Moneycontrol
Oct 26, 2012 04:05 PM IST | Source: Moneycontrol.com

Why can a financial plan only be custom-made

We have always come across people saying that no two persons can have the same set of Fingerprints. This theory remains unchanged even in case of financial planning. Financial planning, in common terms, is a roadmap which ensures that you reach your destination without any difficulties.


Swati Mukund
MSVentures Financial Planners


We have always come across people saying that no two persons can have the same set of Fingerprints. This theory remains unchanged even in case of financial planning. Financial planning, in common terms, is a roadmap which ensures that you reach your destination without any difficulties.


There are several reasons why a financial plan can never be the same for two people.


1. Milestones Vary
When a person approaches a certified financial planner to sort out his economic life for him, the first question that he would be asked is “What are your goals?” It simply means that he has to list out his objectives in order of priority.


For eg. An average individual, Mr. A, who is a married 35 year old having one child may have goals like Child’s Education, Child’s Marriage, Buying a House, providing for Retirement etc. as against Mr. B who is a 55 year old who would have objectives such as ensuring Medical and other health securities for him and his family, ensuring a comfortable retired life etc.
This goes to prove that everyone has different goals in different orders of importance and the goals can also differ for the same person at various intervals.


2. Time Span Differs
With varying goals of individuals, the time frame of goals also differs. This means, that when a financial questionnaire is presented to the individual for filling up his details, he will have to list his personal details along with the goals for which he is investing for. Each of the goals will have a specific time frame attached to it i.e. in terms of days, months or years. Depending upon the severity of the goal, the financial plan will change over a period of time. Similarly, as goals change, the time frame attached to it will also differ for every individual.


3. Risk Appetite Divaricates 
A financial plan is a process which can be exercised on individuals from all walks of life. Some may be salaried, some professionals and others may be businessmen. With every changing individual and occupation, the risk taking ability varies. The financial planner first ensures that the individual and his family have the pre-requisite emergency funding for all contingencies and then proceeds with his plan execution. With the amount required for various goals in tow, the client can take calculated risks after consulting his financial planner as against a person whose basic funds are not allocated in accordance with the goals.


4. Current Financial Position  
The prevailing financial position of the client also determines the shape his financial plan will take. Current financial situation involves a thorough analysis of the assets which the client holds, the asset class, whether the individual is actually holding a white elephant in the name of “asset” and so on. Simultaneously the liabilities of the individual also causes a shift in the financial plan viz.a.viz the nature of the liabilities and what portion of the net worth it is eating into. The resources, in relation to the debt and the current income of the client and his family put together will help mould the final layout of the financial plan.


A financial plan is not only about showing the mirror to the person, it also involves incorporating the changes in the above factors from time to time in order to give him a comprehensive solution that helps him achieve his goals.

The writer is Head Admin Team at MSVentures Financial Planners.

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