Vous êtes sur la page 1sur 39

1.

CONTENTS
2. Introduction ......................................................................................................................................... 3 2.1 Wealth Management .................................................................................................................... 3 Personal Wealth Management ............................................................................................. 3

2.1.1 2.2

Problem Definition ........................................................................................................................ 4 Background of the Problem .................................................................................................. 4 Statement of the Problem .................................................................................................... 4 Objectives of the project....................................................................................................... 4

2.2.1 2.2.2 2.2.3 2.3 3.

Importance of the study ............................................................................................................... 5

Literature review .................................................................................................................................. 5 3.1 3.2 Eight Principles of Strategic Wealth Management ....................................................................... 5 The future begins now .................................................................................................................. 6

4.

Profile of the Respondent / Client........................................................................................................ 8 4.1 Demographic Profile ..................................................................................................................... 8

4.2 ............................................................................................................................................................. 8 4.3 4.4 3.2 Details of Family and Dependent............................................................................................ 9 Other Details ................................................................................................................................. 9 Regular commitments ........................................................................................................... 9 Insurance details (all insurance policies held by family): ...................................................... 9 Existing investments ........................................................................................................... 10

4.4.1 4.4.2 4.4.3 4.5 5.

Expected contingent Events........................................................................................................ 10

Financial Details.................................................................................................................................. 10 5.1 5.2 5.3 Position Statement of Mr. JINESH JANARDHAN .................................................................... 10 Cash flow Statement of Mr. JINESH JANARDHAN ....................................................................... 12 Ratio Analysis .............................................................................................................................. 14 Basic solvency ratio ............................................................................................................. 14 Liquidity ratio ...................................................................................................................... 14 Savings Ratio ....................................................................................................................... 15 Debt to asset ratio............................................................................................................... 16 Solvency ratio ...................................................................................................................... 16

5.3.1 5.3.2 5.3.3 5.3.4 5.3.5

Personal Wealth Management 6.

2013

Personal Goal Setting ......................................................................................................................... 17 6.1 6.2 6.3 6.4 Analysing Financial Values .......................................................................................................... 17 Knowing Spending Habits ........................................................................................................... 18 Knowing Credit Habits................................................................................................................. 19 Goals for Mr. Jinesh Janardhan ................................................................................................... 19 Short Term Goals (Upto 2 years)......................................................................................... 20 Mid- Term Goals (2 to 5 years) ........................................................................................... 21 Long Term Goals (More than 5 years) ................................................................................ 22

6.4.1 6.4.2 6.4.3 7.

PLANNING .......................................................................................................................................... 24 7.1 7.2 Tax Planning ................................................................................................................................ 24 Tax-planning Ways ...................................................................................................................... 24 Make full use of the entire Section 80C deduction ............................................................ 24 Reduction of tax liability beyond Section 80C deductions ................................................. 25

7.2.1 7.2.2 7.3

Estate planning............................................................................................................................ 25 Benefits of a Will ................................................................................................................. 26 Update the will .................................................................................................................... 26

7.3.1 7.3.2 7.4 7.5

Retirement Planning ................................................................................................................... 27 INSURANCE PLANNING ............................................................................................................... 27 Insurance policies suggested to Mr. Jinesh......................................................................... 28

7.5.1 7.6

INVESTMENT PLANNING ............................................................................................................. 28 Analyzing the Current situation of Mr. Jinesh Janardhan: .................................................. 28

7.6.1 8. 9. 10. 11. 11.1 11.2 11.3 11.4 11.5

Recommendations ............................................................................................................................. 29 Limitation of Study ............................................................................................................................. 30 References ...................................................................................................................................... 31 Annexure ......................................................................................................................................... 32 Questionnaire 1: Analysis of Financial Values ........................................................................... 32 Questionnaire 2: Are you in Debt Trap? ..................................................................................... 33 Questionnaire 3: Knowing Credit Habits .................................................................................... 34 Questionnaire 4: Knowing Spending Habits ............................................................................... 35 Questionnaire 5: Risk Profiler..................................................................................................... 36

| Introduction|

Personal Wealth Management

2013

2. INTRODUCTION
2.1 WEALTH MANAGEMENT
Wealth management is an investment advisory discipline that incorporates financial planning, investment portfolio management and a number of aggregated financial services. High Net worth Individuals (HNWIs), small business owners and families who desire the assistance of a credentialed financial advisory specialist call upon wealth managers to coordinate retail banking, estate planning, legal resources, tax professionals and investment management. Wealth managers can be an independent Certified Financial Planner, MBAs, Chartered Strategic Wealth Professional, CFA Charter holders or any credentialed professional money manager who works to enhance the income, growth and tax favoured treatment of long-term investors.

2.1.1 Personal Wealth Management


Private or Personal wealth management (PWM) is the term generally used to describe highly customized and sophisticated investment management and financial planning services delivered to high net worth investors. Generally, this includes advice on the use of trusts and other estate planning, vehicles, business succession or stock option planning, and the use of hedging derivatives for large blocks of stock. Experts in personal wealth management perform an important role for clients who wish to make the most of their financial assets. Beyond just overseeing investments, handling individual monetary resources can reach past stocks, mutual funds, and bonds and administer other issues as well. Retirement planning that starts early is a much easier and more painless way to provide for future needs. Insurance needs and tax concerns can be difficult to direct without professional help. Money set aside for educational purposes can offer children the kinds of choices that can influence their futures in positive ways. Vacation homes and family travel can become a reality through the skilled administration of finances. All in all, personal wealth management constitutes a lot more than just paying bills and investing in the stock market. Most organizations will help clients by going over their individual income and assets and create a plan of action that is uniquely tailored to them. Whether the need is for asset protection or trust administration, inheritance issues or tax expertise, consulting professionals in the field can make the difference between financial success and fiscal disappointment.
| Introduction| 3

Personal Wealth Management

2013

Estate planning is an important part of anyone's personal wealth management program. The future of a client's potential heirs is a very important concern. Clients work a lifetime for assets that they wish to see passed to the next generation. Careful estate planning can limit the bite that taxes can take out of a client's holdings after death. Without careful management, valuable assets can be frittered away. There are many benefits associated with personal wealth management. By turning these complex issues over to experts in the financial field, a client is free to handle other life priorities with reduced stress and less distraction. Seasoned professionals can look at the life goals of the client and zero in on the best way to meet those goals. Solid planning can address current as well as future issues.

2.2 PROBLEM DEFINITION


2.2.1 Background of the Problem
With the help of this end term project, my aim is understand and study the strategies for managing wealth on trans-generational basis of an individual. Increased level of wealth created by individual and brighter economic prospects for the future has substantially augmented the demand for sound professional advice on setting financial goals, aligning financial planning with career planning, investment planning, retirement planning, tax and estate planning.

2.2.2 Statement of the Problem


To understand the Personal Wealth Management of an Accountant, Mr. Jinesh Janardhan, an accountant working in UAE

2.2.3 Objectives of the project


1. Demographic profiling of the respondent 2. To comment on respondent's attitude towards money 3. To List out personal goals in SMART format 4. To give observations based on personal financial ratio.
| Introduction| 4

Personal Wealth Management

2013

5. To know the status of insurance (both life and non-life) and e-fund 6. To Do Risk profiling and comment on special situation planning 7. To Analyze existing personal investments 8. To study retirement and estate planning 9. To Identify Tax Planning

2.3 IMPORTANCE OF THE STUDY


We should give importance on wealth management as much as the attentions we give on money earning. Though people plan for their wealth management perfectly, there are some common mistakes which people commit and tend to lose their hard earned money. The mistakes which they commit might look very simple, but the impact which they create might be complex and huge. Affluent individuals often need sophisticated advice and strategic guidance to capitalize on opportunities to preserve, grow and transfer their wealth.

3. LITERATURE REVIEW
3.1 EIGHT PRINCIPLES OF STRATEGIC WEALTH MANAGEMENT
Author: Stuart E. Lucas , Wharton school publishing

Over the last 25 years of managing other people's money, my personal finances, and our family's wealth, I have developed what I consider to be a useful set of principles for effective long-term wealth management. They apply equally well whether you're managing a nest egg of $1 million or $1 billion. They apply regardless of time horizon and family complexity, and they apply whether your ambitions are aggressive or conservative. For anyone concerned about managing wealth, they provide a source of stability and a critical frame of reference. The Eight Principles of Strategic Wealth Management are at the heart of what I do every day. They are: 1. Take charge and do it early.

| Literature review|

Personal Wealth Management

2013

2. 3. 4. 5. 6. 7. 8.

Align family and business interests around wealth-building goals and strategies. Create a culture of accountability. Capitalize on your family's combined resources. Delegate, empower, and respect independence. Diversify but focus. Err on the side of simplicity where possible. Develop future family leaders with strong wealth management skills.

Every decision I make, whether it involves choosing an investment manager, thinking about tax strategy, or working with my family to set goals for next year, gets filtered through these principles. Let's examine them now in detail.

3.2 THE FUTURE BEGINS NOW


Author: Paul Mc Indijoe

Here is nothing new about saving money; most people have some type of savings account. However, the reasons people save and the manner in which they do it has changed over time, and modern banking is determined to help. In the past, saving was about security, peace of mind and knowing that you had options should you run into difficulty somewhere down the line. These days it is a little more structured and goal-oriented, resulting in a more thorough analysis of savings options before a decision is taken. Governments actively encourage saving and nowadays many parents attempt to instil a saving mentality in their children from an early age. Deeming it wise to be prudent and knowing that it certainly cannot hurt, people now are prepared to search a little further than their local bank for the best deal in savings. Many ambitious young people are planners, constantly thinking ahead with regards to property, travel, career and family. All of these require money and thus a savings account is the next step after taking care of their regular obligations with a current account.
| Literature review| 6

Personal Wealth Management

2013

The days when savings were for a rainy day are long past. Now savings play a much more significant role in peoples long term finances. Savings are incorporated into plans for homes, holiday property, economic downturns, having children, interest rate jumps affecting mortgages, health cover and child trust funds to mention a few. Banks and other financial institutions have responded to the reasons why people save and their range of savings products reflects this shift in attitude amongst the public. To the consumer, a bank savings account now often represents a firmer, more focused commitment to a personal goal. The amounts moved to savings accounts are now more substantial and with a more specific purpose in mind. The more organized and financially aware among us realize the benefits of long term planning and seek out those providing the savings accounts that best suit their wishes as well as those providing the best rate of return or value for money. People are also becoming more aware of the pitfalls of inadequate financial planning and the need to have extra resources at hand to deal with them. Fluctuating interest rates and slowing economic growth can affect both the job and mortgage markets. Savings are not just a quick fix to these problems, but a sound investment that gives people more options for the long-term. Modern savings accounts help people achieve their personal goals by being flexible and adaptable while still retaining the original merits of saving such as security. People now look at them in terms of a useful tool as they have shed their static and rigid image and are now looked upon as a helpful and significant long term allay.

| Literature review|

Personal Wealth Management

2013

4. PROFILE OF THE RESPONDENT / CLIENT


4.1 DEMOGRAPHIC PROFILE

The below details are about the demographics of client.

Name Sex Age D.O.B. Marital Status Educational Qualification Occupational Status Profession Company

Jinesh Janardhan Male 28 25 - 04 1986 Married B. Com, Hotel Management Earning Accountant ACE Global Chartered Accountatnts

Location E- Mail

Sharjah jinugourinilayam@gmail.com

Table 1: Demographics Details of Client

| Profile of the Respondent / Client|

Personal Wealth Management

2013

4.2 DETAILS OF FAMILY AND DEPENDENT

No. of Family Members No. of Dependents Wifes Occupation No. of Children Siblings

5 1 (spouse) Teacher 0 A Brother (Doing MBA, 24 Yrs.) and a Sister(married)

Mothers Age Fathers Age Nature of family

55 62(Retired) Independent Family

Table 2: Details of Dependents and Family

4.3 OTHER DETAILS


4.3.1 Regular commitments
This means any regular payments for specific purpose other than regular expenditure like maintenance of parents or charity contribution: Payment of Interest of Brothers Education Loan (Rs.10, 000 per month). Payment of EMI per month of Rs.22,000

4.3.2 Insurance details (all insurance policies held by family):


LIC (Jeevan Saral, Jeevan surabhi ) Rs.200, 000 on Maturity 2015 | Profile of the Respondent / Client| 9

Personal Wealth Management

2013

4.3.3

Existing investments
Investment in Real estate (Return as per the current market price-70%)

4.4 EXPECTED CONTINGENT EVENTS


This includes any future event which might be occur and have significant impact in your life: Unexpected Illness of any family member: Mediclaim Policy (Term Policy of Rs. 2000 Annual Fee)

Need to come back from UAE for any unexpected happening.

5. FINANCIAL DETAILS

5.1 POSITION STATEMENT OF MR. JINESH JANARDHAN Amount Assets Investment Assets Investment in Real estate Investment in gold Liquid Assets Cash in hand Cash in savings A/c Fixed deposit 35,000 50,000 150,000 235,000 2,80,000 12,50,000 15,30,000 (INR) Amount (Total) (INR)

| Financial Details|

10

Personal Wealth Management

2013

Cash value of life insurance Real Estate Personal Possessions Market Value of Automobile (CAR) Furniture and appliances Jewellery Home computer Total Assets

6,00,000

600,000 50,00,000

5,00,000 3,00,000 350,000 25,000 11,75,000 INR. 8,540,000

Liabilities Current Liabilities Chit fund outstanding Long-Term Liabilities Loan for real estate outstanding Car loan outstanding Total liabilities NET WORTH Table: Personal Position Statement of Mr. Jinesh Janardhan
| Financial Details| 11

50,000

17,00,000 1,70,000 19,20,000 6,620,000

Personal Wealth Management Total Compensation per month of Mr. Jinesh RS.90,000

2013

5.2 CASH FLOW STATEMENT OF MR. JINESH JANARDHAN Cash Flow Statement of Income and Outflows (Annual) in INR -2011 Income (Cash Inflows in INR) Salary Returns on Investments Fixed Bonus Provident Fund Performance Linked and other Variable Bonus GROSS INCOME 12,63,790 Expenses (Cash Outflow) Cell Phone Internet Connection Rent Housing totals Other Living Expenses 52,000 6,000 1,80,000 2,38,000 1,80,000 10,00,000 30,000 1,24,000 9,790 1,00,000

| Financial Details|

12

Personal Wealth Management

2013

Daily living totals Gas/fuel Insurance Air travel Public transportation Transportation totals Movies Restaurants Entertainment totals Clothing Gifts Personal totals Financial totals Savings & Term Payments Misc. payments totals TOTAL EXPENSES (Annual) Cash Surplus

180,000 10,000 6,000 40,000 6,000 62,000 15,000 35,000 50,000 30,000 5,000 35,000 2,40,400 70,000 50,000 9,25,000 3,38,790

Table: Cash flow Statement of Mr. Jinesh Janardhan


| Financial Details| 13

Personal Wealth Management

2013

5.3 RATIO ANALYSIS


5.3.1 Basic solvency ratio
Definition: This ratio indicates your ability to meet monthly expenses in case of any emergency or catastrophe. It is calculated by dividing the near-term cash you have with your monthly expenses.

You can also call it as emergency or contingency planning ratio. This ratio helps you prepare for unforeseen problems.

Formula Used: Basic solvency ratio = Cash / Monthly expenses (this ratio is not mentioned in percentage)

Ideal Basic Solvency Ratio = 3 In Case of Mr. Jinesh Janardhan: Immediate cash from liquid assets = 235,000 Monthly Expenses = (9,25,000 / 12) = 77,083 Basic Solvency ratio = 235,000/77,083= 3.04 Analysis: The basic in the case of Mr. Jinesh is pretty good, as it is little more than the ideal value. Apart from that, there is no member in his family with some illness or he dont have any kids. So he is keeping his basic solvency very well as per the financial conditions.

5.3.2 Liquidity ratio


Formula Used: Liquidity ratio = Liquid assets / Net worth

Where liquid assets comprises of:


Savings account Bank fixed deposit Liquid funds Cash in hand

| Financial Details|

14

Personal Wealth Management


Equities (shares) All open-ended mutual funds gold

2013

Net worth would include your total assets less total liabilities. It shows what you are worth after paying off all your liabilities.

Ideal Liquidity Ratio = 15% In Case of Mr. Jinesh Janardhan: Liquid Assets (Calculated in Position Statement)= 14,85,000 Net Worth (Calculated in Position Statement) = 66,20,000 Liquidity Ratio = 3720000/ 16831800 = 22.43%

Analysis: Therefore, more than 22 percent of his portfolio is comprised of liquid assets, that is, he should be able to sell them off at a short notice and convert it into cash! That much liquidity in a portfolio, he has. This is pretty good as he has convertible assets in case of any emergency.

5.3.3 Savings Ratio


Savings should be an integral part of life here's why you need to save money. There are various reasons: for your child's education or marriage; your retirement; for buying a house or a car; for going on a world tour; for medical and other emergencies.

Formula Used:

Savings ratio = Savings / Gross income

Ideal ratio = 10% It was found that Mr. Jinesh invests 100,000 in gold regularly. | Financial Details| 15

Personal Wealth Management In case of Mr. Jinesh Janardhan Savings = 100,000+ 50,000+150,000 = 300,000 Gross Income = 12, 63,790 Savings Ratio = 300,000/12, 63,790 = 23.73 %

2013

Analysis: It is really good saving as compared to that of Income. So from this, we can understand that, Mr. Jinesh is a regular saver who tries to invest profitably by saving regularly.

5.3.4 Debt to asset ratio


It is the percentage of total assets of an individual that goes towards payment of debt. This ratio is calculated by dividing your total liabilities by total assets

Formula Used:

Debt to asset ratio = Total liabilities / Total assets In Case of Mr. Jinesh Janardhan: Total Assets = 8,540,000 Total Liabilities = 19,20,000 Debt to Asset Ratio = 19,20,000 / 8,540,000 = 22.48% Analysis: Debt to asset ratio is healthy in his case as it should be less than 50%. In this case Mr. Jinesh can easily payoff all his debts by using 22.5% of his assets and that is pretty good.

5.3.5 Solvency ratio


This ratio is used to check your potential long-term solvency, that is, the measure of how much you are left with after paying your liabilities from your assets to avoid any solvency problem.

Formula Used:

Solvency ratio = Total net worth / Total assets (total net worth divided by total assets) | Financial Details| 16

Personal Wealth Management

2013

In Case of Mr. Jinesh Janardhan Total Net Worth = 6,620,000 Total Assets = 8,540,000 Solvency Ratio = 6,620,000/ 8,540,000 = 77.5% Analysis:Yes, The ideal solvency ratio should be at least 50 percent. Anything less than 50 per cent would lead to financial trouble in the long run. Therefore it is very good here.

6. PERSONAL GOAL SETTING


Goal setting is a very powerful technique that can yield strong returns in all areas of your life.

Benefits of personal goal setting: Clear and focused direction giving a sense of security and purpose. Maximum use of time. Enthusiasm is high for what you want. Moving steadily towards and achieving the results you really want and ultimate success. Boosted self-esteem, confidence and belief in your ability to make things happen and feel in control One convenient way of creating your list of goals is to fill in the blanks under the following categories:

What you want to BE What you want to DO What you want to HAVE What you want to GIVE What you Dont want to BE, DO, HAVE, and GIVE

6.1 ANALYSING FINANCIAL VALUES


*Refer the Questionnaire No. 1 with Clients Response in Annexure

| Personal Goal Setting|

17

Personal Wealth Management

2013

Values are relatively permanent personal beliefs about what you regard as important, worthy, desirable or right. Values tend to reflect your upbringing or other important events, and change very little without conscious effort over a lifetime. These values are reflected in your attitude and the more harmonious your values, attitudes and goals will be the greater will the likelihood of attaining them. Values are beliefs or ideas that you consider import or desirable. Everyone has values, but everyone does not value the same things equally Number of times circled each item in the pair activity:

Car Charitable Giving Education Hobbies/Sports Housing Personal Care Retirement/investment Social Vacation/Travel

3 2 4 0 1 0 5 2 3

The item of utmost importance for Mr. Jinesh Janardhan is retirement planning. He is right now having a vacation with his wife now. The Secondary Important items include education and is followed by car and vacation. From these preferences, it is obvious that Mr. Jinesh is a saving person who does not want to spend more but rather like to spend that in social and charitable activities. He gives little importance to hobbies and personal care and does not want to much money in recreational activities.

6.2 KNOWING SPENDING HABITS


Refer Questionnaire : Knowing Spending Habits in Annexure | Personal Goal Setting| 18

Personal Wealth Management

2013

According to the answer got in regard to spending habits of Mr. Jinesh Janardhan, he always spends judiciously. He does not use a credit card for his purchases instead, he buys almost everything in cash. . He never shop or spend money as a result of feeling depressed, disappointed, angry, scared or lonely. He never lies to others about purchases made or how much you have spent. He never feels a rush of both euphoria and anxiety when spending money. He is doing fair in terms of his spending Habits. On an all, he is a wise spender and does not purchase anything out of emotions.

6.3 KNOWING CREDIT HABITS

Refer Questionnaire: Knowing Credit Habits in Annexure From the answers I got from these sets of questions, Mr. Jinesh is not a credit card user and almost all the buying he does is on cash basis. He is not using any credit cards now and he does not believe in using credit card for purchases. He is almost current on all of his payments and gives much importance to paying back his debts. Very rarely he come across emergencies and in such situations, he will ask help either from his parents or relatives or his friends where he dont have to pay the interest. Overall Mr. Jinesh is a wise spender and a good saver.

6.4 GOALS FOR MR. JINESH JANARDHAN

Vision: To achieve the desired goals and build a retirement corpus to lead a healthy lifestyle. Mission: To make rational financial decisions and live a healthy life without spending on unnecessary purchases. Goal: To achieve the desired financial objectives.

| Personal Goal Setting|

19

Personal Wealth Management

2013

6.4.1 Short Term Goals (Upto 2 years)

Goal No.1: Paying car loan Specific: Paying off the car loan outstanding which is a high interest bearing debt Measurable: Attainable: Realistic: Time Bound: To pay total of remaining 1.7 Lakhs It can be attained by proper debt management Mr. Jinesh is Earning and has good savings. By Year 2014

Action to Achieve: As getting free from debt is the top priority of anybody. Mr. Jinesh Janardhan should first pay off the car Loan of his brother.

Goal No.2: buying a bike for his brother Specific: Measurable: Attainable: Realistic: Time Bound: Collecting Corpus for bike To Build a corpus of 1 Lakh It can be attained by regular savings Mr. Jinesh is Earning and has good savings. By Year 2014

| Personal Goal Setting|

20

Personal Wealth Management

2013

Action to Achieve: Mr. Jinesh wants to buy a bike for his brother when he joins his job. He can save Rs. 8-10 Thousand per month to build a corpus of Rs. 1 Lakh in a year. He can also take recurring deposit for that purpose.
6.4.2 Mid- Term Goals (2 to 5 years)

Goal No.3: First kid Specific: Collecting Corpus for all the expenses associated with the birth of his first kid Measurable: Attainable: Realistic: To Build a corpus of 2 Lakh It can be attained by using done saving Mr. Jinesh and his wife is alos earning. So collecting 2 lakhs is not a huge task. Time Bound: By Year 2015

Action to Achieve: He can make use of savings made by his parents for his brothers marriage. He can put money on fixed deposit for 3-4 years. Also his sister will start earning in some months and he will not have any liabilities to made he can save money for marriage.

| Personal Goal Setting|

21

Personal Wealth Management

2013

Goal No.4: saving a corpus for buying a home Specific: Measurable: Attainable: Collecting Corpus buying home To Build a corpus of 20 lakhs margin money Separate saving is to be done for building this corpus. He is already saving more than 3 lakhs for this and have an investment in gold. Realistic: Time Bound: Mr. Jinesh is Earning and has ample Net worth. By Summers 2016

Action to Achieve: Mr. Jinesh wish to buy a home by the year 2016, before his brothers marriage and for that he want to save 20 lakhs of money for margin money and the rest he wish to take home loan.
6.4.3 Long Term Goals (More than 5 years)

Goal No.5:Childs Education Specific: Measurable: Attainable: Realistic: Collecting Corpus for Childs Education To Build a corpus of 20 Lakh It can be attained by using saving, Sips Mr. Jinesh is Earning & He has good investment

| Personal Goal Setting|

22

Personal Wealth Management

2013

sense. Time Bound: By Year 2030

Action to Achieve: Mr. Jinesh wish to have 2 kids and he wants to build a corpus of 25 lakhs by the year 2030 for providing good education to his children. He should invest in fixed deposit so as to get tax benefit and build corpus both which he is already doing.

Goal No.6: Buying a farm house Specific: Measurable: Buying a farm house To build a corpus of 2 crore to buy a farm house in Ooty to spend his retirement life after 30 years Attainable: It can be attained by using saving, Sips, PF and other savings. Realistic: Mr. Jinesh and his wife are earning and they both are saving enough to build this corpus by the time they retire. Time Bound: By Year 2040

Action to Achieve: He can invest in post office schemes where he will have sure returns and also tax benefits. Which will help him in building corpus for buying farm house.

| Personal Goal Setting|

23

Personal Wealth Management

2013

7. PLANNING
7.1 TAX PLANNING
Tax Planning in India is an application to reduce tax liability through the finest use of all accessible allowances, exclusions, deductions, exemptions, etc, to trim down income and/or capital profits. Salaried individuals in India are not fully aware of the tax planning exercise which is why they rush at the end of the tax-planning season and make investments to reduce their tax liability. This has negative effect on tax payable by them and they eventually end up paying more taxes than they are required to.

7.2 TAX-PLANNING WAYS


7.2.1 Make full use of the entire Section 80C deduction
The maximum reduction available in Section 80C is Rs 100,000 and salaried citizens whose gross salary is Rs 250,000 or more are entitled to use the full Rs 100,000 limit. Individuals who make monetary infusions of over Rs 100,000 in Section 80C in selected areas fail to understand that the advantages are limited. In spite of investing Rs 70,000 and Rs 40,000 in Public Provident Fund and ELSS respectively, the amount entitled by the investor is only Rs 100,000.

Following investments/contributions meet the criteria for Section 80C reduction:


Public Provident Fund Accrued interest on National Saving Certificate Life Insurance Premium National Saving Certificate Tuition fees paid for children's education (maximum 2 children) Principal component of home loan repayment 5-Year fixed deposits with banks and Post Office

| PLANNING|

24

Personal Wealth Management

2013

Equity Linked Savings Schemes (ELSS)

Application in Case of Mr. Jinesh Janardhan: As he is working abroad now and he dont have a plan to settle there, he is not at all making any investments there, he is paying the tax for the salary as per the tax laws of UAE. But almost all the investments, spending and savings he does in India only. He is getting tax deductions on, Life insurance Premiums, Bank Fixed deposits. He is paying the NRI tax as per the laws.

7.2.2 Reduction of tax liability beyond Section 80C deductions


As per the Indian laws, he dont have to pay tax under the income category as he is not earning anything in India,

Medical insurance: A deduction of upto Rs 15,000 pa under section 80D is applicable under this. At Present Mr. Jinesh has no medical insurance, but he should plan for his family medical insurance

Donations: Tax advantages under Section 80G entitle the donations to particular funds/institutions. At Present Mr. Jinesh is not making any Charity

Suggestion: Mr. Jinesh is spending most of the money here in India only. So he will have to spend judiciously to save the tax. He is not at all investing in high rist-high return investments such as equity and mutual funds. So considering his risk averseness, he can invest in govt. bonds and other institutional investments, as he can get tax deductions through these spendings.

7.3 ESTATE PLANNING


Mr Jinesh has yet not planned a will considering his young age and the fact that he has not build a huge estate as of now. Moreover he is yet to have children and so the thought of dividing the assets amongst them hasnt really been borne in his mind. As a planner I would like to suggest Mr Jinesh to go for a will planning soon in the future owing to the benefits that it provides as stated under:

| PLANNING|

25

Personal Wealth Management

2013

7.3.1 Benefits of a Will


A will gives you the opportunity to make sure certain matters are handled in accordance with your wishes after your death. These include:

Allowing you to choose in advance how you want your property to be distributed. Appointing a guardian for your minor children or other individual who requires guardianship. Choosing the executor of your estate. Designating a successor custodian in cases where you are serving in a custodial capacity for a minor or special-needs adult.

Providing for individuals who would otherwise not have been eligible to receive property you leave behind.

A will can also allow you to donate property to charities of your choice and choose the assets that would be used in the donation. Moreover there are many vital changes that may take place in his current life and hence he needs to change the will and update it with respect to events such as:

7.3.2 Update the will


The will should be updated regularly and if the circumstances change, for example:
o o o o o o o

Marriage or remarriage; Divorce or separation; Moving in with a partner; The birth of children and grandchildren; Retirement; Acquiring a large asset; or The loss or sale of assets disposed of by specific gift.

| PLANNING|

26

Personal Wealth Management So, Mr. Jinesh Janardhan is suggested to have a Valid Will and proper estate Planning.

2013

7.4 RETIREMENT PLANNING


Mr. Jinesh Janardhan plans to have a corpus of Rs. 2 crores by the time he retires at the age of 60. He expects his career to experience a steady rise through the ranks of the company, and a rise in salary along with that. He plans to come back after 10 years or so and start his own business in India. So thinking positively it will not be a big deal for him to raise that much amount if the business goes well as he planned. Thus, the suggestion for Mr. Jinesh is to put a portion of some of his income (which is expected to rise substantially in the next 3 years) for the establishment of the planned business back in India. The Plan suitable for Mr. Jinesh Janardhan is LIC Jeevan Nidhi. Options available:

Lifetime annuity: annuity for life. Life annuity certain for 5, 10, 15 years: Annuity is paid for chosen term and for life thereafter. Life annuity with return of purchase price: life annuity with return of purchase price on death to the beneficiary.

Joint Life, last survivor annuity: life annuity to you and then to your spouse with return of purchase price to the beneficiary on death of last survivor. You can choose these options at any time, but before 6 months of the vesting date.

Eligibility: Minimum age limit is 18 and maximum is 55 years. The minimum sum assured one needs to apply for is Rs. 50,000 and the minimum term is 10 years. The vesting age can be between 45 and 65. So he can buy a policy to build the corpus for his business start.

7.5 INSURANCE PLANNING


He has taken an LIC (Jeevan Surabhi and Jeevan saral) Rs.200, 000 policy Maturity 2015 Amount on Maturity Rs 600, 000. | PLANNING| 27

Personal Wealth Management

2013

7.5.1 Insurance policies suggested to Mr. Jinesh


As Mr. Jinesh is married and he have dependants now, he should opt for a term policy so that his famlily will a lump sum amount of money if something happen to him. There should be a term life policy for Mr Janardhan to the extent of 15 times his annual income. The ICICI term policy can be taken for the same as it can be taken online and thus it will be less expensive. A family health cover is recommended to the Mr.Jinesh which can cover a medical expense of upto Rs 5 lac.

7.6 INVESTMENT PLANNING


7.6.1 Analyzing the Current situation of Mr. Jinesh Janardhan:
As he is working in UAE and there is a chance of job loss of him leaving the job due to some uncertainty, he should plan his investment decisions very wisely. He believes that with his experience and expertise will bring him out of any uncertainty. In the worst case he might not bring home a salary for maximum 2-3 months. He has enough past savings to thrive on. He has only Fixed Deposits as income generating assets other than his Salary. His Current Investments:

Investment in gold Investment in Fixed Deposit Investment in real estate

INR. 12,50,000 INR. 150,000 INR. 280,000

| PLANNING|

28

Personal Wealth Management

2013

8. RECOMMENDATIONS
1. It is recommended to Mr. Jinesh to plan for any contingency such as losing his job or immediate return to India. In that case, he will have to keep an emergency fund for all the living expense for at least 6 months. Now he has enough basic solvency to meet his expenses for 3 months. 2. As getting free from debt is the top priority of anybody. Mr. Jinesh should first pay off the car Loan he has taken as soon as possible as it is high interest bearing loan. He should first pay off the loan EMI every month he receive his salary. 3. Mr. Jinesh wants to have a bike for his brother before he joins his job within 6 months.. He can save Rs. 8-10 Thousand per month to build a corpus of Rs. 1 Lakh in a year. He can also take recurring deposit for that purpose. 4. Being a salaried individual, he does not have much by way of savings. Hence Mr. Janardhan needs to provide this cover for his family. He should invest some more money into term insurance. He should opt for life insurance cover him up till the age of 60.The amounts being, Rs 1 lacs each for him and his wife. In this manner they also end up getting savings on tax. 5. He can invest in post office schemes where he will have sure returns and also tax benefits. Which will help him in building corpus for his Childs education 6. He can make use of savings made by his parents for his brothers marriage. He can put money on fixed deposit for 3-4 years. Also his brother will start earning in some months and he will not have any liabilities to make he can save money for marriage. 7. At Present Mr. Jinesh and his family does not have any medical insurance coverage. So it is highly recommended to buy a family floater policy which covers all the members as his parents are growing old and there will medical expenses in the near future. 8. Mr. Jinesh is highly risk averse person, he can invest in bonds and start investing in mutual funds as an entry to equity market for higher yield.

| Recommendations|

29

Personal Wealth Management

2013

9. LIMITATION OF STUDY
The study couldnt test about the 100% accurate wealth management and financial planning as respondent may skip some information and he might not want to share 100% correct information. The results are based on the data collected from one respondent only based on his wealth planning. It cannot be applied to any other person as it used the data collected from a UAE based accountant, Mr. Jinesh Janardhan. As he is working in UAE, and the taxes he pays are according the tax law which is existing in that state, there was a confusion in the tax planning of him for the investment he does in India. There was a proper communication problem as all the responses I got from him through phone calls and mails, lot of information were missing and the availability of time for the respondent was also limited. So this created some problems.

| Limitation of Study|

30

Personal Wealth Management

2013

10. REFERENCES
http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=f2f45 7f7-fd19-44d1-a788-8351bbb75ffd http://www.incometaxindia.gov.in/general/filereturn.asp http://articles.moneycentral.msn.com/Investing/SimpleStrategies/HowToA ssessRiskTolerance.aspx http://www.allbusiness.com/personal-finance/3878802-1.html http://www.allianceinvest.com/downloads/wealth.pdf bx.businessweek.com/personal-wealth-management Tata Mc Graw Hill, Dun & Bradstreet: Wealth Management www.mutual fundsindia.com http://www.licindia.in/individual_plans.htm http://www.amfiindia.com/navreport.aspx

| References|

31

Personal Wealth Management

2013

11. ANNEXURE
11.1 QUESTIONNAIRE 1: ANALYSIS OF FINANCIAL VALUES
If you had an extra Rs. 1.5 lac, on which one of the two items (in each row) would you spend your money? You must make one choice in each pair. S.no. Option 1 1 2 3 4 Housing (Dream Home) Education: Self/Others Retirement Savings/Investment Hobbies/Sports Vacation/Travel 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Charitable Giving/Religious Activity Social Activities/Eating Out Housing (Dream House) Education: Self/Others Hobbies/Sports Option 2 Investments/Retirement Savings Vacation/Travel Hobbies/Sports Charitable Giving/Religious Activity Personal Appearance/Grooming/Clothes Social Activities/Eating Out Car Retirement Savings/Investments Housing (Dream House) Housing (Dream House)

Personal Appearance/Grooming/Clothes Car Charitable Giving/Religious Activity Retirement Savings/Investment Social Activities/Eating out Hobbies/Sports

Personal Appearance/Grooming/Clothes Vacation/Travel Hobbies/Sports Retirement Savings/Investments Housing ( Dream House) Education : Self/Others Vacation/Travel Car Social Activities/Eating Out Vacation/Travel Car Charitable Giving/Religious Activities

Personal Appearance/Grooming/Clothes Education: Self/Others

| Annexure|

32

Personal Wealth Management

2013

11.2 QUESTIONNAIRE 2: ARE YOU IN DEBT TRAP?

Are you in a DEBT TRAP?

You have more than three credit cards. You are using your savings to pay current expenses. You have a habit of buying in instalments even if you have enough cash in hand You dont know how much you owe. You make late payment a habit. You charge more on your cards each month than you make in payments. Has a collection agency called recently about an overdue bill? Are you threatened with repossession of your car, cancellation of your credit cards, or other legal action?

Yes Yes Yes

No No No

Yes Yes Yes

No No No

Yes

No

Yes

No

| Annexure|

33

Personal Wealth Management

2013

11.3 QUESTIONNAIRE 3: KNOWING CREDIT HABITS

This questionnaire is to know about your credit habits. Please fill to the best of your knowledge 1. I pay my bills when they are due a) Always b) Almost always c) Sometimes

2. After paying my regular bills each month, I have money left from my income a) Yes b) Sometimes c) Never

3. When I get behind in my payments, I ignore the past due notices a) Never or not applicable b) Sometimes c) Always

4. When I need more money for my regular living expenses, I take out a loan or overdraft or saving account a) Never b) Sometimes c) Often

5. My credit record shows that I am current on all my loans a) Yes b) Dont Know c) No

6. To pay off my current credit and charge card accounts it would take me. a) 4 months or less b) 5-8 months c) Over 8 months d)Not Applicable

7. My consumer loans (including car loan, but not home loan payment) each month always average more than 20% of my take-home pay. a) No 8. b) Sometimes c) Always

If I had serious credit problems, I would ask help from my parents or friends. a) Yes b) Probably c) No

| Annexure|

34

Personal Wealth Management

2013

11.4 QUESTIONNAIRE 4: KNOWING SPENDING HABITS


1. Do you shop or spend money as a result of feeling depressed, disappointed, angry, scared or lonely? Yes No 2. Do you experience emotional distress or chaos in your life due to shopping or spending habits? Yes No 3. Do you have arguments with others about your shopping or spending habits? Yes No 4. Do you buy items on credit that would not be bought with cash? Yes No 5. Do you feel a rush of both euphoria and anxiety when spending money? Yes No 6. Do you feel guilty, ashamed, embarrassed or confused after shopping or spending money? Yes No 7. Do you lie to others about purchases made or how much you have spent? Yes No 8. Do you think excessively about money? Yes No 9. Do you spend a lot of time juggling accounts or bills to accommodate spending? Yes No | Annexure| 35

Personal Wealth Management

2013

11.5 QUESTIONNAIRE 5: RISK PROFILER

1) Your Age is

a. Under 25 b. 25 30 c. 31 50 d. 51 65 e. Over 65
2) What is you working status? I have a job In Case of Mr. Jinesh Janardhan: Total Assets = 8,540,000 Total Liabilities = 19,20,000 Debt to Asset Ratio = 19,20,000 / 8,540,000 = 22.48% a. I am practicing professional

b. I am a businessman c. I am retired d. I am presently without a job

3) Since how long?

a. Less than a year b. Since 2 3 years c. Since 3 5 years d. More than 5 years

4) How many dependents do you have?

a. 0 b. 1 2 c. 3 4
| Annexure| 36

Personal Wealth Management

2013

d. Above 4
5) Do you own your home?

a. Yes b. No

6) What is your savings as a percentage of your annual earnings?

a. Under 10% b. 10% - 25 % c. 25% - 40% d. 40% - 50% e. Above 50%


7) What is your present investment pattern?

a. Only in fixed income such as bank deposits, PPF, etc b. Mainly in fixed income and a portion in real estate and gold c. Mainly in equity mutual funds d. Mainly in direct equity

8) Are you satisfied with the returns you are getting on your existing investments?

a. Unsatisfied too low b. Somewhat satisfied c. Satisfied d. Satisfied but too high for comfort

9) What is the situation of your wealth build-up?

a. No wealth built up b. Very little wealth built up c. Build up is satisfactory d. Build up is very satisfactory
| Annexure| 37

Personal Wealth Management

2013

10) Usually, how much of your total investment do you invest in a single scrip? (in share of one company)

a. Less than 10% b. About 15% - 30% c. About 30% - 50% d. More than 50% e. I dont generally invest in equity

11) A few years ago you bought shares of a reputed company. The company experienced a severe decline in profits and the share price dropped drastically. You sold at a substantial loss. The company has restructured and most experts expect its shares to produce better than average returns. Would you buy the shares now?

a. Definitely b. Probably yes c. Probably not d. Definitely yes e. I dont invest in equity
12) What is your approach in making final decisions?

a. Make a quick decision based on information received b. Make a decision after validating information received c. Make a decision after validating information received and collecting additional
information

d. Usually make a decision after tremendous pondering and speaking to almost all the people I
know

| Annexure|

38

Personal Wealth Management

2013

13) You personally know a company's promoters. The company is expected to do extremely well. The promoters themselves say that they have put in all their personal wealth behind the company and its stock. Would you invest? If yes, to what extent?

a. I would invest a significant and meaningful amount in the scrip b. I would invest an amount that I would have regularly invested in a single scrip c. I would invest a very modest amount d. I would not invest in the scrip

14) When you think of the word 'risk' in a financial context, which of these options come first to your mind?

a. Thrill b. Opportunity c. Uncertainty d. Danger

| Annexure|

39