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Financia Planning And Wealth Management

Wednesday, May 13th, 2020


Personal Financial  Planning is the process of planning for money to be made available for oneself in the amount that one wants it, at the time one wants it and in the manner, one desires to have it. It aims at meeting your current and future financial goals. As the word “Personal” denotes, it is very specific to an individual. The age, life stage, aspirations, liabilities, existing financial positions differ for every person, so does the plan. 

Wealth management refers to money in all its aspects. Its aim is to conserve, grow, and distribute and/ or transfer residual wealth.

A  key differentiator between the two is that Financial Planning is more of day to day in nature and involves dealing with money as it is earned, deployed, and harvested. Wealth Management on the other hand deals with wealth which already exists.

Financial Planning

Financial resources are invariably limited, while aspirations are unlimited. Future events are either foreseen or unforeseen. Financial Planning helps to deal with the unfortunate events better and also increases the probability of achieving financial goals and therefore fulfillment of dreams. Planned investments ( and liabilities) offer peace of mind not achieved with ad hoc investments.

Financial planning can be broken down into six steps as follows

1.Assessing  the current  financial  position—Income, expenses, assets, and liabilities

2. Setting financial goals—specific, time-bound targets eg. Children’s education, new house, retirement, etc

3.Risk Profiling—Attempting to know the capacity and willingness to take risks ( specifically – face  erosion in the capital )

4.Deciding  the asset  allocation—match the investment  and insurance products to the goals based on the information gathered in the first three steps 

5. Regular review and course correction—Ensuring that the plan is progressing as desired and making changes where necessary. It may also involve redemption of assets for the planned goals and or injecting more funds if necessary. Incomes change, aspirations increase, adversity may arise at a personal level or at the general economic level. Emotions are strongly attached to ones goals. Therefore this step is the most challenging part of Financial Planning. A  competent financial planner/ advisor who can offer   UNBIASED, NON-EMOTIONAL advice is therefore necessary to avoid pitfalls.

6. Estate Planning —Every individual wants his desired near and dear ones to enjoy the fruits of his lifetime earnings. Estate planning aims at passing on your assets to the person whom you want to, when you want to, in the manner you want to.

The  above  steps  if  followed  meticulously  bring  clarity of thought and   despite  risks, volatility in markets  and setbacks  in various asset classes  lead to a “ HAPPY   INVESTMENT  EXPERIENCE” 

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Key aspects of investments are  –Safety  ( of Principal ) –Liquidity ( timely availability of assets ) —Return ( income from the asset/ appreciation of the asset) —Taxation ( tax efficiency of the earnings/appreciation of the asset) —in short SLRT. Wealth Management aims to achieve this is exactly the above order of priority. 

The wealth available to be managed being a prerequisite,  a wealth manager serves the needs of the wealthy, high net worth individuals/families. Typically such individuals have large and complex portfolios, interlinked ownerships, business interests, complex taxation needs, assets (and therefore legalities) may spread over different geographies and nationalities, have cross-currency holdings or any other specific needs.

Like  financial planning Wealth Management is also highly customized and  can include some or all of the following

1.Objective Setting

2.Risk Profiling

3.Asset allocation, reallocation, and continuous monitoring, review.

4.Taxation, accounting, and legal advice

5. Liaising with banks, financial institutions, real estate firms, precious metal dealers, art dealers, charitable institutions etc.

6. Selling or buying stakes in businesses or funding projects.

7.Private  Equity 

8.Retirement Planning

9.Estate Planning

It is obvious from the above that a very often unique set of solutions outside the commonly used tools are required in wealth management.

The arena of  Wealth management is vast and not specifically defined. Its objective is to put existing wealth to the most efficient use and transfer it hassle-free to the next generation. There are a few firms and some banks who offer wealth management services for a fee.

There are many misconceptions and myths pertaining to financial planning and wealth management, which we will elaborate on in another article.



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