – standalone basis and vis-à-vis other emerging economies
    • Inflation, interest rate, and growth scenario in India
    • Taxation policies and other regulations in India
    • Future prospects of the overall sector, industry, and the security
  • FIIs today can invest in already listed, unlisted, and to-be-listed securities and participate in both the primary and secondary capital markets.

If you have any questions add them in the comment section. If you are looking for Financial Guidance – let’s have a call.

10 Myths that skew Retirement planning

Hemant Beniwal
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10 Myths that skew Retirement planning

10 Myths About Retirement planning

Retirement planning has gained prime importance largely due to changes in the lifestyle of people, an increase in life expectancy, the concept of nuclear families, and an urge to live independent retirement life without being financially dependent on children.

This article also got published on FirstBiz – a business news website owned by Network18.

10 Myths About Retirement planning

Read: 5 reasons you should never retire

One has to be very cautious and meticulous while preparing a correct retirement plan to lead a financially comfortable retired life. Over this, there are many lies/myths surrounding retirement planning which need to be dispelled or it may hinder your progress in planning for retirement. Below are a few of them

1. Too early to start saving in the 20s

Why be bothered when I am just starting my career, is what many think. It’s a general myth that they can save later on in life for their retirement in their 40s. People think that since salary is low at earlier stages, it would be better to contribute bigger amounts when the salary gets fatter. Small savings at initial years of employment in life is more beneficial than saving a large amount at a later stage in life. A SIP (systematic investment plan) in the mutual fund of Rs 1000 for 35 years compounded at an annual rate of 15 percent can give approx Rs 1.45 Cr, where as Rs 10,000 for 10 years will give you only Rs 27.5 lakh amount earning a similar return.

10 big Lies that skew Retirement Planning Click to Tweet

2. Social security will take care of retirement needs

During their careers, people generally don’t bother about their retirement life as they think that social security benefits will take care of their retirement needs. This is very common with people serving in government departments. But, social security benefits don’t guarantee the same standard of living of a person in the post-retirement phase considering the inflation and the old structure of defined benefit plan.

3. Need less income after retirement:

It’s a myth that one will spend less money after retirement. It has been observed that people spend more money in the initial years of their retirement. This is the time when they freak out, purchase what they have been longing and do things they had been postponing due to their hectic work style during their career. They spend money on holidays, gifts and hobbies.Retirement Myths

Read: Is Rs 1 Crore enough to retire?

4. Medicare will cover all health expenses

Medicare doesn’t cover all health-related expenses. There are many costs which are not covered under medical insurance and the burden of these costs falls directly on the person. Even medical insurance covers only a portion of doctor’s fees and treatment and not the entire treatment. These costs are estimated to be huge and must be considered well while preparing a retirement plan.

5. Work until full retirement age

People believe that they will work until full retirement age which is 60/65 in most cases. But one cannot be certain that one will be able to work until the age of 65. It has been observed in many cases that one has to unwillingly take early retirement due to some untoward circumstances like health issues or shifting to another country. Thus one should start saving for their retirement from the initial years and must not rely on the savings of the last years of employment.

6. Inheritance will cover the retirement needs

Calculative Indian minds should not forget at least this! If one is likely to inherit some fortune in the future, it doesn’t mean that one should not bother about retirement needs. It can be likely that the inheritance could be used for paying off the debts or building assets for the future generations.

big Lies that skew Retirement Planning

Read: Retirement Planning Vs Child Future Planning

7. Prioritizing it as an Important Goal

The greatest challenge faced in retirement planning is that it is never given prime priority. When one prioritizes his or her desires, retirement planning never finds the first place and one keeps postponing or putting it off until other desires are met.

8. Rely on Bonds than Equity

It’s a myth that one should invest in bonds which are safe investments for retirement and should keep away from stocks. While planning retirement for a 30-year period, one can invest in stocks either directly or through equity mutual funds which are professionally managed. Inflation can erode the returns of your investment in bonds. Also if you are planning for 25 years plus, equity is best in terms of returns.

9. Lower tax bracket after retirement

It is not necessary that income after retirement will fall in lower tax bracket. It may be possible that income clubbed together from all the sources (like from pension, rental income, interest, capital gains and income from other investments) can raise an individual to a higher tax bracket.

10. Can always keep working

A person may want to keep working even after retirement, either part-time or full-time. But it may not be possible for all.

Thus few of these myths related to retirement planning can obstruct us in building a correct and suitable plan to fulfill the needs of our post-retirement life stage. A true financial planner tries his effort best to eradicate and educate these myths. One needs to understand the implications and should take advice from a professional for building a successful Retirement Plan.

If you would like to know how you need as retirement corpus & how you can achieve that  –

check my Do It Yourself book “Financial Life Planning”

7 Ways to kickstart the Saving Habit

Hemant Beniwal
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7 Ways to kickstart the Saving Habit

You might think this is another sermon on saving money and the article might ask you to start habits that might make you and your family lead a miserable life. I am not giving any such advice. Really! I am sharing some ways that will help you save money and make saving a lifelong habit.

7 Ways to kickstart the Saving Habit

Read More – Importance of Financial Planning in Your Life

Kickstart the Saving Habit before its late

1. Start with small steady steps

You have heard the phrase – ‘slow and steady wins the race’. We should use the same approach while saving. It is not easy for many of us to have discipline in our finances all the time. So you should start with small steps to inculcate the savings habit. You should set up a small target amount to be saved in the beginning. You need not wait for a big amount to invest. You can make small investments as soon as you have some savings or even before that – when you just get your income. Investing early is financially beneficial. When you meet these targets, you will get confident and be more motivated. You can then set bigger targets. You should be regular in your savings so that you have an idea of how much time it will take to meet your target and you are able to generate this amount in a defined time. Try investing in PPF, MF SIP, or Bank RD.

7 Ways to kickstart the Saving Habit Click to Tweet

2. Plan your Shopping

Most of us love shopping. Shopping malls have attractive displays that tempt us to buy. Last month was such an example as all carries their season-end sales. Before shopping especially in a mall, it is best to make a list beforehand of the things to buy/do there. When your hand reaches out for something, check the list, and if it is not there, the thing back in its place. It is best to use cash to shop – you will feel the real pain. You will have an idea of the money you are spending and be more conscious.

Many of us visit the mall as a weekend activity and end up splurging. Try to go to shopping centers only if it is required.

3. Make a budget and stick to it

It is important to create a monthly budget. Create a realistic budget of your expenses that includes expenses on entertainment and leisure as well. Then set a target amount to be saved every month. This is not enough. You should stick to the budget as well. Track your expenses and make sure you are not going over the budget. If some expenses are more than planned, try to reduce expenditure in another area so that the target amount to be saved is not compromised upon.

7 Ways to kickstart the Saving Habit

4. Avoid extensive use of credit cards

You like something and want it but do not have the money. That is not a problem as a simple swipe of the credit card gives you what you want. Credit cards are convenient when we are spending but when the bill comes, we realize that we went overboard. Do not keep more than 1 or 2 credit cards and use it only for emergencies like medical expenses. You should pay the bill on time and pay the full amount to avoid penalty charges or late fees. It will also save money and time that you lose in terms of calling up the credit card company and trying out innovative ways to reverse the charges.

Read: 7 costly credit card mistakes almost everyone makes

Moreover, if you really want something and you save up till you have enough money to buy it, you will understand the difference between wanting or just an impulse. You will value the purchase more as you know you have worked hard to get it.

5. Check your bills

Do you assess the amount you spend on petrol, electricity, mobile bills, cable, Internet plans, etc? When the electricity bill comes or when you see the fuel bill, you cringe at the amount to be paid. Instead, ensure that you or your family does not waste electricity by having energy-efficient appliances in the house and unplugging/turning off appliances when not in use. You should check alternative options of commuting to work instead of using your private vehicle. You can try out public transport or taxi sharing. You might also meet interesting people that way.

Relook at your mobile plan, Internet plan, and cable charges. Is the plan best suited for your usage? Are there more economical plans available? Do you receive channels on TV that you never view? Answers to these questions will help you get an optimum plan and reduce your expenses. These steps would result in increased savings.

Read: How someone reduced Rs 20000 from annual expenses – just 8 hours effort

6. Donate to yourself

This is a great idea. It helps in two ways. Every time you splurge or make unplanned expenses, put away a small percentage of the spent amount in a box. This will make you think twice before buying something and also increase your savings, as money would get accumulated over a period of time if you don’t follow your budget.

7. New ways to earn money

You need not stop at earning one income. Were you part of a band in your college days? Were you the one who everyone went to when they had to finish up their projects? You can freelance for assignments where your talents lie. You could take up creative projects, take tuitions or be part of a music band playing in hotels, functions for the weekends. You will earn more leading to more savings and at the same time you might find your true calling or end up starting a new business/profession.

These steps will ensure that you get into the habit of saving. Savings will ensure that you have a stronger financial base. You will feel good that you achieved your targets and just feeling good about yourself definitely does wonders to the mind and body.

Please share your saving strategy in the comment section – hope that will help other readers.

How to Choose your Financial Advisor? Top 3 Factors To Consider

Hemant Beniwal
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How to Choose your Financial Advisor? Top 3 Factors To Consider

Finding financial advisors or sales representatives who call themselves advisors, is easy. They are seemingly on every street corner. More than 50 Lakh people in India sell investment and insurance products. The low entry barrier for selling financial products has ensured that anyone at all can become an advisor.

How to Choose your Financial Advisor? Top 3 Factors To Consider

Must Check – What is Financial Planning?

The basic expectation from an advisor is that he would offer unbiased advice. But recent interventions from the regulator about fixing the code of conduct for these advisors in many industries have clearly indicated the gap. They have become part of the problem and not part of the solution. You would be shocked by reading my last sentence… but it’s true.

How to Choose your Financial Advisor?

Let me share a few points which will help you to find your financial advisor. The list can be long… but let me keep it simple & stick to the top 3 points, which merit attention.

Comprehensive

Someone rightly said, “To a man with only a hammer, every problem looks like a nail.” For all your financial needs be it – Saving, Children’s Education, or your Retirement Planning an Insurance Agent will be ready with a Policy. Also, the agent obviously will only promote his company’s product and may not even know much about other company’s offerings. Similarly with mutual fund agent, he will hate to talk about post office schemes, corporate FDs, or Bank FDs.

How to Choose your Financial Advisor? Top 3 Factors To Consider Click to Tweet

Has any advisor ever told you that you should repay your loan first & then think of investment or you should keep some amount for emergency needs in a savings bank account or liquid fund? Your advisor should follow one principle – “people have one thing in common that they all are different”. He should not try to fit the person into an already tailored coat. He should look at every aspect of the client’s financial situation. That’s the only way to give truly customized, comprehensive advice.

How to Choose Financial Advisor

Must Read – How to Setting SMART Financial Goals?

Independent

Is your Best Interest his Only Interest or something else is cooking in his mind when he is talking to you. Is he thinking about his monthly target or yearly bonus which is dependent on an expensive product being sold to you? If your advisor is working with any bank, brokerage firm, mutual fund house, or insurance company, there is a good chance that your goals & requirements are on the back burner. His sales pitch is derived/motivated from something else. This type of advisor is very dangerous for any individual. Try to search for an advisor who is genuinely interested in your goal & long-term relationship with you. His ethics should guide him rather than his boss & company.

So if you are looking for above mentioned 2 qualities you will mostly end up finding an Individual Financial Planner – but In India, the term “Financial Planner” has been in confusion for quite some time now. In the absence of any local regulation or guidelines, anyone can call himself a “Financial Planner” without having the necessary training, education, or certification. There are so many individuals who decide to start putting the term “Financial Planner” in their business cards leaving the public more confused. So here comes the last point which is equally important.

Competent

Have you ever tried to find out what is the education, knowledge & experience of the advisor who is guiding you? Warren Buffett quoted “Wall Street is the only place people ride in a Rolls-Royce to get advice from people who ride the public transport.” That’s true in India also I have seen many people taking stock advice from those who are sitting on terminals or brokers which have zero knowledge about Investments. Employees from banks who have just joined after completing their management course will pose that they know everything related to investment world & they are masters in it.

The best way to find the right advisor is to shortlist a few advisors that you feel have good knowledge. Draw a questionnaire – ask some questions that will help you to analyze them. There is nothing wrong in asking these questions. Along with education and experience, ask about his association with financial companies. Is his earning linked to his performance and if yes, by how much? These questions will answer your concerns over his advice.

Finding a good advisor is time-consuming but this will decide your financial success. Try to find a good advisor that’s right for you.

This also got published in Business Bhaskar Newspaper
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