FINANCIAL PLANNING TOOLS & CA PRACTICE CA ARVIND A. RAO ARVIND RAO & ASSOCIATES CA Arvind A. Rao 12/01/2014

“Trends and Insights into Financial Goals of Indian Consumers” A study that examines attitudes and behaviors of a new class of upwardly mobile Indian professionals towards financial planning ~ by Ameriprise India : 2nd edition in 2013 Identifying leading financial aspirations of a fast-emerging population Growing demand for professional advice to help them achieve their goals CA Arvind A. Rao 12/01/2014

Key Findings CA Arvind A. Rao 12/01/2014

140 % increase in respondents rating retirement as a key goal 48% respondents mentioned family as their top financial priority A 22% drop from 2012 Approx. 24% say retirement is their key priority (only 10% in 2012 said this) Retirement given precedence over large-ticket family spendings like: Buying secondary homes / cars Traveling around the world Youngest age-group 28-33 years are giving increased importance to retirement CA Arvind A. Rao 12/01/2014

Single women are focused on managing their money but marriage may change the dynamics Single women feeling financially confident (70%) than single men (56%) Invest earlier than men (25 years v 26 years for men) despite joining the workforce at the same age (24 years) Marriage – shifts the trend ~ mens financial confidence increases, wife’s financial confidence decreases as they get dependent on their husbands for their financial decisions Different approaches to investing CA Arvind A. Rao 12/01/2014

Measuring financial intelligence Do investors think about goal-based planning or investments made without aligning them to goals Is investment portfolio diversified or focused on 1 instrument Do respondents think long-term with their investments Do they start investing early (avg age 26 years) Do they take professional advice on financial planning CA Arvind A. Rao 12/01/2014

Investors with higher income pay for advice and ensure a diversified portfolio Follow a structured approach to managing money in long run Higher risk appetite but believe in following a plan Goals important ~ no compromise on current living standards Invest less in deposits, more in gold, insurance, shares and bonds CA Arvind A. Rao 12/01/2014

What does this mean for CAs? CA Arvind A. Rao 12/01/2014

Focus on saving / better planning taxes – implies saving money - implies making money for clients Our advice helps people save additional money – means greater resources at disposal to achieve their objectives or fulfill aspirations The process of financial planning helps to fill this gap!! – additional value-add for clients CA Arvind A. Rao 12/01/2014

Traditionally the function of financial planning was typically driven by the following factors: CAs ~ seeking advice for tax-planning w.r.t. investments and insurance for tax planning Insurance distributors ~ for life and general insurance needs Post-office / brokers / mutual fund distributors ~ for investments needs CA Arvind A. Rao 12/01/2014

Dynamics of the game ~ now changing Product-pushing by banks and distributors have made clients wary of the ‘Sell’ model Increasing emphasis on advice from ‘Trusted circles’ and ‘Professionals’ CA Arvind A. Rao 12/01/2014

SEBI – RIA : Game changer CA Arvind A. Rao 12/01/2014

Most commonly understood as a sales service relating to financial products ~ provision of strategic advice SEBI RIA ~ means only serious and professional people stay in the financial advisory business The regulations is only one of the reasons why CAs should consider providing financial advice Trends discussed earlier in the slides point out to the next emerging discipline in personal finance CA Arvind A. Rao 12/01/2014

Additional source of revenue ~ fee-based advice is the future Knowledge and In-depth understanding of client’s financial situation ~ CA well placed to offer services Adding another dimension to your service lines to make it more comprehensive ~ financial planning Additional source of revenue ~ fee-based advice is the future CA Arvind A. Rao 12/01/2014

What is financial planning? CA Arvind A. Rao 12/01/2014

Making money available when clients need it Focus on customer needs and not product baskets Focus on customer objectives and their life patterns Anticipating the problems in life and strategizing for the same Making sense of long-term, short-term and medium-term CA Arvind A. Rao 12/01/2014

Prioritizing between needs, wants, aspirations and life-style needs Balancing between saving for present and future Balancing between spending for present and future Meaning and context of financial planning changes with the client and his situation ROI v. HOI CA Arvind A. Rao 12/01/2014

TOOLS OF FINANCIAL PLANNING CA Arvind A. Rao 12/01/2014

SETTING UP AN INSURANCE PORTFOLIO CA Arvind A. Rao 12/01/2014

Life insurance ~ protection Disability insurance Critical illness Medical policy Health insurance ~ not sickness insurance Pruning client’s insurance portfolio Decision making ~ when to exit or retain CA Arvind A. Rao 12/01/2014

LETS TALK ABOUT YOU CA Arvind A. Rao 12/01/2014

Creating personal net worth Distinct from business needs Making way for expansion and new partners CA Arvind A. Rao 12/01/2014

MASTER PLAN CA Arvind A. Rao 12/01/2014

Mapping investments to goals Maintaining life-cycle of investments Setting up goal sheets Mapping investments to goals Maintaining life-cycle of investments Creating dashboards for goals and client fulfillments Getting discipline ~ is it about returns? CA Arvind A. Rao 12/01/2014

SUCCESSION PLANNING CA Arvind A. Rao 12/01/2014

Why plan for succession ~ Raja Harinder Singh case Important for businesses: Taxes Risk Control Value Designing and implementing the succession plan CA Arvind A. Rao 12/01/2014

RETIREMENT PLANS CA Arvind A. Rao 12/01/2014

Setting up the retirement nest-egg Planning milestones Post-retirement corpus Strategies for maintenance of the corpus: Systematic withdrawal Annuity model ~ capital preservation Time-segmented allocation model CA Arvind A. Rao 12/01/2014

HOW TO BEGIN? CA Arvind A. Rao 12/01/2014

Referral ~ formulated agreement Joint venture with an established professional ~ to work with the firm on a regular basis Self-education Referral ~ formulated agreement CA Arvind A. Rao 12/01/2014

QUESTIONS CA Arvind A. Rao 12/01/2014

THANK YOU ARVIND RAO (M) 98700 33370 arvind@caarassociates.com CA Arvind A. Rao 12/01/2014