Medical insurance, retirement plans: Mashruwala's guidebook

In CNBC-TV18’s special show Financial advisor Gaurav Mashruwala talks bout the best investment. He also guides on how to select the medical insurance and why retirement plans are so important to any earning individual.

Also read: Importance of life insurance for NRIs Here is an edited transcript of his interview. Q: Besides investing in equity how else can one manage investments?
A: When it comes to personal finance. It is much larger gambit that one should look at. One is goal setting. Many times the question that comes is, where do I get maximum return. It is not about maximisation, it is about optimization. Are your investments aligned top your requirements? That is one.
Second is contingency funding. Do you have enough emergency money left incase there is job loss or whatever reason either market condition or economic condition. Insurance, is there enough health insurance? What I normally see with salaried individuals is, employer gives it to us, but they have rarely gone to HR department and said show me the kind of cover that I have, limited, unlimited, cashless, insurance aspects – borrowings. We see portfolios or balance sheets where there is loan at 11% and there were FD at 8%. It doesn’t make sense, liquidate that FD and pay it off. So, investment is another aspect.
Taxation, tax efficiency, am I kind of making my money work in a manner which is tax efficient? Lastly estate planning - assets. How my assets will go on to next generation. Even simple things like nomination and then obviously drafting Will. We are creating assets much-much faster than what our parents did. So, transferring of those assets to next generation is very important.
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These are all these aspects which are much more focused important in the sense that it is not only investments. Investments will give you good returns and you should focus on that but if you have not looked at all those things, those good assets that you have created may not be of so much use to you when you really need them. So there are a lot of other things that you should look at. Q: How can one select medical insurance? What are the factors that should be considered before buying one?
A: One is that insurance is not an investment but that is fine, how much is maximum possible. In the sense if you have an employer cover then obviously it is not costing you but if you are on your own then it also depends on the city that you are leaving in. Say if you are living in Mumbai, Bangalore, Delhi we ideally recommend individuals to take health cover of at least Rs 5 lakhs and if they can enhance it to 10 lakhs that would be brilliant because that is the maximum cover you can get.
Smaller cities costs are little less, so based on the city that you live in, for example in South Mumbai hospitals like Jaslok Hospital or Breach Candy Hospital then in central Mumbai Lilawati Hospital the costs are very high. But if you are living in Ghatkopar, the costs may not be that much high. If there are emergencies you are likely to go to hospitals which are nearby unless there is critical illness and you require specialty hospitals.
So there is not benchmark as to how much, but try and take maximum possible cover that you can because treating of illness these days is a very expensive proposition. Q: As you know these days the corporates are moving towards pension less salary structure. What do you think what is the best way to secure post retirement?
A: Start investing fast, as soon as possible, as simple as that. I understand that we are moving from defined benefit to defined contribution system and hence a) the entire market risk is shifted on to the individual. Start as early as possible is the only way, there is nothing else that can be as complicated or as simple as this because there is no solution.
Gone are the days when you were sure of how much corpus will come to you. So, you take on the market risk. On the flip side the better part is that you can choose where you want to put in your money.
Instead of your money going only in debt based instruments now you have an option of equity. If you are going beyond so called typical retirement product you can even put your money into gold. If you have excess amount of money you can pick real estate from retirement perspective so you now have a much larger asset classes available for retirement planning. So, you have both pros and cons. Q: I want to ask about the conflicts of interest that an adviser faces. How does one figure out if an adviser is working for one’s interest or he is working to earn more commission?
A: One litmus test is, how is he earning? Is he earning you by selling you a product or is he earning by charging you fees. That is one simple thing that you can find out. Also look at what is he doing? Are you looking at a investment advisor or a overall personal finance advisor because if it is an overall personal finance advisor then he is not typically looking at only investments.
He could be talking to you about insurance and repayment of your debt. He could be also talking about have you done your nominations properly or not and about banking. So, if it is a personal finance advisor or financial planner, he is talking much larger gambit and not necessarily products.
If it is only investments yet you need to figure out how is he earning because that could be more or less a clear test . If he is earning from you, by you paying fees, he is obviously going to be loyal to you. If he is earning by not charging you, but by selling products then while he may say that he is loyal to you, but he obviously has a conflict of interest. Q: So, is there any kind of simple way where one can get the PF amount back?
A: In terms of procedure it is a standard procedure where you need to apply. If you have changed the job the better option for you is actually to transfer that PF to new company. While it is tedious and long term but at least you are not losing anything. Here if you want to withdraw then the procedure is that you apply and you get it. In terms of can you shrink that period, I don’t know. Are there any agents or are there any people who can help you, I am not aware of that. Otherwise the process remains same.