Financial planning covers all areas of the client’s financial needs and will result in the achievement of each of its objectives. A financial advisor effectively manages its finance with its short and long-term outlook towards it.
With the analysis of objective and advisor make sure about the desire of the client there perspective and objectives of investments. A salaried individual always wishes to have a secure retirement which cannot be done without proper planning and which also requires correct execution of it.
A financial advisor is that person who observes the risk capacity and after understanding that he delivers as per the requirements.
Major elements of financial planning & advisory service.
Analysis of personal finance.
An adviser assesses the financial position of the person by bringing up together its income & expenses, his source of income, stability, and growth determine how he may be able to manage current household expenses. His income should be apportioned to expenses and saving for the future.
His income should be allocated in such a manner that it should meet the household aspirations and would lead to a secure lifestyle saving and live comfortably. If expenses are higher then income, his future earning will get affected as to meet the current requirements he needs to borrow funds which seems an easy way to full fill current desires.
This repayment of the borrowing over a period in the future reduces a part of the future income and apportions it to funding the asset that has been bought with a loan. Financial advisers collect information about the household’s finances and analyze them in various ways to draw various inferences about their financial position.
Financial advisers help households plan their liabilities efficiently. Evaluating which assets or expenses can be funded by borrowings is a function adviser can perform.
They can advise households about how to finance their assets, how much to borrow, how to provide for repayment, how to ensure that credit scores are not unfavourably impacted. Advisers help households to deal with their borrowings taking into account their need and ability to repay debt.
Insurance is a risk transfer mechanism where a small premium payment can result in payments from the insurance company to tide over risks from unexpected events. The temporary loss of income from disabilities and permanent loss of income from death can be covered with life insurance products.
Health and accident insurance covers help in dealing with unexpected events that can impair the income of a household while increasing its expenses on health care and recuperation. General insurance can provide covers for loss and damage to property and other valuables from fire, theft, and such events. Insurance planning involves estimating the losses to the household from unexpected events and choosing the right products and amounts to cover such losses.
Investment Planning and Asset Allocation:
A crucial component in financial planning and advisory is the funding of the financial goals of a household. Investment planning involves estimating the ability of the household to save and choosing the right assets in which such saving should be invested.
Investment planning considers the purpose or financial goals for which money is being put aside. The focus is on how much money is invested in which particular asset class to deliver the expected return within the risk preference of the investor.
A financial adviser should be able to assess the impact of taxes on the finances of the household and advice appropriate saving and investment options. The post-tax return of financial products will have to be considered while choosing products and estimating holding periods.
The taxability of various heads of income such as dividends, rents, and interest differ. The treatment of return if accumulated, rather than paid out periodically, varies. The taxability of gains differs based on the holding period. A financial adviser should bring in these aspects while constructing a plan for an individual.
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