Posted in Finance Articles, Total Reads: 4024
, Published on 08 September 2013
In today's world everyone is concerned with increasing their wealth. For this Financial Planning is the required. In the 1960-70's the situation was very different : there were joint families, everyone was there to offer a helping hand if a person faces any abnormal situation, even very few investment opportunities were available. But now the situation as well as time has changed. Now there are nuclear families and so many investment opportunities are available like Real Estate, Commodities, Shares, Debentures, Government Securities, Mutual funds, and list goes on. Every day a new investment plan comes into the market.
This all requires a proper analysis. Proper time is required to be devoted over this. And not every individual is so much capable to make proper investment decisions. A Financial Planner helps in making a proper investment decision.
A Financial Planner is like a Doctor. Like Doctor makes us healthy, similarly a Financial Planner helps us to become wealthy. One should properly determine what he actually wants (Financial requirements) at different stages of his life. There must be a proper Investment plan. Various Investment avenues are available but where to investment is the main concern which is properly dealt by a Financial Planner. Different Investment opportunities such as Real estate planning, Tax planning, Retirement planning, Insurance planning.
Financial Planning basically involves:
Tax Planning: Indian tax structure is so much complicated that everybody cannot understand what exactly tax is. Indian income tax act is regarded as one the most complicated tax of this world. Tax includes both direct and indirect tax. However Individual financial Planner is mainly concerned with direct tax which includes Income Tax and the Wealth Tax. Financial planners have proper knowledge of tax laws so they can advise their clients about the options available to them in saving of their tax. They are well informed about the amendments in the law, various tax saving opportunities and even loop holes in the law.
Real estate Planning: Real estate planning is the area where a person is least concerned. Since a thought is prevailing that real estate planning is meant for wealthy. No planning is done by them upto a certain age. A proper real estate planning gives a financial security to their loved ones. Without proper planning the decision regarding estate is determined by the laws and regulations of the country which also a costly affair.
Retirement benefit: Retirement is faced by every individual. Everyone has to plan for his retirement. As the western culture gradually overtaking our Indian culture and one has started preferring nuclear families over joint families so a proper planning in this area is quite important. At present we are not planning our retirement properly since we have developed a thought that that our savings would be enough that can take our future needs. But the thing is these savings must be properly invested, since inflation keeps on eroding value of money. Also in India no social security system is there. An early retirement planning will definitely prove to be fruitful.
Insurance planning: One of the area where a good advice is at utmost importance. Calculating correct amount of cover requires specialized knowledge which a normal person can't have. Proper planning helps one in getting a proper cover at a lower premium or at a same premium a higher cover. Various types of insurance policies are need to be taken for expl: Medical Insurance, Term Insurance. Proper selection of insurance requires expert knowledge. Since now time has changed, now not only LIC is there which provides Life Insurance cover but many private sector players already entered into the insurance market with different types of insurance policies.
Investment Planning: As already said, day by day new mutual funds schemes and different shares comes to the market so proper knowledge of the market and the investment option is the prerequisite to make a proper investment. Proper Fundamental Analysis and Technical Analysis should be done which requires expert knowledge.
The problem that we are facing is trust. We doesn't develop a trust on Financial Planner. In our mind one thing continuously goes on that there must be some individual benefit of the planner that's why he is suggesting that option. We have developed a kind of mentality that these planners must be having some connection with the companies that's why they are recommending them. But this is not correct. Financial planners have proper knowledge of rules, laws and regulations. They are expert of their field. And they charges for that only.
However it can also be said the it is somewhat naturally difficult to develop a trust with a stranger to whom whole income and family details can be provided.
I can conclude by saying that as a proper knowledge is required to make a good investment plan, similarly proper knowledge is also required to judge a person whether he's a good Financial Planner or not.
The article has been authored by Mayank Jain(CA)
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