What is the Financial Planner role in your life and who is a Financial Planner? Does her roll ONLY to give you investment and insurance advice or is she a person who can do more about it?
Recently I came across a picture, which might answer the above queries -about what people think financial planner is and actually what Financial Planner is?
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What people think – what a Financial Planner does?
People think that a Financial Planner only gives insurance and investment suggestions and manages investments.
What People don’t see – What does a Financial Planner do?
Although Financial Planning is quite an established concept but awareness of Financial Planning is still very low.
That is why, writing this post to make people understand the role of a Financial Planner in your life.
Scenario Planning and plan B
Scenario planning is the planning of any kind of life important events in your life. Since each individual is different and has unique needs and requirements.
Might be you need to invest a high amount today but due to your present responsibilities, low salary or any other obligations- you are not able to invest a high amount.
Here a financial planner’s role comes in handy for the investor.
She can guide on how he can pay later and meet his goal. She might give few suggestion based on calculations and experience.
She also might suggest plan B too, where the planner can provide the alternative which suits the investor’s needs.
Here, the ultimate goal is to achieve a Financial goal without taking too much risk.
Net Worth Optimization
Net worth is nothing but the sum total of wealth you have.
The formulae to calculate the net worth is
Net Worth = Asset – Liabilities
Now, the wealth you have, is going to remain the same at this juncture.
A Financial Planner cannot make a miracle and change/increase your net worth in a night span time.
But, definitely he/she can make better allocation of your assets so you can have maximum appreciation and benefit from your current assets.
He might suggest you to decrease or increase your money investment/ allocation in a particular asset.
Might be you have huge loans on one side and a good amount lying in your fixed deposit or bank account.
A Financial Planner can suggest you to make the changes and pay the loans, if required and hence one can save in lakhs by saving interest.
Cash Flow Planning & management
You might have good cashflow but at the end of month you might not able to save any good amount. Even after good salary packages the savings are very low.
Here, the financial planners’ role comes into action. The financial planner can make best use of positive cash flow and make better money management by exiting the low performing Investments.
Or if in case of negative cashflow corrective measures can be given which may alter the cashflow to positive note.
Thus a Financial Planner can save good amount of money by optimizing Net worth( changing the asset allocation) secondly optimizing the best use of the cash flow and money management.
Life Goal Planning & Financial Health
Fulfilling money requirement at the required life is very important for anyone.
For instance, if your child require money for his higher education and you can shell out money comfortably. Such events are the most satisfying event for a parent.
Financial planners can help you to set smart financial goals and help you fulfilling life goals with the right planning at the right time.
If one is able to fulfil the financial goals and maintain a good financial health by maintaining contingencies, medical needs, insurance requirements and Investments.
Preparation for Life transition events
Life transition events comes in everyone’s life. The financial planner can also make provisions for life transition event make and changes the allocation of money so that one can have safe and secure cash flow without too much hassle.
Regular Review & Accountability Sessions
Planning only works when implemented fully and reviewed from time to time. It is the time when one can check the success rate of the planning and if required, the old decisions can be replaced by the newer ones.
This is not all. A much more elaborated planning work ( Below stated) also come in handy along with the above one when one appoints a Financial Planner. The planner job is also to provide the below mentioned services along with the above ones.
Retirement Planning, Education Planning, Estate Planning, Tax Planning, Investment Planning, Risk management are the part of Financial Plan.
