An

Assignment On
Fund Management

Topic: Financial Planning & it’s approaches

Submitted To:. Submitted By:

Prof. N.S. Malik. Sonali
190101040015
MBA ‘FINANCE’

HARYANA SCHOOL OF BUSINESS

GURU JAMBHESHWAR UNIVERSITY OF SCIENCE & TECHNOLOGY
HISAR (HARYANA)
Financial Planning:
Financial independence is now an integral part of
our complex lives. Gone are the days when it meant having enough to
tide over one's personal needs without really having to struggle. In
current times, due to various reasons like a fast-paced life, job
insecurities and high inflation rates (that erode the value of money),
being financially competent in the present as well as the future should
is of prime importance for every individual.
However, it is widely observed that most individual's spend their life
in earning money and saving it but ignoring the third most important
aspect, financial planning, i.e. managing money. The process of
financial planning entails understanding an individual's present and
future earnings ability, analysing future financial requirements (like
buying a house) and developing a path to create wealth and reach
those goals as per the individual's ability to tolerate investment-
related risks. Further, financial plans must be dynamic to reflect the
ongoing changing market environment and the changing needs of the
individuals.
Financial planning is a step-by-step approach to meet one’s life goals.
A financial plan acts as a guide as you go through life’s journey.
Essentially, it helps you be in control of your income, expenses and
investments such that you can manage your money and achieve your
goals.
If you take a closer look at the above examples, you’ll find that there
is one factor that connects all of them: money. You need to have an
adequate amount of money to fulfil your goals and desires. More
importantly, you need to have money at the right point in time.
For example, if you want to build up a corpus of Rs. 10 lakh for your
daughter’s college education through investments, you need to grow
this amount by the time she turns 18. Not a year later. This is where
financial planning becomes essential.

Financial planning includes:

1.Planning for the amount of capital or investment required for a
business to carry out its operations in a smooth way.
2.Determining and comparing sources of funds both internally and
externally.
3.Making of suitable rules and policies for administration and
utilization of funds.
4.Identify risks and issues with all the estimations.

5 Objectives of Financial Planning:

The most prominent five objectives of financial planning are the
following:
1.Estimating the total capital required:
The first step in financial planning is to determine the actual
investment or capital required. The capital requirement can be further
divided into two categories, i.e. short term requirements and long
term requirements. Capital required depends on a number of factors
like the requirement of current and fixed assets advertisement and
operation expenses.
2. the sources, availability, and timing of funds:
Determining the sources and timing of funds is as tricky as anything
else. The required amount of funds should be available at the right
time according to business needs. Financial planning helping in
determine the inexpensive source of funds and make sure that funds
are available at the right time.

3.Determining the business capital structure:

The capital structure of a business is considered as the composition of
total external or internal debt to the shareholder’s capital. Financial
planning includes the decision on debt to equity ratio and kind of
investment required both in the short term and long term which
doesn’t affect the capital structure of the company.

4.Avoid excess generation of funds:

Unnecessary excess and shortage of funds are always an expensive
deal for businesses.One of the most important objectives of financial
planning is to prevent the business from rising of unnecessary funds.
Excess funds are just an idle asset of a business that cannot generate
any revenue for the business but have their own cost.

5.Counter strategies for Risks:

Financial planning identifies the risks and issues associated with the
business plan.Once the issues are identified at the planning stage, the
counter strategies are prepared to counter the identified issues. This
ensures the smooth completion of the project and saves a lot of
money and time.
Importance of Financial Planning:
Financial planning helps businesses to prepare a balanced plan for
their short term and long goals. The most common importance is as
follows:
1.Arrange funds according to the project need at the right time.
2.Financial planning helps to plan and execute long term development
which plays a vital role in the growth of the business.
3.Financial planning helps to prepare for any shortcomings and risks.
This rise the chances of success for the project.
4.Proper financial planning gives a competitive edge by arranging
sufficient funds for every stage of the project.
5.Financial Planning helps in ensuring a reasonable balance between
outflow and inflow of funds so that stability is maintained.
6.Financial Planning ensures that the suppliers of funds are easily
investing in companies which exercise financial planning.
7.Financial Planning helps in making growth and expansion
programmes which helps in long-run survival of the company.
8.Financial Planning reduces uncertainties with regards to changing
market trends which can be faced easily through enough funds.
9.Financial Planning helps in reducing the uncertainties which can be a
hindrance to growth of the company. This helps in ensuring stability
and profitability in concern.
How Financial Planning Works
There’s no mystery when it comes to financial planning. What it
requires is simply taking a personal, detailed look at your objectives
and aims and deciding how best to achieve them. Once you decide
what you want, you can make plans to get from where you are today
to where you want tomorrow.

We use a 6 step Financial Planning Process:

Step 1: No Obligation Initial Meeting:
At this meeting, we will listen to your financial concerns and discuss
what financial planning can do to help you achieve your financial
objectives. Identifying your financial goals and objectives will be the
foundation of your financial plan.

Step 2: Fact-finding:
We delve a little deeper into what you want to do in the future, how
much your current lifestyle costs, what financial commitments you
have and what future aspirations you have. To correctly establish an
overall picture of your finances, goals (short, medium and long term),
and attitude to risk, a detailed financial questionnaire will be
completed.

Step 3: Analysis:
When all of the required information has been gathered, it will be
analysed in order to fully understand how the client’s current finances
can be optimised to achieve their objectives. This process includes
determining how well the client’s investments match up to their risk
profile, if they have a sufficient emergency fund in place and tax
implications.

Step 4: Presentation Meeting:

Once the analysis and development of your financial plan is complete
we will outline the recommend course of action. After the plan has
been presented, we will thoroughly discuss the plan and address any
questions or concerns, and review the plan if necessary.

Step 5: Implementation:
After agreeing on the final structure of the plan, we will then handle
all of the changes required on your behalf, to ensure all items are
completed appropriately and efficiently.

Step 6: Regular Review:

In life, one thing is consistent: change. In order to adapt to changing
circumstances, and ensure the strategy continues to be relevant to
the client’s requirements, a structured review strategy will be put in
place.

Approaches of Financial Planning:

A true planner will use a defined process to determine the basis for
any recommendations. Inside that process, however, there are still
three main ways to look at how the customer-planner relationship
will evolve.

1. The Single-Purpose Approach

If the planner sells the client a single product, having used the
financial planning process to arrive at his decision, and being
approved by the client, then he has utilized the single-purpose
approach. Some examples might be the banker who opens a trust
account for the benefit of a handicapped child, or a stockbroker who
advises a client to buy shares of a particular company. This approach
solves a single problem for a evolve.
2. The Multiple-Purpose Approach
Many times a client will have concerns and/or needs in a particular
area, such as risk management, or income tax planning. It’s not
uncommon for a planner to take a multiple-purpose approach in
solving the problems. A good example might be a tax attorney who
assists clients with estate, income, and tax planning, or an investment
advisor who is registered with the SEC who assits clients in setting up
a complete portfolio to reach defined goals. Even though the advisor
is helping the client, he or she may still not know the overall financial
situation of the client.

3. The Comprehensive Approach

Comprehensive planners consider all aspects of a client’s financial
position. Since this type of planning must encompass such areas as tax
planning, and legal issues, a team is usually required, consisting of the
planner, an attorney, and a CPA. This type of plan will integrate
different areas of expertise to effectively solve the client’s problems.

Conclusion
Benjamin Franklin has rightly said, “If you fail to plan, you are
planning to fail.” You may have several different financial goals you
wish to achieve but to reach them at the right point in life; you need
to have a financial plan in place at a very young age.