Will : legal declaration of how a person wish his/her possession to be disposed after their death
Return : Profit or loss derived from an investment
Investor : An investor is any party that makes an investment.
It is a type of pure insurance plan where the beneficiary will get the benefit only in case of death of the policy holder during the policy term.
Compounded Annual Growth Rate is the year over year growth on an investment at the given point of time.
Wealth is accumulation of resources or as on date value of assets a person own. Commonly Net worth is the measure of Wealth of an individual.
Investment Planner: One man who changes everything about your financial future
Investment Planner can make or break your financial future. A right investment planner puts your “Financial Present” in order. So that your “Financial Future” becomes perfect.
Many of the world’s most influential people have benefited from having a mentor, such as:
• Plato – mentored by Socrate
• Alexander the Great – mentored by Aristotle
• Helen Keller – mentored by Anne Sullivan
These mentors shared their expertise with their mentees and transformed them.
Similarly, Investment Planner is your financial mentor who coaches in shaping your financial future by seeding your financial present.
Common Misconceptions: Who is NOT an Investment Planner?
The term “Investment Planner” is used loosely by most of the people. So it is imperative to know who is NOT an investment planner.
1. Chartered Accountant:
An auditor focuses on how to account your income, reduce your tax and file tax returns. An investment
planner focuses on retaining and increasing your
financial commitment in order to achieve your financial goals.
2. Investment Broker:
Investment Broker is a person who sells financial products like insurance, mutual funds, stocks, PMS in order to earn a commission. He sells you investment schemes in order to earn him a commission. He pushes financial products to you. Some investment brokers missell wrong investment schemes and make commissions for them.
Investment Planner is a person who coaches you on managing personal finance. He will make you take the right financial and investment decision. He educates you, pushes you out of your comfort zone and transforms your financial life and charges fees from you. As he is charging fees from you, he will be customer centric and unbiased.
Investment Planner is like a doctor and the investment broker is like a pharmacist.
Investment Broker = Investment schemes seller
Investment Planner = Financial consultant or counselor
Whom you rely on for your long-term financial success? An investment broker or an investment planner….
Revealed: 3 Categories of Investment Planners and who is right for you?
Investment Planners can be broadly classified into these 3 major categories. Understanding them in detail and carefully choosing the particular category to suit your requirement will put you in the right direction in your financial life journey.
i) Individual Investment Planner:
Individual Investment Planner is a professional who provides investment planning services as an individual. Mostly he runs a small office – home office. There are no associates, partners, assistants or employees for him.
ii) Firm of investment Planners:
Firm of Investment Planners is a firm which provides investment planning services. These firms mostly have a small to medium sized office. There will be more than one certified financial planners and they will have associates, assistants, and employees to support them and the clients.
iii) Corporate Investment Planners:
These are the large corporate companies or financial institutions or banks that are into investment planning services. They will have large offices in different locations and a large workforce.
Which Category of Investment Planner is right for you?
Every category has its own pros and cons.
Individual Investment Planner comes with a risk of not able to access them for any critical situation when they are temporarily not available and no backup.
Corporate Investment Planner comes with a risk of frequent change in POC which affects continuity. Also, we need to consider corporate investment planners with a pinch of salt about their biased recommendations.
The firm of Investment Planners brings you the perfect blend of accessibility, expertise and unbiased advice.
Warning: All “Investment Planner Firms” are not the same.
All that glitters are not gold. Similarly, all investment planners or investment planner firms are not the same. Though they all claim themselves as Investment Planners…
There are 3 types of Investment Planners based on the purview of their service.
I. Systematic Investment Planners
II. Goal Based Investment Planners
III. Full-fledged Investment Planners
Based on the scope of their service, they will fall under one of these types.
It is not sufficient to select the right category (individual, firm or Corporate) of investment planner, you also need to choose the right type (systematic, goal based or full-fledged) of investment planner.
Is your investment planner giving you basic investment plan or limited investment plan or complete and comprehensive investment plan?
I. Systematic Investment Planners:
These investment planners provide very basic investment planning services to their clients. They just recommend schemes after just 2 questions.
• When do you need this money back?
• Are you willing to take the risk?
Based on the answers, they develop a few systematic investment plans that can be made on a monthly basis.
Here, there is no big picture. Client’s complete situation is not understood by the investment planner.
II. Goal Based Investment Planners:
These investment planners provide limited investment planning services to their clients. This will be of a typical financial planning service.
All the financial goals of a client are taken into consideration. They come out with a beautiful report that gives clear direction to financial goals.
Client’s complete financial situation is understood by the planner.
Then, in what way, they are providing limited service?
To understand their limits and limitations, please go through the next type of investment planner.
III. Full-fledged Investment Planners:
These investment planners don’t limit themselves just with a goal based financial plan and investment plan. They provide a wholesome, holistic, complete and comprehensive investment plan.
a) Personal Finance = 80% Person oriented + 20% Finance oriented
Why did Michael Jackson and Boris Becker become bankrupt?
They are celebrities and sought after clients of a corporate investment planners.
Long-term financial success will be achieved by a client when the investment planner not only just looks at the financial side; but also the human side.
If an investment planner worked with them on the human side of the financial plan, then their relationship with money could have changed. Their thought process in managing their wealth could have changed. They could have ended up taking right financial and investment decisions.
b) Text Book Problem Solution Vs Practical Coaching and counseling:
In goal based investment planning, all your financial data is collected and viewed just like a problem in a textbook and they arrive at a solution that will be given to you as the financial plan report.
In full-fledged investment planning, they go beyond the report.
• They explain you on … what habits, strategies, and techniques brought to your current financial situation.
• They educate you on … what new habits, new strategies, and new techniques applied TODAY will take you to the desired financial situation in the future.
• They coach you on how to give up old habits and strategies and how to go up with the new habits and strategies.
• Their relationship is not just transactional, but transformational.
c) Report Oriented Vs Relationship Oriented:
Can you expect a drastic progress in a patient’s health, just by doing a health checkup and giving him a medical report with a prescription?
The report needs to be explained to the patient; the patient may need counseling; hand holding in following the prescription; coaching in changing the lifestyle, monitoring and reviewing the progress…
A robotic financial planner may generate the financial plan report for the client and expect the client to implement and achieve financial goals.
But a full-fledged investment planner goes beyond the report and builds the relationship with the clients by working on the client’s skills on wealth creation, wealth preservation and wealth management.
They want the clients to get educated; They organise educational seminars and webinars.
Full-fledged Investment Planners make the client feel confident about their financial future by bringing client’s current financial situation under control.
These investment planners spend more time with the clients in educating them, transforming them, making them implement the plan and motivating them to retain the commitment towards the financial plan.
d) Informing Vs Involving:
In goal based investment planning, the clients are informed about the output about the plan. The client may have less conviction on the plan, this way.
In full-fledged investment planning, the clients are involved in the process of preparing the financial plan at different stages.
• During the initial feasibility study, if the client's goals are unrealistic or unachievable, to make it workable a discussion on the scenario analysis.
• To make the clients understand, the different school of thoughts in the investment world and which school of thought the investment planner belongs to. A discussion on different investment products and investment strategies.
• A discussion on the financial plan for the client at the last stage to fine tune the plan and create the final financial plan.
• A discussion on the final financial plan to understand the nitty-gritty.
• A discussion on implementing the financial plan.
• Getting the feedback on implementation; understanding the challenges in implementing the plan and making it easier for the client to implement.
With this method, investment planner, not just informs the client and also involves the client in the process. So the client has a complete conviction on the plan. This psychologically motivates the clients to take action and implement the plan.
e) Investment Returns Vs Investor Returns:
In the last 5 years (July 2012 to June 2017), the top-performing equity funds have delivered 25% + CAGR. If one could have invested Rs. 1 lac in these funds in July 2012, the value on June 2017 is Rs 3 lacs +.
Though these investment schemes have delivered this return, how many investors actually received this kind of return actually? Very less.
It is because investors hesitate to enter the stock market or want to come out when the markets are down in between …
In order to increase the investor returns, full-fledged investment planners work on the investment behaviour of the clients. Their professional way of educating and counseling the clients, make the required transformation in the behaviour of investors.
f) Retaining the financial commitment:
There is a difference between interest and commitment. When you are interested in doing something, you do it only when it is convenient. When you are committed to something you accept no excuses; only results.
The commitment level of you towards your financial plan may come down because of other priorities and pressure. But full-fledged investment planners will help you retain the commitment by focusing on the importance of the plan and making you understand what will be the future loss if not implemented.
g) Advice Oriented + Action Oriented:
Full-fledged Investment Planners know very well that “Change starts with you, but it doesn’t start UNTIL YOU DO.”
It is not just the advice given by the investment planner that makes the remarkable financial results; It is the action taken by the investor that brings the results. Taking the action and bringing the change to the financial situation is not going to be easy but it is worth it.
A full-fledged investment planner will make sure that
• you do what financial action item needs to be done;
• when it needs to be done and
•in response to the needs of the financial situation.
h) A unique exercise of meeting Mr. Future:
This is a unique exercise which we do at our company for our clients
• that changes the complete perspective of the clients,
• that increases the level of financial commitment of the clients
• that makes the client more action oriented.
Clients may find it difficult to implement 100% of the plan, may postpone surrendering an insurance policy, may delay in signing up a new term insurance policy…, this exercise has brought them the required result.
Imagine you are getting into a time machine. You are setting the time machine to travel 10 years from now. The time machine quickly transports into the future (10 years from today).
You slowly get down. You are excited. You see a man. He looks very similar to you. He has more gray hairs than you. He has few more wrinkles on his face. But he resembles very much like you.
It is none other than your future self. Your Mr. Future.
He comes close to you. He recognises you.
He thanks you for creating a financial plan. He explains to you that how comfortable his life there because of the financial action items you completed 10 years back. He is really proud of you for surrendering unwanted investments and signing up for the useful investments. He is overall very grateful to you for your financial commitment.
You feel really great and get into the time machine again and come back to the present.
When you meet your Mr. Future, you want him to thank you for the financial actions you have taken or you want him to regret for the financial actions not taken and kept pending.
List down the activities, you need to complete TODAY, so that your Mr. Future will be thankful to you.
This exercise will help you find a way to do all the financial action items instead of coming out with excuses.
A full-fledged investment planner will connect you with your Mr. Future so that you take the right financial action at present.
You will not compromise when it comes to choosing a financial mentor who can make or break your financial future. Your hard earned money should be managed just not by a desirable investment planner but by a deserving investment planner.
Most of the cases, a right investment planner for you is a Firm of Investment Planners providing Full-fledged Investment Planning services.