FINANCIAL PLANNING TOOLS & CA PRACTICE

FINANCIAL PLANNING TOOLS & CA PRACTICE CA ARVIND A. RAO ARVIND RAO & ASSOCIATES CA 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 goals CA Arvind A. Rao

Key Findings CA Arvind A. Rao

140 % increase in respondents rating retirement as a key goal • 48% respondents mentioned family as their top financial priority • A 22% drop from 2012 • Approx. 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 / cars • Traveling around the world • Youngest age-group 28-33 years are giving increased importance to retirement CA Arvind A. Rao

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 CA Arvind A. Rao

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 CA Arvind A. Rao

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 CA Arvind A. Rao

What does this mean for CAs? CA Arvind A. Rao

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 CA Arvind A. Rao

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 CA Arvind A. Rao

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’ CA Arvind A. Rao

SEBI – RIA : Game changer CA Arvind A. Rao

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 CA Arvind A. Rao

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 CA Arvind A. Rao

What is financial planning? CA Arvind A. Rao

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 CA Arvind A. Rao

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 CA Arvind A. Rao

TOOLS OF FINANCIAL PLANNING CA Arvind A. Rao

SETTING UP AN INSURANCE PORTFOLIO CA Arvind A. Rao

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 CA Arvind A. Rao

LETS TALK ABOUT YOU CA Arvind A. Rao

Creating personal net worth • Distinct from business needs • Making way for expansion and new partners CA Arvind A. Rao

MASTER PLAN CA Arvind A. Rao

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? CA Arvind A. Rao

SUCCESSION PLANNING CA Arvind A. Rao

Why plan for succession ~ Raja Harinder Singh case • Important for businesses: • Taxes • Risk • Control • Value • Designing and implementing the succession plan CA Arvind A. Rao

RETIREMENT PLANS CA Arvind A. Rao

Setting up the retirement nest-egg • Planning milestones • Post-retirement corpus • Strategies for maintenance of the corpus: • Systematic withdrawal • Annuity model ~ capital preservation • Time-segmented allocation model CA Arvind A. Rao

HOW TO BEGIN? CA Arvind A. Rao

Joint venture with an established professional ~ to work with the firm on a regular basis • Self-education • Referral ~ formulated agreement CA Arvind A. Rao

QUESTIONS CA Arvind A. Rao

THANK YOU ARVIND RAO(M) 98700 33370arvind@caarassociates.com CA Arvind A. Rao

FINANCIAL PLANNING TOOLS & CA PRACTICE