Investor Issues
Financial planning: Positive approach but no support

Some 76% of Indian respondents say that they have a financial plan in place, according to a recent global study done by HSBC Bank. But are Indians really financially prepared to handle their finances after retirement?

In a recent global survey by HSBC Bank called 'The Future of Retirement', 76% of the Indians surveyed said that they have a financial plan in place. However, despite this majority saying that they have a plan in place, there seems to be a glaring contradiction-51% of the respondents were worried about being able to cope financially in their old age and 10% felt that they would need to work in their life after retirement to be able to finance themselves. Indian respondents may have a financial plan in place, but their plan not being good enough is causing them to worry.

The 1,028 respondents from India were mostly between 30 years to 60 years, living in urban areas and having a decent education. For a country where just 30% of the population are from urban areas, the sample size of the survey may not adequately represent the views of the entire country-but the figures are still a cause for concern. If the sample size was larger, considering all income groups, the picture would have been more worrying.

As per the report, "A key challenge in encouraging households to start planning remains the need to raise basic levels of financial literacy. The level of awareness is low and some don't even know how to find a good advisor."

Though Indians are positive in their approach towards financial planning, there seems to be a lack of proper guidance.  There maybe over 20,000 independent financial advisors (not including bankers and the mass of insurance agents). How many of them are trained and qualified to sell financial products?

Financial products are being sold as consumer goods. Consumer products are standardised, while financial products are not. The way they are being sold is equally important. Each person is different, with different kinds of plans and objectives and a different set of financial product to suit his/her needs. Most agents just push whichever product earns them a higher commission.

Apart from this, there have been numerous counts of mis-selling.

The Certified Financial Planner (CFP) is a certification which is administered globally by the Financial Planning Standard Board (FPSB) and by Certified Financial Boards of Standards in the US and its territories. India became a CFP council member in 2001. But till 2010, there are just 1,285 CFP professionals in India. The US has the highest with 61,951 CFPs. China and Japan have 9,034 and 17,109 professional planners respectively. China, which has a population close to ours, became a council member much later in 2006 and has seven times more financial planners than India.

Retirement planning is essential. Many fail to plan for the 30-35 odd years of retirement, now that longevity is increasing. The key to making your financial savings outlive you is to make wise investment decisions. Most people are starved for time and need quick and to-the point investment advice. But, how reliable this advice is, is a cause for concern.



Bhavesh Patel CFP

5 years ago

75% of the respondents have a Financial plan? This statement does not really make any sense. May be investors who have bought insurance policies or SIPs in Mutual Funds think they have Planned for their Retirement or Future. This is how the Insurance is being Sold in India. Of course, unfortunately.
In my opinion and observations, more than 70% of the Insurance policy holders are Over Insured. They have bought the Insurance (Mis Sold to them) thinking that if they buy more insurance they would get more money. (when they die of course).

People often miss the other aspect of personal financial planning like General Insurance, health Insurance, Estate Planning, Tax Planning, Inflation, Budgeting and Cash Flow etc.

Melvin Joseph

5 years ago

Good Articles giving the reason, why we should go for Financial Planning.
The peculiar issues in India are:
1. We are saving a lot, but good amount is invested in Bank Deposits which gives very poor return that too taxable.
2. We spend lot of money in Gold, which has a sentimental value. Eventhough the prices have increased a lot in the recent past, we cannot book profit in gold by selling it. Investments in EGold and Gold ETFs are yet to pick up in India.
3. We invest heavily in Real Estate. With a huge home loan and ever increasing interest rates, we will be fully loaded with the EMI burden all through our working life. This will not permit us to invest in any other avenues.
4. If at all, we want to invest, there are so many financial products available, which are complex to an ordinary investor.Even the distributors will find it difficult to explain the schemes. Most of these products are loaded with agent's commission.The moment, the customer feels cheated, he discountinue the investment!
5. When most of the foreign pension funds are investing in Indian Equities, we invest in post office(8%),bank deposit(7-9%) because of the saftey factor. In a fast developing country growing at around 8% pa, the equity returns will be around 15% atleast for the next 15-20 years. If we are not participating in equities, we will have a tough time in the long run, with ever increasing inflation.
The only solution to all these issues will be to consult a genuine and unbiased financial planner before making any investments in life. The fee paid to the financial planner will ensure that, you are on track to your goals in life including your retirement.
But you must know how to avoid your uncle coming to sell some policies to you. Beware, he is doing his retirement planning not yours!

Govt seeks public views online on black money issue

The government has already constituted a committee headed by CBDT chairman Prakash Chandra to devise new strategies to deal with the issue. The committee is expected to submit its recommendations in the next six months

New Delhi: The government on Wednesday created an email id for public to send their ideas and inputs to tackle issues arising out of black money, reports PTI.

The email—[email protected]—has been created on the server of the National Informatics Centre and the public can send their responses on the subject with immediate effect, a senior finance ministry officer said.

“General public can send in their responses and inputs like imposing penalties and making penal provisions to tackle with the issue,” the officer said.

The government has already constituted a committee headed by Central Board of Direct Taxes (CBDT) chairman Prakash Chandra to devise new strategies to deal with the issue. The committee is expected to submit its recommendations in the next six months.

The email account will be continuously monitored by finance ministry officials and they would place the messages before the committee headed by the CBDT chairman.



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5 years ago

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Advance tax mop-up nails slowdown fears; SBI pays Rs1,100 crore

Companies from across the sectors paid up more in advance tax this quarter than the year-ago period, except cement companies which had a poor showing. SBI led the pack with Rs1,100 crore, followed by RIL with a tax bill of Rs900 crore and LIC with an advance tax payment of Rs580 crore

Mumbai: Advance tax paid by India Inc presents a rosy picture, despite a massive fall in April Index of Industrial Production (IIP) numbers and a likely fall in the remaining months of Q1; with the largest lender State Bank of India (SBI) leading the pack with Rs1,100 crore against Rs850 crore in the year-ago period, reports PTI.

The Income Tax (I-T) department sources said today that oil and gas major Reliance Industries (RIL) has paid Rs900 crore in the first quarter of this fiscal, up nearly 50% from Rs650 crore in the same quarter of the previous fiscal.

Companies from across the sectors paid up more in advance tax this quarter than the year-ago period, except cement companies which had a poor showing.

The third in the list is the insurance giant Life Insurance Corporation of India (LIC), which made an advance tax payment of Rs580 crore in the first quarter of this fiscal, against Rs530 crore last fiscal.

Largest software exporter TCS saw its tax bill nearly doubling to Rs240 crore in the reporting period from Rs128 crore in the year-ago quarter.

The fourth in the list is the state-run Deposit Insurance & Credit Guarantee Corporation which saw an outgo of Rs475 crore against Rs400 crore last time.

Banks too, barring a few state-run ones, have paid up more. Leading foreign bank Citi saw its advance tax outgo jumping 50% to Rs150 crore from Rs100 crore, state-run IDBI Bank saw the tax bill soaring over 125% to Rs180 crore against Rs81 crore in Q1 last year.

The second largest foreign bank, HSBC, too paid up more, with a tax outgo of Rs250 crore against Rs225 crore.

State-run lenders like Bank of India paid Rs165 crore (Rs158 crore), Bank of Baroda (Rs250 crore versus Rs225 crore), Dena Bank around Rs55 crore against Rs45 crore, while Central Bank of India saw its advance tax payout declining to Rs145 crore against Rs150 crore.

All the private sector lenders have paid up more in taxes this time. While the largest private sector lender ICICI Bank paid Rs390 crore (Rs350 crore), the immediate competition HDFC Bank coughed up Rs350 crore (Rs315 crore). Kotak Mahindra Bank’s advance tax outgo stood at Rs60 crore (Rs45 crore) and Yes Bank paid Rs60 crore (Rs50 crore).

Pure-play mortgage lender HDFC saw its tax bill rising to Rs250 crore from Rs215 crore in the reporting period and so did LIC Housing Finance which saw its tax bill rising to Rs47 crore in the reporting quarter from Rs38 crore.

Among auto companies, barring the largest player Tata Motors, which saw its tax bill dipping a tad to Rs62 crore (Rs65 crore) all reported higher numbers. Bajaj Auto paid Rs125 crore (Rs110 crore), Mahindra & Mahindra (M&M) paid nearly 50% more at Rs90 crore (Rs63 crore).

Steel major Tata Steel also saw its tax bill shrinking during the reporting quarter to Rs280 crore from Rs300 crore, so did another group company Tata Chemicals, which paid up only Rs27 crore against Rs29 crore.

Aluminium major Hindalco’s tax bill rose to Rs80 crore against Rs55 crore. So did the engineering behemoth Larsen & Toubro (L&T) which coughed up Rs175 crore in advance taxes, up from Rs130 crore. Similarly, consumer goods leader Hindustan Unilever (HUL) too saw its tax bill jumping to Rs100 crore from Rs75 crore.

Oil companies presented a mixed picture with Bharat Petroleum Corporation paying a little more than half of what it had paid last time at Rs77 crore, against Rs126 crore; while both Hindustan Petroleum Corporation and MRPL paid up more at Rs62 crore (Rs61 crore) and Rs100 crore (Rs67 crore), respectively.

Cement players saw their tax outgo shrinking. ACC saw its tax bill declining to Rs45 crore from Rs50 crore, Ambuja, too, paid up less at Rs50 crore (Rs65 crore), while UltraTech bucked the trend with a sharp spike in its tax bill at Rs37 crore against Rs22 crore.

Pharma major Lupin paid Rs18 crore (Rs16 crore), AC major Voltas paid more at Rs23 crore (Rs18 crore) and the tobacco leader Godfrey Philips saw its tax bill exactly doubling to Rs12 crore.


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