Financial Matters - Financial Planning

FINANCIAL PLANING:

A financial planner is some one who uses the financial planning process to help another person determine how to meet his or her life goals. The key function of a financial planner is to help people identify their financial planner needs, their present priorities and the product that are most suitable to meet their needs. The financial planner normally possess detailed knowledge of a wide range of financial planning tools and products, but the planners major role is to help clients choose the best products for each need the planner can take a “ big picture “ view of a client’s financial situation and make financial planning recommendation that are right for the client.

The planner can look at all of client’s need including budgeting and savings, taxes, investments , insurance and retirement planning or, the planner may work with his client on a single financial issue but within the context of his overall situation. This big picture approach to a client’s financial goals sets the planner apart from other financial advisers, like tax advisors and insurance agents, who may have been trained to focus on a particular area of a person’s financial life.

BENEFITS OF FINANCIAL PLANNING:

It may be necessary for a person to save for many years to create adequate income in the retirement phase. It is important that financial plans are tax efficient. The simplest plans may mean little more than making contributions into a suitable financial products. The most complex plans will involve detailed knowledge of law, taxation and investment principles. A mildest this complex environment for an investor, financial planning provides direction and meaning to financial decisions. It allows one to understand how each financial decision one makes affects others areas of one’s finances. By viewing each financial decisions as part of a whole, one can consider its short and long-term effects and on one’s life goals. One can also adapt more easily to changes in life and feel more secure that one’s goals are on track.

Ability to establish long-term relationships:

A financial planner is just selling products, but is instead taking responsibility for the financial well-being of his clients. With such an approach, it is easy to build lasting relationships, unlike in a transaction- oriented, products selling where a customers has to be found a new for every fresh investment.

Ability to build a profitable business:

By offering value added service, the financial planner takes the emphasis away from price and is able to retain enough to build a profitable business. Cleary, clients are less likely to ask for a rebate if they perceive good advices and value being offered them. If one does not offer such advices, then it is merely a commodity service where there is intense competition, difficulty in retention and narrow margins.

FUNDAMENTALS TRAITS OF SUCCESSFUL FINANCIAL PLANING

Building trust with the client by empathizing with them and understanding their aspirations, concerns and needs, good listening skills and the ability to ask the right questions.

Good knowledge of financial products and options, their risk- return profile, and strong understanding of the behavior and track record of various investment and assets classes.

Familiarity with taxation and estate planning issues.

An understanding of the various stages in client’s life and wealth cycle and the assets allocations that make sense for each of these stages.

Independent judgment and balanced thinking. Which is a key value that must be shared with clients when they overreact and get overly elated or dejected based on market sentiment.

An organized way of working, with one of the critical elements being a written financial plan which documents client needs and resources, a specific investment strategy and the progress made towards achieving those objectives.

Regular contract with clients, especially during times when the client’s portfolio has declined in value and they are feeling disillusioned. This is the time to remind clients that the only measure of a successful investment is how well it helps in achieving the client’s goals. Clients should realize that such setback are temporary, the natural price one pays when aspiring for growth, and that overtime the portfolio should perform to their expectations.

Finally, a clear focus on the overall financial well-being of a client, rather than on individual transactions. In an ideal sense, the in financial planner should link his remuneration to the overall achievement of client goals, rather than relying on a fee from each transaction. This ensures that there is consistency and alignment between planner and client- the better off a client is as a result of professional investment advices, the higher the rewards for the planner.