Financial Planning & prudent Wealth Management (FP/WM) – your duty to your family

Accumulated savings, invested well, result in Wealth. There is Rs 86 lakh crore of wealth with individuals in India (source: Karvy Private Wealth’s India Wealth Report). Because Indian economy has started galloping at a quicker pace only in recent years, significant part of this wealth has been generated in last 5-10 years. Hence, India is a “neo-rich” nation. Handling wealth gracefully and prudently is something we are learning as a nation. However, we don’t have too much of time to learn this because wealth with individuals in India is going to increase to Rs 250 lakh crore by 2016!!!

Along with great power comes great responsibility. Hence, it’s almost a responsibility for us to understand the basics of Financial Planning and Wealth Management (FP/WM).

This article tries to demystify the frequently used terms of Financial Planning and Wealth Management, covers the types of people who need FP/WM (short answer : everyone), lists down what all is included in this process, and a comprehensive list of all Investment Products available to meet your financial goals.

Hmmm…not for me

“I save well and look at costs carefully – so I don’t need Financial Planning or Wealth Management”; “Let me get enough money and savings first – then I shall start doing serious wealth management”; “I have enough wealth to last me a life-time – do not need Financial Planning”; “I have adequate life insurance – this is my Financial Planning”; “I am a senior executive; shall start financial planning or wealth management sometime soon”; “I have a huge home EMI; shall start doing my wealth management after repaying the loan”.

So go ahead, and pick your scenario from any of the above. Or of course, since your situation is “unique”, you could fall in yet another situation. However, in your heart of hearts, you know that all the above fall in the same category as “I shall start exercising from tomorrow” or “I shall stop smoking from tomorrow”. Well, postponement of Financial Planning and prudent Wealth Management (FP/WM) is 3-4 times more serious and deadlier than either of the above 2 health-related postponements. Because it may affect the lives of your entire family and possibly those of a few generations to come.

We have covered enough so far in this article to almost declare that FP/WM for your family is not a luxury or a “nice-to-do” activity but your duty towards your family. Each day that we don’t start doing this for ourselves, we are letting down our loved ones.

What is covered in Financial Planning & prudent Wealth Management (FP/WM) ? 6 Objectives…8 Goals…

Well, doing FP/WM is creating and executing Investment Plans for taking take care of ALL of the following six scenarios / objectives:
1. If I die tomorrow, my family members should be able to maintain the same level of living that we had planned for, and should be able to fulfill their aspirations for their individual lives

2. If I live till 100 years, my family should not fall short of money in the years after I stop working

3. If I have an accident which forces me not to work after that, my family members should be able to maintain the same level of living that we had planned for, and should be able to fulfil their aspirations for their individual lives

4. My savings are invested smartly to build separate buckets of wealth, each bucket designed to meet one key goal of my life; these goals would typically be :

• my marriage,
• buying a good home,
• higher education of children,
• marriage of children,
• annual vacations,
• post-retirement expenses,
• legacy for future generations and
• charity

5. Besides taking care of my key goals, my investments should work hard and be invested in the smartest options, which give maximum returns

6. If there is a collapse in equity markets or real estate or gold or interest rates, my investments should not get significantly hit.

So, we are talking about Mutual Funds, Stocks and fixed deposits, correct?

Well no, the options for investments have increased manifold over the past few years for smart Indian investors. As you may guess, each one of the products will have few sub-types & variants, and will play a different role in your portfolio.

A good FP/WM firm will recommend a judicious combination of multiple products from the below to meet your desired returns at acceptable risk levels and also simultaneously, meeting each of your life goals :
• Direct equities
• Mutual funds
• Equity Portfolio Management Services (PMS)
• Multi-asset class PMS
• Exchange Traded Funds (ETFs)
• Equity linked debentures
• Gold linked debentures
• Bank Fixed deposits
• Corporate Fixed deposits
• Long-term Government bonds
• Real estate funds
• Private equity funds
• Real estate property
• Gold, Silver
• Gold ETFs.

As you may have guessed by now, FP/WM is a serious exercise and while we all will need a qualified professional firm to advise us on this, it is almost our responsibility to understand as much of this for ourselves – after all, we have worked very hard to create our wealth!!!

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