Why Financial Planning isnt Popular - MADHU T

Rigour,discipline and time are needed to make a financial plan effective

Call it a professional hazard.Most of my meetings with friends start with a standard line: hey,I was thinking of calling you.Would you please give me numbers of some good financial planners or advisors Nothing wrong with the request per se,considering I write on the topic.But the trouble is that we have been through the same drill many times in the past.The same requests were made a few months,a few times earlier,the numbers were passed on and the gentlemen had spoken about meeting some advisors,too.But thats where it always ends.As they say,history repeats itself mostly as farce.By now I know what happens in those meetings.In the initial enthusiasm,an appointment was made with the advisor.After the initial meetings,the advisor asks for (sometimes in a form) financial details.Many bravehearts call it quits at this juncture because for most of them remembering or going through their financial records is a task similar to preparing for the board exam.They did it in school because they didnt have a choice,but wont do it ever again.Some people even filled up the necessary details,but failed to turn up for the proposed meeting at a future date.Now,they are embarrassed to go back to the same person.The story may have different ingredients,but the crux remains the same: many people fail to finalise their financial investment plan for a variety of reasons.

A FEW HOURS EXTRA,PLEASE

In our experience,the younger category within the age group of 25-45 often fails to go through the entire exercise.Its mainly because of the lack of awareness or enthusiasm.More importantly,they also cant find time to do it because they are extremely busy with their life and career, says D Sundararajan,investment consultant,Trendy Consultants.This is a familiar story shared by many planners and advisors.I dont know whether they actually cant find the time,or is it that famous chalta hai attitude at work, says an advisor.Many youngsters seem to think they dont have to worry about the future because they have a great life ahead. Sundararajan says he has found a unique solution to deal with the issue.We find that senior and elderly people are very diligent when it comes to financial aspects of their life.We impress upon them to convince the younger people in the family to be serious about their financial health.Since we have the tradition of listening to elders like parents or in-laws in the family,it seems to work, he says.

CANT SACRIFICE LIFES PLEASURES

For most people,planning for the future is equal to sacrificing the present happiness.Rightly or wrongly,the perception is deeprooted among the younger category.Blame parents for trying extra hard to ingrain financial discipline.For most people,spending has become a way of life.They dont think it is worthwhile to plan for a big purchase when they can do it with a credit card or a zero percent finance scheme in a matter of a few minutes, says Hemant Rustagi,CEO,Wiseinvest.Sundararajan also has an interesting experience to share: We were conducting a serious programme for young managers in a bank.When it came to investment and financial discipline,many of the younger manages had serious issues.They were categorical that they dont want to compromise on their current lives to be able to lead a better future life, he says.However,experts say,these people have got it completely wrong: financial planning doesnt mean living a hermitic life.You can definitely spend but it should be within your means.Thats all.

I KNOW IT ALL

A lot of people believe that since they read so much about personal finance on the net,newspapers and magazines,they are their best manager.Hiring a mutual fund advisor or an insurance advisor and making investment is their idea of a comprehensive financial plan, says Suresh Sadagopan,chief financial planner,Ladder7 Financial Advisories.Sure,one can do justice to it this way,but the sad truth is very few would be able to do that.Apart from the knowledge about investments and financial plans,the real problem is lack of time.Many people dont have the time to follow their plans continuously, he says.Sundararajan also says thanks to the internet and various online tools available,many people have become experts overnight.He doesnt find anything wrong with it,provided they can do a thorough job.I dont want to say that it is difficult to do it because it may sound serving my own interest.But the trouble is many people just accumulate various investments without understanding them, he says.

STARTING WITH VAGUE IDEAS

Building castles in the air is best left to special effects experts.You cant have fancy plans that cant be supported by numbers.Most people fail to finalise a plan because they dont have a clear idea about their objectives.For example,they cant decide when they want to own a house or a car.It is easier in the case of their retirement or childs marriage because they are certain when it will happen, says Rustagi.According to experts,fancy notions about ones future are a common problem among highearning category.They want everything in life,but the problem is that you should be able to support it financially.For example,there is nothing wrong with a holiday home in Goa.But the question is will you be able to save or invest for it along with your other goals like,say,childs education,a house to stay,or your own retirement, asks a financial advisor.When they face these real issues,most people have the tendency to vanish. Some people start investing as per the plan very earnestly,especially those who have started late in life.But the trouble is that they tend to be extremely aggressive.The moment they see their investments not doing well for a year or two,they lose all interest.They just abandon all their plans and run away, says Rustagi.He says this is a concrete example of not having a concrete plan.

I DONT WANT TO PAY FOR THE ADVICE

Your fee is a bit stiff.Thats something many experts are used to.In fact,many people even ask for a discount.I dont think they ask for a discount from their doctor, fumes a financial planner.The attitude is that I am coming to you only because I dont have the time.But I dont think your fee is justified, he adds.People dont understand that drawing up an entire financial plan or reviewing an entire plan is not an easy job and they should be prepared to pay for it.Even those who go through the initial plan think its for life and vanish because they dont want to pay for the review, says Suresh Sadagopan.It could be a costly mistake because any big change in your life would call for a proper review of your financial plan, he says.

10 Tips to Get Your Finances Right



Be clear about your objectives before starting to make a plan



1) A few mutual fund units and Ulips alone wont help you meet your future financial goals

2) Assess your financial situation and investments,do some calculations to find out the ground reality

3) If you think you cant do it alone,then its time to hire a professional planner or advisor

4) You can fix an appointment and meet the person for an introduction mostly free

5) Keep your bank statement,investments,loan details ready for the next meeting

6) Once you give the necessary details,the advisor will be able to draw up a financial plan for you

7) A financial plan would have details of all your future goals and investments to achieve them

8) You have the option to just buy the plan or ask the person to implement it for you for an extra fee

9) Always show up for periodic reviews and clear your doubts promptly;never try to second guess

10) The plan given by your advisor is never final.You have to review it periodically to fine tune it to the present situation



Written By Madhu T in economic Times of 22/09/2011