Financial Planning is an important aspect in human life as it helps individuals set & achieve their long-term financial goals, through investments, tax planning, asset allocation, risk management & retirement planning. It means maximizing one’s wealth by investing in different asset classes, so as to capitalize on their unique risks, rewards & liquidity attributes. It is therefore, becomes necessary for an investor to identify their financial needs & goals, understand their investment choices & decide an appropriate mix of various investment choices. Financial planning is generally recommended to start early as possible as when a person starts earning, so that he/she can benefit from the compounding by the time they reach their retirement stage. Compounding means the computation of interest paid using the principal plus the previously earned interest. Each investor has different goals in life & in order to achieve that goal in a systematic & planned way, financial planning is necessary & for financial planning to make successful in the long -run, an investor should understand their available finances in different forms & how he/she can best utilize the available resources (finances) to achieve greater returns & within a time frame set by them.
Hence, in clear terms, financial services planning can be defined as an exercise aimed at identifying all the financial needs of an individual, translating the needs into monetarily measurable goals at different times in the future, & planning the financial investments that will allow the individual to provide for & satisfy his/her future financial needs & achieve his/her life’s goals. The objective of financial planning is to ensure that the right amount of money is available in the right hands at the right point in the future to achieve an individual’s financial goals.
These can be measured in monetary terms.
Personal financial needs are of two types – protection and investment. An
earning member providing for his family to have continued income after his
death is an example of protection need. Providing for the marriage expenses
of a daughter is an example of an Investment need.
Hence, Financial planner helps the customer to maximize his/her existing
financial resources by utilizing financial tools to achieve his/her financial goals.
About Financial Planner
A Financial Planner is someone who uses the financial planning process to
help another person determine how to meet his or her life goals. The key
function of a financial planner is to identify their financial planning needs,
their present priorities & the products that are more suitable to meet their
The financial planner normally possesses detailed knowledge of a wide range
of financial planning tools & products, but the planner’s major role is to help
clients choose the best products for each need.
The planner can take a ” big picture ” view of a client’s financial situation &
make financial planning recommendations that are right for the client.
The planner can look at all of client’s needs including budgeting & saving,
taxes. Investments, insurance & retirement planning or the planner may work
with his client on a single financial issue but within the context of his overall
situation. Therefore, planner is set apart from other financial advisors, like
tax advisors & insurance agents, who may have been trained to focus on a
particular area of a person’s financial life.
Basis for financial planning
Financial planners generally pursue “The Life Cycle Stage” for making a well-defined financial plan for their clients. As the need for each stage of life-cycle is different, thereby financial planner has to cautiously devise a well-suited financial plan for their clients so that they can meet their objectives successfully within a given level of time frame & resources. However, priorities will change as people grow older & their personal circumstances change.