How a good financial planner creates value for clients!

These are uncertain times of high inflation and rising cost of living; Financial Planning helps one to find answers on many financial challenges. The Financial Planning services are best secured from a fee-only Certified Financial Planner or SEBI Registered Investment Advisor who provides unbiased advice independent of product sales. 

 If you pay fees for financial planning, what do you get in return? Will you be able to recover the value of the fee that you are paying?

 

The first thing that you need to appreciate is that financial plan is a blueprint that we create, to achieve future goals.  This offers a framework and a path that could be followed to reach the destination. It is like drawing a strategy for you that clarify your current situation, the final destination you need to reach and how you should get there. A Financial plan gives you clarity about your current situation, achievement of future goals and peace of mind. This by itself is the single most important benefit of a financial plan. Further it brings in Financial and Investment discipline, which is a problem area by itself to many.

A good unbiased financial planner also offers various benefits where clear monetary values can be assigned to benefits derived. Let us see what they could be.

1. Life Insurance:  Many make huge mistakes here. An insurance plan is a long-term scheme where there are high annual charges and the surrender is costly. A wrong insurance plan can cost a person tens of thousands of rupees per annum. And if it has been done in a wrong plan not suitable to your goal, it is money down the drain.

For instance, if one has invested Rs.50,000 pa in an insurance policy and the first year charge is 20% and subsequent year charges are 5% for next two years and 2% thereafter. The charges on premium allocation alone would be 34% in the first five years. That adds up to Rs.17, 000/- in these five years. This is just one charge.

For a client, we analyze all the charges and ensure that clients take low cost products for insurance (Link is broken) and good investment products for achieving their goals. Bulk of the costs would have been saved, sayRs.15,000/-.

2.  Medical Insurance – Here too, it is just not a question of choosing the policy with the lowest premium. You need to consider the benefits offered, time before they cover pre-existing illnesses, pre & post hospitalization expense reimbursement, domiciliary treatment, day care procedure coverage etc., before taking a plan. Also, one needs to consider policies / riders for hospital cash & critical illness.  Now, there are ways to save premium and at the same time keep the coverage high.

One of the ways is to take a top-up policy. A top-up policy taken over and above the basic cover helps in saving substantial premiums.   The savings can be over Rs.10, 000/- for a family of  four.

A risk profiling done by fee-only Certified Financial Planner or SEBI Registered Investment Advisor will give you more clarity on insurance. 

3. Tax efficiency -   Most people only see how many returns they would get and not see what they get after taxes. For instance, if you were to invest Rs.10 Lakhs in bank FDs and the same amount in a debt MF and both were to offer the same returns of 10%, the post-tax returns for FDs would be 6.9% post tax ( for someone in the highest tax slab ) and as high as 9.5% or more post tax in case of a debt fund. The difference in this case would be a substantial Rs.26,000!

Also, lot of people keep money for liquidity purposes in their bank accounts. The amounts that people keep in their bank accounts are substantial.

Let us say there is Rs.3 Lakhs in the bank account for liquidity purposes. We would probably have advocated investing half of that in ultra short-term funds. Ultra ST Funds would offer about 7.5%pa returns post tax and SB A/cs offer 2.8% returns post-tax. If you calculate, you would make Rs.7,050/-more per annum by just investing this way.

There are other ways to where we can offer substantial difference, even in simple money terms. Think about it carefully and then contact us. We can make a world of difference to you.

Hence, get your tax planning done by SEBI registered investment advisor or certified financial planner. This will help you to grow your hard-earned money more efficiently and peacefully. 

Last modified on Friday, 16 August 2013 13:29

Prakash Praharaj

Shri Prakash Praharaj has a passion for excellence. He has been awarded two gold medals for securing top positions both in Graduation and Post Graduation in Commerce. He is an MBA with specialization in Finance and marketing. He has been awarded Diploma in Treasury, Investment and Risk Management besides CAIIB from the Indian Institute of Bankers. He is a Certified Financial Planner from the Financial Planning standards Board, India (FPSB), affiliated to FPSB, Denver, USA and Certified Personal Financial Adviser from NISM. He is also a SEBI registered Investment Adviser vide Reg. no. INA 000000045 dated 2nd August 2013.His book "Your Every day guide to Personal Finance and Insurance" has been published by CNBC TV 18 in August 2015.

3 comments

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    Saturday, 03 August 2013 09:39

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