“A detailed study on personal financial planning in Mumbai.

A RESEARCH REPORT SUBMITTED FOR PARTIAL FULFILLMENT OF

COMPLETION OF GRADUATION

TO

UNIVERSITY OF MUMBAI

FOR AWARD OF THE DEGREE OF

BACHELOR OF MANAGEMENT STUDIES

IN THE FACULTY OF COMMERCE (MANAGEMENT)

(ADMISSION NUMBER: 2018PC1189 & DATE: 02/03/2021)

SUBMITTED BY
Maneet Neeraj Malhotra.

UNDER THE GUIDANCE OF

ASST. PROF FARHAT S.

PILLAI COLLEGE OF ARTS, COMMERCE & SCIENCE (AUTONOMOUS),

NEW PANVEL, SECTOR – 16,
DISTRICT - RAIGAD, MAHARASHTRA

2020-2021

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 CERTIFICATE

This is certified that the report entitled “A detailed study on personal financial planning in Mumbai.”
submitted by Maneet Neeraj Malhotra. (Admission no: 2018PC1189 and Date: 02/03/2021) for the
fulfillment of the requirement for the degree of Bachelor of Management Studies of the University of
Mumbai , is his original research work carried out under my supervision. To the best of my knowledge,
the results presented have not been submitted in part or full for any other diploma or degree of this or any
other University.

Asst. Prof. Farhat S. (Signature of External Teacher)

(Signature of Guiding Teacher)

Asst. Prof. Nithya Varghese Dr. Gajanan Wader

(BMS Co-ordinator) (Principal)

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 DECLARATION

I, the undersigned Mr. Maneet Neeraj Malhotra hereby, declare that the work embodied in
this project work titled “A detailed study on personal financial planning in Mumbai.”,
forms my own contribution to the research work carried out under the guidance of Asst.
Prof. Farhat S. is a result of my own research work and has not been previously
submitted to any other University for any other Degree/ Diploma to this or any other
University. Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography. I, here by further declare that
all information of this document has been obtained and presented in accordance with
academic rules and ethical conduct.

Name and Signature of Learner

(Maneet Neeraj Malhotra)

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 ACKNOWLEDGEMENT
To list who all have helped me is difficult because they are so numerous and the depth is so enormous. I
would like to acknowledge the following as being idealistic channels and fresh dimensions in the
completion of this project. I take this opportunity to thank the University of Mumbai for giving me the
chance to do this project.

I would like to thank my Principal, Dr. Gajanan Wader for providing the necessary facilities required for
completion of this project.

I take this opportunity to thank our BMS Co-ordinator Mrs. Nithya Varghese, for her moral support and
guidance.

I would also like to express my sincere gratitude towards my project guide Mrs. Farhat S. whose
guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and magazines
related to my project.

My genuine thanks are due to the rest of the workforce, staff of the Mahatma Education Society's Pillai
College of Arts, Commerce and Science (Autonomous), New Panvel for their significant exhortation and
direction.

Ultimately, no words can satisfactorily offer my obligation of thanks to my parents for producing in me a
lasting interest in higher investigations.

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 INDEX PAGE

Chapter No. Topic Page No.

1 Introduction
1.1 Introduction to Personal Financial Planning.
1.2 Need for Personal Financial Planning.
1.3 Study of various factors of Personal Financial Planning.
1.4 The Financial Planning process.
1.5 Constituents of Personal Financial Planning.
1.6 Misconceptions about Personal Financial Planning.
1.7 The Personal Financial Planning process.
1.8 Financial Planners.
1.9 Characteristics of Personal Financial Planning.
1.10 Forecasting.
1.11 Industry Structure.
1.12 Essential Components of Personal Financial Process.
1.13 6 Principles of Finance relating to Financial Markets.
2 Research Methodology
2.1 Statement of the problem.
2.2 Objective of the study.
2.3 Scope of the study.
2.4 Limitation of the study.
2.5 Significance of the study.
2.6 Sample Design
2.7 Data collection technique.
2.8 Purpose of Basic financial planning.
2.9 Need to study personal financial planning.
2.10 Hypothesis of the study.
2.11 Statistical tool used for analysis of data.
2.12 Research Paradigms.
2.13 Research Instrument.
2.14 Main contributions of this research.
2.15 Summary of the research.
3 Literature Review

4 Data Analysis, Interpretation and Presentation

5 Findings , Conclusions and Suggestions

6 Bibliography

5
7 Appendix

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 Executive summary

Personal financial planning is the process of assessing financial goal of individual, taking an inventory of
the money and other asset which the person have, determine life goals and then take necessary steps to
achieve goals in the stipulated period. It is a method of qualifying a person’s requirement in terms of
money.

The major things to be considered in personal financial planning are risk and return, diversification,
taxes, unforeseen future, liquidity need, the inflation which would eat up the living and decrease the
standard of living and the need for growth or income. Keeping all this in mind personal financial
planning is done with six step process. Determining your current financial situation, Developing financial
goals, Identifying alternative courses of action, evaluating alternatives, Creating and implementing a
financial action plan, and Reevaluating and revising the plan.
A good personal financial plan includes contingency planning, saving option investment planning, risk
planning, tax planning.

This project is conducted for gaining knowledge about consumer awareness of personal financial
planning. Questionnaire is collected from Navi Mumbai area to know the awareness of personal financial
planning. In this project researcher study’s awareness level of customers towards personal financial
planning. To know the concept of personal financial planning.

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1.1. INTRODUCTION TO PERSONAL FINANCIAL PLANNING

A financial plan is a comprehensive picture of your current finances, your financial goals and any
strategies you've set to achieve those goals. Good financial planning should include details about your
cash flow, savings, debt, investments, insurance and any other elements of your financial life. Personal
financial planning is the process of meeting life goals through the proper management of finances.
Financial planning is a process that a person goes through to find out where they are now (financially),
determine where they want to be in the future, and what they are going to do get here. Personal financial
planning provides direction and meaning to persons financial decisions. It allows understanding of how
each financial decision a person makes affects other areas of their finances. For example, buying a
particular investment product might help to pay off mortgage faster or it might delay the retirement
significantly. By viewing each financial decision as a part of the whole, one can consider its short and
long-term effects on their life goals. Person can also adapt more easily to life changes and feel more
secure that their goals are on track.

In simple personal financial planning is what a person does with their money. Individuals have been
practicing personal financial planning since centuries. Every individual who receives money has to make
decisions about the best way to use it. Typically, the decision was either spend it now or save it or later.
Everyone have to make decision every time they receive money.

Every human being is interested in leading a ‘Happy Life’ as long as he lives. Happy life would mean
having some goals to be achieved and possessing sufficient money to attain those goals. Personal
financial planning helps one to lead a happy life by planning one’s goals, process required to achieve the
goals, the timing of the investments and the class of assets (here, assets denote the type of financial
instruments where one has to invest the money like Bank FDs, Shares, National Savings Certificates,
Real Estate etc.) to be invested in.

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 1.2. NEED FOR PERSONAL FINANCIAL PLANNING
Why one should plan one’s finances can be understood by knowing the advantages or benefits one
derives if he plans:

• Seeing the Future with a Clear Vision:

When we have a goal to be achieved, we will be clear about the future, and through financial
planning, we would be able to follow the steps needed to achieve the goal. Without a financial plan, it
would be like groping in the dark and everyday crisis management. When we clarify our vision for
the future, we need to remember with our mind what it is we want in life. And then, let our feelings
be encouraged to strive for those things. And our will is enabled to make those decisions to get us
there. Even when things get hard, we have our vision to rely on to get us through.

• Ensuring Financial Discipline:

Financial discipline means being in control of your money. You are able to avoid impulse spending
and less likely to blow all of your money before paying your bills. If you have financial discipline
you will save up for an item and can set aside sinking funds without spending the money on
something else. Proper planning helps one to limit his/her expenses within the budget. It also ensures
that planning is done for the various events in one’s life and the money required for meeting them.

• Efficiently Managing Debts:

Taking a loan does offer instant gratification. However, when the liabilities turn in to a debt trap, it’s
time you put your personal finances in order with a financial plan. Many often land up increasing our
loans and borrowings through credit cards, overdraft facilities or personal loans. In most cases, these
easy finance options result in damaging their financial health, leading them into a financial mess. A
financial plan will not only help you to come out of this mess, but will also enable you to manage
your cash flows better in order to achieve your other financial goals.

• Inculcating a regular savings habit:

To create wealth in the long-term, investing with discipline and determination is the key. Even a child
needs discipline and regular monitoring to achieve his goal of being a good student. Hence, you too,
need to invest regularly and wisely to meet your financial goals. Investing small amounts regularly
will also prove to be light on your wallet and reduce the burden of defraying a huge amount from
your bank account. With a financial plan in place, you can determine the amount that you would need
to invest regularly to meet all your goals. You can establish the requisite corpus for meeting your
financial goals through planned investments in the right investment avenues.

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• Assessing the Person’s Risk Tolerance and Develop an Asset Allocation Strategy:

All people are not alike when it comes to taking risk in investing. Some may be aggressive while
others may be conservative. There may be few others who may be balanced. Financial planning helps
in finding out the risk appetite (risk bearing capacity) of each individual, and on the basis of the risk
appetite, suitable investments can be recommended.

• A Blueprint To Your Long Term Goals:

If you don't have road map of how to achieve your dreams, a prudently drawn financial plan can be
your blue print to meet all your financial goals while empowering you to deal with contingencies as
well. Hence financial planning is for those who have unclear ideas or plans of how they would
achieve their dreams and wishes in life.

• Safeguarding Self and Family against Financial Crises in the Event of Death or Disability:

As already understood, financial planning takes into account not only the individual’s needs but also
his entire family members. Financial planning in the form of obtaining insurance protects the family
in times of distress (death or disability). Providing for your family's financial security is an important
part of the financial planning process. Having the proper insurance coverage and policies in place can
provide peace of mind for you and your loved ones.

• Tracking Investment Performance with Respect to Set Goals:

A proper financial plan considers your personal circumstances, objectives and risk tolerance. It acts
as a guide in helping choose the right types of investments to fit your needs, personality, and goals.
Financial planning is not a onetime exercise. Constant monitoring of the investments’ performance
vis-à-vis the goals set would help in taking corrective action at the right time.

• Providing Peace of Mind:

It is said that a person who borrows without proper planning ends up in a debt trap. When he is
unable to pay the debts, he loses his sleep and thus peace of mind. Efficient financial planning would
ensure that the individual enjoys peace of mind.

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1.3. STUDY OF VARIOUS FACTORS OF PERSONAL FINANCIAL PLANNING

The financial lives of every individual has become complex as there are multiple incomes and a number
of expenses. Such scenario calls for the need to keep the personal finances in order so as to avoid
challenges in future. Every individual has a unique set of financial goals and challenges, which needs
customized personal financial planning. Here are few things to be considered while personal financial
planning:

1. Consider Inflation

Do not underestimate the impact of Inflation. To consider the impact just look a decade in past and
consider the value of common purchases like Gold, Real Estate, 2 Wheelers, Electronic Appliances, etc.
and compare it with present cost. Inflation is a slow but steady monster which eats away your value of
money over time, so one should always consider Inflation as an integral part of Financial Planning.
Inflation is a cause for concern among investors, especially those with less risk appetite (like pensioners)
and live on a fixed income. Increase in price will inadvertently impact interest rates too. The effect of
inflation on your investment portfolio is based on its underlying securities. Putting your money only or
mostly in equities has historically succeeded in keeping up with the pace of inflation. This is because the
company’s income and turnover tend to rise in tandem with inflation. So, the share value also increases
accordingly.

Inflation is an important parameter an investor should consider when he/she invests in any scheme. Low-
risk investments like fixed deposits and PPF give returns from 7% to 9%, while with moderate to high-
risk investments like mutual funds generate 14% to 20% returns. Mutual funds like ELSS offer you
inflation-beating earning potential. Thus, you will be able to retain or boost your current living standards.

Causes of Inflation

People always talk about inflation as one big economic menace. There are many reasons for that among
which the following three are the most common.

• Rising Demand

It is basic economics that when a product or a service is in demand, its cost (including that of the raw
materials) will also increase accordingly. Why would someone sell a commodity for a lesser price when
there are people ready to pay more?

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 • Insufficient Supply

When there is limited supply and more demand, inflation is the obvious result. For instance, the rising
housing prices in metro cities like Bangalore and Mumbai. High cost of organic vegetables and fruits is
also due to less supply.

• Minting Money

Another aspect that prompts price rises is excessive currency flow. With more printed money influx in
the economy, the value of currency goes down.

2. Risk & Return

Risk and return are highly correlated. Increased potential returns on investment usually go hand-in-hand
with increased risk. Different types of risks include project-specific risk, industry-specific risk,
competitive risk, international risk, and market risk. Return refers to either gains and losses made from
trading a security.

The return on an investment is expressed as a percentage and considered a random variable that takes any
value within a given range. Several factors influence the type of returns that investors can expect from
trading in the markets. People save money and if it is not invested in the right instrument but kept as it is
in a safe box then probably it will amount to zero savings over a period of time. Thus, it is important to
invest money that give higher returns on those savings, which will help money grow over the years.
Higher the risk, better are the returns but such instruments should be elected based on a person's risk
taking ability.

3. Diversification

Diversification allows investors to reduce the overall risk associated with their portfolio but may limit
potential returns. Making investments in only one market sector may, if that sector significantly
outperforms the overall market, generate superior returns, but should the sector decline then you may
experience lower returns than could have been achieved with a broadly diversified portfolio.. Since there
is no guarantee as to which asset class will perform than the other, therefore, it is recommended to
distribute the investible surplus across different asset classes like debt, bonds, equity, gold etc.

4. Consider Taxes

Taxes are inevitable and so your investment should earn more after applying taxes and not before. Take
care that taxes do not nullify the returns and fail to beat inflation. Tax advantages are sometimes created
for personal financial strategies as a way of encouraging certain personal goals. In the United States, as in
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most developed economies, certain goals such as home ownership, retirement savings, and education and
health financing are seen as personal goals that benefit society as well as the individual.

In most cases, tax advantages are created to encourage progress toward those goals. For example, most
people can buy a home only if they can use debt financing, which creates added costs. So mortgage
interest, that added cost, is tax deductible (up to a limit) to make home financing and therefore home
ownership more affordable and attractive. Where you have a choice, it makes sense to use a strategy that
will allow you to make progress toward your goal and realize a tax advantage. Your enthusiasm for the
tax advantage should not define your goals, however. Taxes affect the value of your alternatives, so
recognizing tax implications should inform your choices without defining your goals.

Unanticipated events such as an inheritance, a gift, lottery winnings, casualty and theft losses, or medical
expenses can also have tax consequences. They are often unusual events (and therefore unanticipated)
and may be unfamiliar and financially complicated. In those circumstances it may be wise to consult an
expert.

Your financial plans should reflect your vision for your life: what you want to have, how you want to get
it, how you want to protect it. You will want to be aware of tax advantages or disadvantages, but tax
consequences should not drive your vision. You would not buy a house with a mortgage only to get the
mortgage interest deduction, for example. However, if you are buying a home, you can plan to do so in
the most tax-advantageous way

5. Unforeseen Future

Personal finance is all about planning and implementing about future events which is unpredictable.
Hence, an individual should prepare himself to meet any adversity or emergency that he might face at a
future point of time.

6. Start With an Emergency Fund

The first step for preparing for the unexpected life event is to have a solid emergency fund in place. Your
emergency fund should be relatively liquid and should cover three to six months of standard living
expenses.

If you are single, or you are a single-income family, you may want to consider building an emergency
fund of up to a year. Having a year's worth of funds provides security for you and your family. This is
especially important if you should lose your job and have a hard time finding another one, or suffer an
unexpected illness where you are unable to work for an extended period and will have a gap in your
earnings.

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 7. Obtain Life Insurance

It is important that you have adequate life insurance to provide for your family. This will benefit your
spouse—if you are married—and will provide for any children you have. When your family depends
primarily on your income to pay debts, life insurance is doubly important.

The value of the policy's death benefit should provide enough money for your beneficiary to pay off
debts after you pass away. If you have children you should get enough that it can help cover the cost of
their education. It is vital that you have life insurance coverage if you have children.

8. Get Adequate Insurance Coverage in Other Areas

Additionally, you should make sure you have adequate health insurance coverage, and renter’s or home
insurance coverage. While you may be adding bills to your monthly budget, having this coverage will
save you in the long run.

Many people gamble with not having adequate health insurance coverage. They feel they are in good
health and do not need coverage and will choose a low premium, but high deductible policy. However,
accidents happen, and medical bills can add up quickly. All it takes is one serious illness or accident, and
you could find yourself deeply in debt. If you are injured to the point you can no longer work it will
compound the problem.

9. Plan for Natural Disasters

Depending on where you live, it may be wise to plan for natural disasters. Disasters include tornados,
hurricanes, floods, forest fires, and earthquakes. They can come upon you suddenly, and you need to be
prepared to deal with them. Consider which natural disasters are common where you live and talk to your
insurance provider about the coverage you may need.

Additionally, a good emergency kit with a five-day supply of food and water is good to have on hand in
your home, car, or office. The kits do not need to be very large or elaborate, but they can make a difficult
situation much easier to get through. An essential element of your emergency kit should include a small
amount of cash and a listing of your credit cards and other accounts along with the contact phone
numbers.

10. Create a Backup Budget

Finally, you may want to sit down and create a fallback budget. The fallback budget should leave out the
things you could cut back on or do without if necessary. This fallback will help you be ready in case you
experience an unplanned financial event or a period of unemployment.

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If you make the plan now, it will be easier to put it into place when and if the time comes. At the
beginning of a crisis you may not be thinking clearly, and it helps to have a plan already laid out that you
can follow.

11. Unplanned Investments/Incorrect Buying

Avoid getting caught up in purchasing of unplanned investments as there will be professionals who could
mislead you just to earn their commissions. It is recommended to have your own set of research and
information ready to prevent incorrect buying or unplanned Investments. Your financial life is linked
directly to your spending. How you spend today determines whether you will achieve your future
financial goals or not. Living within your means is very key to a bright future. One downside of
overspending is that you lose your credibility among lenders. Other serious consequences pop up if you
don’t control your spending behavior. In a nutshell, you must be watchful of your expenses to live
comfortably in the coming days.

12. First Save and then Spend and not Vice Versa

Savings should be considered as a part of Overall Fixed Expense per month and the other variable
expenses should be planned accordingly to the surplus remaining. This will go a long way in creating a
systematic and robust Portfolio and help in achieving all the Goals over a period of time.

13. Disciplined Approach

Saving and Investing should become a habit and not a once in a while event, hence a constant monitoring
and investing is the basic requirement of Financial Planning.

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1.4. THE FINANCIAL PLANNING PROCESS

The financial planning process is a logical, six-step procedure:

Determining your current financial situation

Developing financial goals

Identifying alternative courses of action

Evaluating alternatives

Creating and implementing a financial action plan

Reevaluating and revising the plan

Step 1: Determine Your Current Financial Situation

In this first step of the financial planning process, you will determine your current financial situation with
regard to income, savings, living expenses, and debts. A professional financial planner will collect a
variety of financial documents, such as a list of debt balances and current assets, and determine where the
person stands financially and what changes will need to be made to reach specified goals.

Step 2: Develop Financial Goals

You should periodically analyze your financial values and goals. This involves identifying how you feel
about money and why you feel that way. The purpose of this analysis is to differentiate your needs from
your wants.

Specific financial goals are vital to financial planning. Others can suggest financial goals for you;
however, you must decide which goals to pursue. Your financial goals can range from spending all of
your current income to developing an extensive savings and investment program for your future financial
security.

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Step 3: Identify Alternative Courses of Action

Developing alternatives is crucial for making good decisions. Although many factors will influence the
available alternatives, possible courses of action usually fall into these categories:

Continue the same course of action

Expand the current situation

Change the current situation

Take a new course of action

Not all of these categories will apply to every decision situation; however, they do represent possible
courses of action. Creativity in decision making is vital to effective choices. Considering all of the
possible alternatives will help you make more effective and satisfying decisions.

Step 4: Evaluate Alternatives

8The next step in the financial planning process involves evaluating possible courses of action. When
evaluating courses of action, it is important to consider the person’s life situation, values and the current
economic conditions. Individuals should also be aware of the trade-offs of their decisions. For example, a
person may choose to use their money to pay off their mortgage but in turn, will not be able to go on
vacation this year.
Consequences of Choices

Every decision closes off alternatives. For example, a decision to invest in stock may mean you cannot
take a vacation. A decision to go to school full time may mean you cannot work full time. Opportunity
cost is what you give up by making a choice. This cost, commonly referred to as the trade-off of a
decision, cannot always be measured in dollars.

Decision making will be an ongoing part of your personal and financial situation. Thus, you will need to
consider the lost opportunities that will result from your decisions.

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Evaluating Risk

Uncertainty is a part of every decision. Selecting a college major and choosing a career field involve risk.
What if you don’t like working in this field or cannot obtain employment in it?

Other decisions involve a very low degree of risk, such as putting money in a savings account or
purchasing items that cost only a few dollars. Your chances of losing something of great value are low in
these situations.

In many financial decisions, identifying and evaluating risk is difficult. The best way to consider risk is to
gather information based on your experience and the experiences of others and to use financial planning
information sources.

Financial Planning Information Sources

Relevant information is required at each stage of the decision-making process. Changing personal, social,
and economic conditions will require that you continually supplement and update your knowledge.

Step 5: Create and Implement a Financial Action Plan

In this step of the financial planning process, you develop an action plan. This requires choosing ways to
achieve your goals. As you achieve your immediate or short-term goals, the goals next in priority will
come into focus.

To implement your financial action plan, you may need assistance from others. For example, you may
use the services of an insurance agent to purchase property insurance or the services of an investment
broker to purchase stocks, bonds, or mutual funds.

Step 6: Reevaluate and Revise Your Plan

Financial planning is a dynamic process that does not end when you take a particular action. You need to
regularly assess your financial decisions. Changing personal, social, and economic factors may require
more frequent assessments.

When life events affect your financial needs, this financial planning process will provide a vehicle for
adapting to those changes. Regularly reviewing this decision-making process will help you make priority
adjustments that will bring your financial goals and activities in line with your current life situation.

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1.5. CONSTITUENT OF PERSONAL FINANCIAL PLANNING

A good financial plan should include the following things:

CONSTITUENT

Contingency Risk coverage Investment Retirement

Tax planning
planning planning planning planning

• CONTINGENCY PLANNING

Many a time, things don't pan out according to your plans. It makes sense then, to have a contingency
plan armoring you to deal with unexpected outcomes. A contingency plan is often used to manage risk
that may seem unlikely to happen, but if it does, would have a disruptive impact on your life.

It is often used for risk management for an exceptional risk that, though unlikely, would have
catastrophic consequences. Contingency plans are often devised by governments or businesses. For
example, suppose many employees of a company are traveling together on an aircraft which crashes,
killing all aboard. The company could be severely strained or even ruined by such a loss. Accordingly,
many companies have procedures to follow in the event of such a disaster. The plan may also include
standing policies to mitigate a disaster's potential impact, such as requiring employees to travel separately
or limiting the number of employees on any one aircraft.

For example, a sudden job loss can derail your financial planning but most importantly, also leave you
struggling to meet your everyday expenses and financial obligations like a personal or home loan till you
find another job. Having a contingency fund will ensure that you don't have to worry if such a situation
arises. It will enable you to pay your EMIs on time, even if your cash flow stops for some time as you
have anticipated this and kept funds aside.

Hence it becomes important to plan for such unforeseen contingencies. This is why you must keep aside
some funds as a contingency or emergency fund.

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• RISK COVERAGE

Every individual is exposed to certain type of risk whether it is due to loss or damage of the personal
property, loss of pay due to illness or disability etc. such risk cannot be determined but on occurrence
there may be a financial loss to the individual or to the whole family. It is a provision from the company
for the benefit of the customer to protect against transit risks when the goods are not insured by the
consignor. The coverage is extended if the customer chooses to avail the provision by paying the
stipulated risk coverage charges. This should not be construed as insurance cover as risk surcharge cover
will have only a limited liability on the part of the company subject to the terms and conditions laid out.
Personal financial planning should definitely include insurance. One main area of the role of personal
financial planning is to make sure that one has the ability to carry on the living in case of some
unfortunate event. Basically insurance provides a safety net to provide the necessary funds when one
meets with uncertain events like disability or illness etc. One main contribution of insurance is that it
helps provide peace of mind, knowing that funds are at hand in the event when things do not go the way
it should be. This peace of mind leaves one with energy and confidence to move forward.

• INVESTMENT PLANNING

Investment planning is the process of matching your financial goals and objectives with your financial
resources. Investment planning is a core component of financial planning. It is impossible to have one
without the other.

Investment planning is a process that begins when you are clear on your financial goals and objectives.
Our Financial Planning process is designed to help you get clear on how to match your financial
resources to your financial objectives.

Investment planning focuses on identifying effective investment strategies according to an investor’s risk
appetite and financial goals. There is a wide variety of investment options, including shares, bonds,
mutual funds, bank deposits, real estate and futures and options. Through investment planning, one can
identify the most appropriate portfolio mix.

Investment Planning: How it Works

Investment planning begins after you have taken into account your current and expected income level and
have laid down your financial goals. The important aspects of investment planning are:
Capital growth versus regular income:

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Investors aiming at long-term goals focus on capital growth. A long-term investment will allow you to
tide over rough times without changing your plans. Stocks, mutual funds and real estate represent
investment options for capital growth. On the other hand, if you're investing to meet a short-term goal or
to give you a regular flow of funds to complement your present salary, you should opt for income
investments. These investments generate a regular flow of income in the form of dividends and interest
and include fixed-income investments, such as bonds and certificates of deposit (CDs). While making a
selection, you should consider the tax implications and associated risks.

Risk: Every investment option represents a unique risk-return trade-off. Typically, more risky
investments offer higher returns in order to make it worthwhile for investors to take on the additional
risk. Investment planning should take into account an investor’s risk appetite, which dependents on your
current income level, savings, lifestyle and responsibilities.

Determine your investment profile: This can be done by considering your risk appetite. There are
mainly four types of investment profiles:

Conservative (Low Risk Tolerance): Such portfolios comprise mainly (about 70%) of income assets,
such as fixed interest and cash.

Balanced (Average Risk Tolerance): This refers to portfolios with an equal emphasis on growth and
income assets.

Growth (High Risk Tolerance): Such portfolios comprise mainly (up to 80%) of growth investments,
such as stocks and foreign currencies.

High Growth or Aggressive (Very High Risk Tolerance): This refers to portfolios with more than 90%
of the funds in growth investments.

Review your investment plan regularly: This helps in fine-tuning a portfolio to suit your current
financial situation and a change in risk preference.

• TAX PLANNING

Tax planning is the analysis of a financial situation or plan to ensure that all elements work together to
allow you to pay the lowest taxes possible. A plan that minimizes how much you pay in taxes is referred
to as tax efficient. Understanding what is tax planning is one of the most important aspect of financial
planning. It is a practice where one analyzes his financial situation based on tax efficiency point of view

21
so as to invest and utilize the resources optimally. Tax planning means reduction of tax liability by the
way of exemptions, deductions and benefits.

Tax planning is a pivotal part of financial planning. Through effective tax planning all elements of the
financial plan falls in place in the most efficient manner. This results in channelization of taxable income
to different investment avenues thus relieving the individual of tax liability. The investment amount post
lock-in can be utilized for fulfilling needs and act as the retirement corpus in most cases. All in all, the
objective of tax planning is to reduce tax liability and attain financial stability.

Tax planning in India allows a taxpayer to make the best use of the various tax exemptions, deductions
and benefits to minimize his tax liability every financial year.

Income Tax Slab for Individual who are below 60 years:

INCOME TAX RATE

Up to Rs.2.5 lakh
From Rs.2,50,001 to Rs.5,00,000
From Rs.5,00,001 to Rs.10,00,000
Income of above Rs.10 lakh
Nil
5% of the total income that is more than Rs.2.5 lakh + 4% cess
20% of the total income that is more than Rs.5 lakh +
Rs.12,500 + 4% cess
30% of the total income that is more than Rs.10 lakh +
Rs.1,12,500 + 4% cess

Income Tax Slab between 60-80 years:

INCOME TAX RATE

Up to Rs.3 lakh
From Rs.3,00,001 to Rs.5,00,000
From Rs.5,00,001 to Rs.10,00,000
Income of above Rs.10 lakh
Nil
5% of the total income that is more than Rs.3 lakh + 4% cess
20% of the total income that is more than Rs.5 lakh +
Rs.10,500 + 4% cess
30% of the total income that is more than Rs.10 lakh +
Rs.1,10,000 + 4% cess

22
Income Tax Slabs for individual above 80 years:

INCOME TAX RATE

Up to Rs.5 lakh Nil
From Rs.5,00,001 to Rs.10,00,000 20% of the total income that is more than Rs.5 lakh + 4%
cess
Above Rs.10 lakh 30% of the total income that is more than Rs.10 lakh +
Rs.1,00,000 + 4% cess

• RETIREMENT PLANNING

Retirement planning is the process of determining retirement income goals and the actions and decisions
necessary to achieve those goals. Retirement planning includes identifying sources of income, estimating
expenses, implementing a savings program, and managing assets and risk. Future cash flows are
estimated to determine if the retirement income goal will be achieved.

Retirement planning is ideally a life-long process. You can start at any time, but it works best if you
factor it into your financial planning from the beginning. That's the best way to ensure a safe, secure—
and fun—retirement. The fun part is why it makes sense to pay attention to the serious and perhaps
boring part: planning how you'll get there.

Understanding Retirement Planning

In the simplest sense, retirement planning is the planning one does to be prepared for life after paid work
ends, not just financially but in all aspects of life. The non-financial aspects include lifestyle choices such
as how to spend time in retirement, where to live, when to completely quit working, etc. A holistic
approach to retirement planning considers all these areas.
The emphasis one puts on retirement planning changes throughout different life stages. Early in a
person's working life, retirement planning is about setting aside enough money for retirement. During the
middle of your career, it might also include setting specific income or asset targets and taking the steps to
achieve them. Once you reach retirement age, you go from accumulating assets to what planners call the
distribution phase. You’re no longer paying in; instead, your decades of saving are paying out.

Remember that retirement planning starts long before you retire - the sooner, the better.

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1.6. MISCONCEPTIONS ABOUT PERSONAL FINANCIAL PLANNING

• It is a One-time Exercise:

Financial planning is thought of as one time exercise which is not true. Financial planning requires
close monitoring regularly and readjust or rebalance the asset portfolio so that the planned goals can
be achieved within the time frame work drawn. Financial planning is a strategic and systematic
exercise to achieve one’s financial goals. Many times people feel that financial planning is a one-time
process and there is no need to review their financial plan regularly. Everyone should keep in mind
that our goals may remain same, but the economic environment, government policies, taxation norms
change so we need to adopt review our plan accordingly to achieve our financial goals.

• It is Only about Tax Planning:

Tax planning is only one aspect of financial planning. Financial planning deals holistically and takes
care of investment, protection and estate planning in addition to tax planning. Tax-saving is only a
smart part of a broad category called financial planning. There is more to a financial plan than what
meets the eye. For a financial plan to be successful, it should have a proper investment plan that
saves taxes.

• It is to be Done When One Reaches Retirement Age:

Another wrong notion is that financial planning has to be thought of only when one is about to retire
or nearing retirement. If one asks what is the right time to start one’s financial planning, the answer
would be yesterday. That means it should be done at the earliest, as soon as one starts earning money.

No one is too young or too old for financial planning. Our circumstances change at various stages of
life so it’s never too early to start financial planning for better financial future.

At young age, you can create a smart budget and save for big events in your life—like your marriage
or buying a house. There are many advantages of starting an early plan because the interest that you
earn on the invested income increases by compounding and that in turn increases the investment
corpus by a phenomenal amount. Thus, starting early will help you increase your retirement corpus
by an unimagined amount! Planning at the younger age is the ideal thing.

• It is meant Only for Very Rich or High Net worth Individuals (HNI):

Another misconception is that financial planning is meant for only rich people. Financial planning
takes care of the goals of every individual whether rich or common man.

24
 It is Only about Investments: As already seen, financial planning covers not only the investment
aspect but also other aspects like insurance, tax planning, retirement planning and estate planning.

Many people think that financial planning is only for wealthy people. However, this is just not the
case. The 2018 Evolution Revolution report states that nearly 82% of individuals who have their
accounts managed by an SEC-registered financial advisor do not fall under the high-net-worth
bracket, i.e., they don’t have over 10 lakhs rupees of investable assets. This statistic clearly proves
that the services offered by financial planners are being used by all kinds of people and not just the
wealthy ones. In fact, it makes more sense for people with fewer assets to invest in financial planning
– if a planner helps save around 30,000 rupees, it is more meaningful for low or middle-income
individuals rather than those with a high income.

Financial planning is for all the people who want to manage their money efficiently and achieve their
financial goals in life. The bottom line is that if you have certain desires in life, you’re a suitable
candidate for financial planning.

• Financial Planning Does not need a Professional’s Advice:

Financial Planning is a specialized job. It requires deep knowledge of the various investment options,
regulatory guidelines, legal aspects etc. This can be done only by a professional qualified financial
planner.

Oftentimes, people believe that their finances are simple and hence the best option is to just ‘do-it-
yourself’ rather than hire a financial planner. In all effectiveness, this is a very ‘penny wise, pound
foolish’ approach. Firstly, finances are more complex than most people think them to be. A qualified
financial planner can manage tax planning, estate planning and other complicated areas of finance in
a manner that untrained individuals never can – that’s a simple truth. Secondly, even if an
individual’s finances are indeed simple, having a second opinion from a trained professional can
never hurt. Finally, a financial planner can offer valuable insights and bring up options that aren’t
otherwise easy to spot.

A 2018 study by Vanguard estimated that individuals working with a good financial advisor
experience a 3% increase on average in the value of their portfolios annually. As you can clearly see,
it just makes more sense to work with a financial advisor rather than going at it alone.

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• Financial Planning Advice is Too Costly:

It is true that one has to pay professional fees to the financial advisor. One should not forget that the
benefits which one derives from this advice would be much more than the nominal fee one pays.

Some people believe that the fees charged by financial planners are too high. The truth, however, is
that instead of becoming a financial burden, the services offered by a financial planner can actually
help save a lot of money. Moreover, trusted financial advisors are very transparent about their fee
structure. They will tell you upfront about the benefits that you will receive in lieu of the fees that you
are paying. While there are some financial planners that only target the wealthy and charge exorbitant
fees, there are also numerous ones who are willing to work with low and middle-income families on
an hourly or fixed-rate basis.

Ultimately, if you have any doubts about whether you can afford a financial planner or not, be honest
about your budget and inquire about the kind of fees you’ll have to pay. Chances are that you will
find an affordable financial planner sooner rather than later.

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1.7 THE PERSONAL FINANCIAL PLANNING PROCESS

Personal financial planning is the process by which an individual considers their current personal and
financial information, determines future financial goals and develops a financial plan to meet these
goals (Dawes, 1998). Once the financial plan is implemented, it is reviewed on a regular basis to
assess progress towards these goals and make adjustments to them as personal and financial
information changes.

The following example illustrates this process. An individual currently aged twenty five earning a
monthly income (personal and financial information), wishes to retire at age sixty five having saved
an amount of money to live off during retirement and be financially independent (future financial
goal). How much money should be saved each month from age twenty five and sixty five to achieve
the future financial goal is determined. The individual begins to save the required amount every
month until age sixty five (financial plan). At age thirty the individual decides to retire at age sixty
with the same future financial goal. This increases the amount of money which must be saved every
month and the individual proceeds to save the new amount of money (review and adjustment of the
financial plan).

Future financial goals for an individual may include planning for life events such as death and
minimising the financial consequences for remaining family members, been disabled and not able to
work and earn an income, financial independence at retirement, choosing appropriate investments to
build wealth, making provision for unforeseen health care expenditure and providing for the
education of children. These goals are common to a broad spectrum of individuals in a modern
economy and the successful achievement of them requires personal financial planning.

27
1.8 FINANCIAL PLANNERS

This complex financial product environment, together with the need to consider other factors, such as
current personal and financial information, future financial goals and the regular review of these
goals, has meant that there is a demand for a personal financial planning service. This service aims to
assist an individual to develop a financial plan, select the correct financial products that are required
to meet the plan’s objectives and review the plan with the individual on an ongoing basis.

This service is provided by Financial Planners. A definition of a Financial Planner according to

Botha, du Preez, Geach, Goodall and Rossini (2006, p. M1-3) is “a person who provides a variety of
services, principally advisory in nature, to consumers with respect to management of financial
resources based on the analysis of individual consumer needs and goals”. A Financial Planner takes
individuals through a consultative financial planning process to identify the individual’s future
financial goals. The financial planner then makes recommendations to the individual about financial
products which are the most appropriate to use to achieve the future financial goals, and assists the
individual with the implementation of the new financial product.

Once the financial product is in place the Financial Planner will review the progress of the personal
financial plan with the individual on a regular and ongoing basis. This is because personal and
financial information and financial goals of the individual can change requiring adjustments to the
plan. The Financial Planner is then in a position to advise the individual what effect these changes
have on the personal financial plan and recommend adjustments to the plan so that it continues to
meet the individual’s future financial goals.

There are many individuals and Financial Planners who engage each other in the provision of this
service. As an indication of the number of Financial Planners in South Africa, in February 2004 the
Financial Services Board, a statuary body which regulates Financial Planners was processing 14 500
licence applications in terms of a new legislative framework (Burger, 2006).

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1.9 CHARACTERISTICS OF PERSONAL FINANCIAL PLANNING.

1.9.1 THE SERVICE SYSTEM MODEL

Kotler (2003, p. 444) defines a service as “any act or performance that one party can offer to another
that is essentially intangible and does not result in the ownership of anything. Its production may or
may not be tied to a physical product”. Applying this definition to the personal financial planning
process, where a Financial Planner assists an individual to develop a personal financial plan and then
reviews the personal financial plan on an ongoing basis, it is proposed that the financial planning
process is an intangible process, which does not result in a physical product that is owned. The
personal financial planning process is a service and Financial Planners operate in this market context.

Considering the five service categories and other general distinctions noted by Kotler (2003), the
financial planning process is not a pure service, but rather a major service with some accompanying
minor goods. This is because the financial plan has some tangibles attached to it. These tangibles
would include the documentation of the plan and the report in which the plan is reviewed. It is a
people based service that requires the client to be physically present, services personal needs and has
the objective of making a profit.

These attributes affect the way in which a Financial Planner structures the efficient delivery of the
financial planning service to an individual (Kotler 2003). The attribute of intangibility means that an
individual will make judgements about the expected level of the financial planning service based on
the people and the environment they see, and may want assurance from others prior to the delivery of
the service.

An individual’s perception of quality will not only be their expectations and actual service received,
but will also include the process they are taken through (Parasuraman, Zeithaml and Berry, 1985).

29
There are two principles in this model which need further consideration. These are:

• As a system there are elements that are either visible or not visible to the customer. Elements that
are visible would include the Financial Planner that the individual interacts with, the office
environment and other customers. Elements that are not visible to the individual would be the
technology deployed to keep track of an individual’s financial plans and administration processes.

• An individual will either have direct or indirect interactions with the elements of the system. A
direct interaction would be the completion of a financial plan, whilst an indirect interaction might be
contact with another individual. This demonstrates is that the all these elements combine and affect
the ability of the Financial Planner to deliver the financial planning process as a service to an
individual. The model is further supported by the proposition from Booms and Bitner (1981) that in
addition to established marketing principles of product, price, place and promotion, three additional
factors need to be considered in a service environment. These are:

• “People” who in the context of the personal financial planning process would be the Financial
Planner and their interaction with the individual. What is evident is that the selection and training of
these Financial Planners will play a large role on the quality of the personal financial planning
process which is delivered.

• “Physical evidence” or the environment to which the individual is exposed in the interactions with
the Financial Planner. This would look at supporting the credibility of the personal financial planning
process by the quality of documentation used, qualifications and other facilities.

• “Processes” that differentiate or give efficiencies in the personal financial planning process that are
experienced by the individual in the personal financial planning process.

This service system model demonstrates that personal financial planning has characteristics which
allow it to be defined as a service and that principles of a service business can be applied to the
personal financial planning process.

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1.9.2 THE PERSONAL FINANCIAL PLANNING PROCESS

Although there are limitations in the academic theory base of personal financial planning, it is
possible to define the process and construct a framework that is used when a Financial Planner
intends to deliver the service of a personal financial planning process to an individual. The University
of the Free State (2005, p. 1) defines the personal financial planning process as the “organisation of
an individual’s financial and personal data for the purposes of developing a strategic plan to
constructively manage income, assets and liabilities to meet near and long-term goals and objectives”.
Evensky (1997) suggests that a Financial Planner should focus attention on the individual and be
dedicated to assisting the individual achieve their future financial goals and reduce uncertainty. The
Financial Planning Institute of Southern Africa (FPI) has developed a financial planning process
consisting of six steps which all Financial Planners should follow when doing personal financial
planning with an individual (FPI, 2006). The University of the Free State (2005) describes what
activities a Financial Planner should do within the context of each step.

Elements of the six steps are requirements of FAIS for the Financial Planner to be compliant
(Republic of South Africa, 2002). The six steps are:

Step 1 – Establishing and defining a professional relationship

In this step the financial Planner should identify the services which will be performed, disclose details
required by legislation, determine the time frame of the engagement, establish responsibilities of both
the individual and the financial planner, the manner of remuneration, identify additional information
that clarifies the scope of the service and record what has been agreed.

Step 2 – Gathering data, including goals

There are two separate elements in this step. The first is gathering financial information that is
relevant to he individual’s personal circumstances, the signing by the individual of a letter of
authority giving the Financial Planner access to the personal financial information and advising the
individual of the importance of the completeness and accuracy of the information relative to the scope
of the agreed service. The second is the determination of the individual’s future financial goals. These
goals allow the financial planner to be specific in the personal financial planning process. These goals
need to be measurable and relevant to the agreed scope and if unrealistic, the Financial Planner
should discuss this with the individual.

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Step 3 – Analysing and evaluating financial status

By analysing the information which is gathered the Financial Planner is able to determine if the
individual’s future goals can be met given their current resources and financial habits. As
assumptions around, but not limited to, future retirement dates and income needs will be used by the
financial Planner, these should be agreed with the individual and may require additional information
to complete the analysis.

Step 4 – Developing and presenting financial planning recommendations

There are three elements in this step.

• The first is to identify and evaluate financial planning alternatives. This is because the
analysis may determine different solutions that an individual may choose to achieve a future
financial goal, or that existing financial plans already meet the future financial goal. It is
incumbent of the financial planner to articulate why a particular solution is proposed.
• The second element is the development of the financial planning recommendations. These
should be consistent with the agreed scope, the future financial goals, the data provided by the
individual and the analysis performed by the Financial Planner.
• The third element is the presentation of the financial plan to the individual. Here the financial
Planner should discuss all the relevant information that affects the financial plan, and note for
the individual that as their personal and financial information changes these assumptions may
not be consistent with future financial goals. A written record of the presentation should be
given to the individual, and a copy kept by the financial planner.

Step 5 – Implementing the financial planning recommendations

There are two elements to this step.

• The first is to agree who will be responsible for the implementation of any actions or
recommendations that arise from the financial planning process.
• The second is to select financial products which will achieve the future financial goals.
Implied in this is the need for the Financial Planner to research financial products and
demonstrate technical knowledge and depth of understanding of financial products.

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Step 6 – Monitoring the financial planning recommendations

This step ensures that the individual’s financial plan remains current withpersonal and financial
information by setting review dates with the individual, advising the individual that they should
notify the Financial Planner should personal or financial information change and explaining the scope
of the review process.

From this we can surmise that a Financial Planner operates in a complex service environment which
requires a structured approach to ensure that individual’s future financial goals are met and
compliance requirements are adhered to.

1.9.3 PRINCIPLES OF PRACTICE MANAGEMENT

Personal financial planning is a service business which is delivered to individuals by the Financial
Planner. Practice management is the system that delivers this service. The term practice management
can been used to describe the service business system of a Financial Planner and this framework will
be developed to identify the four components of practice management, the principles which apply to
each area and their placement in the framework.

The development of this framework begins in understanding what an individual expects from the
service and the design of the service to meet their needs and create competitive advantage. Research
done by Sayer (2004) showed that the respondents identified four areas that an ideal Financial
Planner should exhibit in practice management. These are to act with integrity, honesty and
professionalism, have knowledge and expertise, fill needs efficiently with superior products and
deliver after sales service. Day and Barksdale (2003)established that trust was a key element of
respondents in the process of selecting a professional service. Aligned to trust, competence and
capacity of the professional service were identified as the two major components of trust.

Further, respondents indicated reasons why a professional service was not selected. These included
poor presentation, poor people skills and lack of communication skills. Coulter and Ligas (2004, p.
493) found that “successful customer relationships depend on the personal aspects of the relationships
as well as on the way in which the core service is performed” and suggested that the ability of the
people who deliver the service to adapt to diverse needs was a success determinant for the
respondents. This body of research reinforces the important role people play in the delivery of
services as suggested by Booms and Bitner (1981) and the need for a high degree of customer
orientation in practice management.

33
As most Financial Planners are financially rewarded for the selling of a financial product, conflict
results from the trade off between immediate personal financial success for the Financial Planner and
the need to remain customer orientated. Rozell, Pettijohn and Parker (2004) examined this issue and
found that high customer orientation was positively related to higher sales performance. The driving
factor behind customer orientation was the level of emotional intelligence resident in the sales team.

This implies that a Financial Planner should adapt their approach to different individuals. Botha et al
(2006) suggest different approaches to financial planning depending on the target market. One is the
Life Cycle Model which considers the consumption and saving of income by reviewing the patterns
of income and expenditure of an individual over their lifetime. Broadly this model presumes that at an
early life cycle stage an individual is reliant on others to support them financially. During the income
generating stage, the individual should have enough income to meet current needs and save for a
period when there is no or little income.

At retirement needs remain constant but income falls. A financial Planner who understands where an
individual is in the life cycle model is better able to do financial planning for the individual. The
money personality model divides individuals into thirteen personal traits and nine financial
personality groups. Personality traits would include pride, work ethic, risk-taking and trust. Financial
personality traits would include hunters, perfectionists, producers and money masters. The Financial
Planner who understands these different money personalities will help clients to make decisions
which provide both financial security and emotional stability and be able to adapt the personal
financial plan to meet the needs of the client.

The first two components of practice management that can be identified from this body of theory are
as follows:

• A Financial Planner has to have particular personal attributes. These attributes should include high
standards of ethics, the ability to build relationships of trust, high emotional intelligence, engage in
continuous education and be entrepreneurial.

• A Financial Planner has to have particular personal skills. These skills include the ability to
communicate with customers who have either different money personalities or who are in different
life cycle stages, strong technical knowledge and professional presentation techniques.

34
Next, the Financial Planner needs to consider the management of the individual whilst the service is
delivered. Some guidelines suggested to Financial Planners are to segment the client base into
profitability categories, retain key customers, referral business from existing customers and marketing
to qualified prospects (Financial Planning Consultants, 2005). Other elements that have been
discussed in the six step financial planning process are the consultative planning process and the need
to manage the personal financial planning needs of an individual on an ongoing basis. Botha et al
(2006) suggests qualifying customers before beginning the personal financial planning process to
ensure that the Financial Planner is able to meet the expected needs of the individual.

The third component of practice management that can now be identified is the strategy a Financial
Planner must use with an individual. These include qualification of new customers, consultative
personal financial planning on an ongoing basis, referrals from for customers and segmentation of
existing customers into appropriate service offerings.

The three components of practice management already identified need to operate together by using
business strategies which is the fourth component of practice management. The organisation of the
business begins with a business plan which should not only be about the pursuit of personal wealth,
but should include the principle of individuals, for whom personal financial planning is done,
achieving their future financial goals as the business fulfils its professional goals (Schweizer, 2006).
An effective marketing plan, designed to achieve competitive advantage will help build presence in a
target market. The marketing plan positions the Financial Planner in the minds of individuals around
trigger events that cause the individual to seek out the Financial Planner and should consist of a logo,
prospect profile and marketing materials (Swift, 2005). Technology can increase the efficiency of the
business. Peppard (2000) suggests that in financial services integrated information is critical for the
successful management of customer relationships. Other business strategies which should be adopted
are recruitment and development of support staff and their integration into the business plan and risk
management processes to ensure compliance (Botha et al, 2006).

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1.10 FORECASTING

Forecasting is the process of making predictions of the future based on past and present data and most
commonly by analysis of trends. A commonplace example might be estimation of some variable of
interest at some specified future date. Prediction is a similar, but more general term. Both might refer to
formal statistical methods employing time series, cross-sectional or longitudinal data, or alternatively to
less formal judgmental methods. Usage can differ between areas of application: for example, in
hydrology the terms "forecast" and "forecasting" are sometimes reserved for estimates of values at certain
specific future times, while the term "prediction" is used for more general estimates, such as the number
of times floods will occur over a long period.

Risk and uncertainty are central to forecasting and prediction; it is generally considered good practice to
indicate the degree of uncertainty attaching to forecasts. In any case, the data must be up to date in order
for the forecast to be as accurate as possible. In some cases the data used to predict the variable of interest
is itself forecast.

Qualitative vs. quantitative methods

Qualitative forecasting techniques are subjective, based on the opinion and judgment of consumers and
experts; they are appropriate when past data are not available. They are usually applied to intermediate-
or long-range decisions. Examples of qualitative forecasting methods are[citation needed] informed
opinion and judgment, the Delphi method, market research, and historical life-cycle analogy.

Quantitative forecasting models are used to forecast future data as a function of past data. They are
appropriate to use when past numerical data is available and when it is reasonable to assume that some of
the patterns in the data are expected to continue into the future. These methods are usually applied to
short- or intermediate-range decisions. Examples of quantitative forecasting methods are last period
demand, simple and weighted N-Period moving averages, simple exponential smoothing, poisson process
model based forecasting and multiplicative seasonal indexes. Previous research shows that different
methods may lead to different level of forecasting accuracy. For example, GMDH neural network was
found to have better forecasting performance than the classical forecasting algorithms such as Single
Exponential Smooth, Double Exponential Smooth, ARIMA and back-propagation neural network.

36
Average approach

In this approach, the predictions of all future values are equal to the mean of the past data. This approach
can be used with any sort of data where past data is available. Although the time series notation has been
used here, the average approach can also be used for cross-sectional data (when we are predicting
unobserved values; values that are not included in the data set). Then, the prediction for unobserved
values is the average of the observed values.

Naïve approach

Naïve forecasts are the most cost-effective forecasting model, and provide a benchmark against which
more sophisticated models can be compared. This forecasting method is only suitable for time series data.
Using the naïve approach, forecasts are produced that are equal to the last observed value. This method
works quite well for economic and financial time series, which often have patterns that are difficult to
reliably and accurately predict. If the time series is believed to have seasonality, the seasonal naïve
approach may be more appropriate where the forecasts are equal to the value from last season.

Drift method

A variation on the naïve method is to allow the forecasts to increase or decrease over time, where the
amount of change over time (called the drift) is set to be the average change seen in the historical data.
This is equivalent to drawing a line between the first and last observation, and extrapolating it into the
future.

Seasonal naïve approach

The seasonal naïve method accounts for seasonality by setting each prediction to be equal to the last
observed value of the same season. For example, the prediction value for all subsequent months of April
will be equal to the previous value observed for April.

The seasonal naïve method is particularly useful for data that has a very high level of seasonality.

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Time series methods

Time series methods use historical data as the basis of estimating future outcomes. They are based on the
assumption that past demand history is a good indicator of future demand.

-Moving average

-Weighted moving average

-Exponential smoothing

-Autoregressive moving average (ARMA) (forecasts depend on past values of the variable being forecast
and on past prediction errors)

-Autoregressive integrated moving average (ARIMA) (ARMA on the period-to-period change in the
forecast variable)

e.g. Box–Jenkins

-Seasonal ARIMA or SARIMA or ARIMARCH,

-Extrapolation

-Linear prediction

-Trend estimation (predicting the variable as a linear or polynomial function of time)

-Growth curve (statistics)

-Recurrent neural network

Relational methods

Some forecasting methods try to identify the underlying factors that might influence the variable that is
being forecast. For example, including information about climate patterns might improve the ability of a
model to predict umbrella sales. Forecasting models often take account of regular seasonal variations. In
addition to climate, such variations can also be due to holidays and customs: for example, one might
predict that sales of college football apparel will be higher during the football season than during the off
season.

Several informal methods used in causal forecasting do not rely solely on the output of mathematical
algorithms, but instead use the judgment of the forecaster. Some forecasts take account of past
relationships between variables: if one variable has, for example, been approximately linearly related to
another for a long period of time, it may be appropriate to extrapolate such a relationship into the future,
without necessarily understanding the reasons for the relationship
38
Causal methods include:

Regression analysis includes a large group of methods for predicting future values of a variable using
information about other variables. These methods include both parametric (linear or non-linear) and non-
parametric techniques. Autoregressive moving average with exogenous inputs (ARMAX).

Quantitative forecasting models are often judged against each other by comparing their in-sample or out-
of-sample mean square error, although some researchers have advised against this. Different forecasting
approaches have different levels of accuracy. For example, it was found in one context that GMDH has
higher forecasting accuracy than traditional ARIMA

Judgmental methods

Judgmental forecasting methods incorporate intuitive judgement, opinions and subjective probability
estimates. Judgmental forecasting is used in cases where there is lack of historical data or during
completely new and unique market conditions.

Judgmental methods include:

-Composite forecasts

-Cooke's method

-Delphi method

-Forecast by analogy

-Scenario building

-Statistical surveys

-Technology forecasting

-Data mining

-Machine learning

-Pattern recognition

Other methods

-Simulation

-Prediction market

-Probabilistic forecasting and Ensemble forecasting.

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1.11 INDUSTRY STRUCTURE

To meet the demand for products and services that assist individuals to achieve their future financial
goals, specialised businesses have been established that develop financial products which
individuals can purchase according to their future financial goals. One type of business model that
operates in this market is a long-term insurance company. A long-term insurance company is able to
take on a financial risk of an individual in exchange for the individual paying the company an
amount of money in regular instalments.

An example of this would be an individual who purchases a house by use of a mortgage with a bank
and has the future financial goal of the outstanding mortgage been settled in the event of the
individual’s death. If the individual will not have sufficient cash on hand at death to do so, the
individual can transfer this risk to the long-term insurance company by agreeing the amount of risk
to be taken by the company in the event of the individual’s death and the amount of money to be
paid by the individual to the company for the transfer of the risk.

As an indication of the size of the long-term insurance industry, as at March 2004, there were 78
long-term registered insurers. Approximate net premiums 5 received for 2003 amounted to R156.8
billion, with total assets amounting to R822.1 billion. Core products consisted of life assistance,
sinking fund, health and disability insurance (Burger, 2006).

The size of the industry has led to a high degree of complexity for an individual who wishes to
purchase a financial product. This is because each company has their own suite of financial products
presenting the individual with a wide choice, and that differences between these products can be
subtle in nature. This complexity can result in the individual purchasing a financial product that will
not meet the future financial goal or, will meet the future financial goal but not in the most efficient
manner.

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1.12 ESSENTIAL COMPONENTS OF PERSONAL FINANCIAL PLANNING

1. Goals & Objectives

Goals and objectives should be listed by priority and should be as specific as possible. They should be
specific, measurable, reasonable, and capable of planning.

2. Income Tax Planning

Tax returns should be examined to determine if you are maximizing tax saving possibilities consistent
with the planning objectives.

3. Balance Sheet

A balance sheet or “Statement of Financial Position” should be created, showing your net worth by
listing all assets and liabilities. This should be periodically updated to track progress towards overall
goals and to identify changes in your financial situation that need attention.

4. Issues & Problems

Issues/problems consist of observations regarding the strengths and weaknesses of your current situation
as well as risks you face.

5. Risk Management and Insurance

A sudden unexpected event can derail even the most detailed plan unless you have anticipated and
planned for catastrophic events. Insurance products are useful in managing these risks. You should
evaluate your life, disability, liability/umbrella, and long-term care insurance.

6. Retirement, Education, and Special Needs

Consideration must be given to retirement, education, or any other special needs (e.g., physically or
mentally incapacitated dependents or divorce settlements). Financial projections should be prepared for
these needs, along with funding strategies.

7. Cash Flow Statement

Preparation of a cash flow statement will show income from all sources, as well as expenses that occur on
a regular or recurring basis. This should be periodically updated to track progress towards overall goals
and to identify changes in your financial situation that need attention.

8. Investment Planning

An analysis of your investments should be completed to determine if the portfolio’s earnings, growth,
and diversification are consistent you’re your objectives and risk tolerance.
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9. Estate Planning

Your financial plan should include a review of your lifetime gifts and final transfer of assets to reduce or
eliminate your gifts and estate tax exposure.

10. Assumptions

Assumptions include inflation rates, rate of return on investments, tax bracket, years of work remaining,
and life expectancy. These should be reviewed periodically against your actual financial plan and
adjustments should be made accordingly.

11. Recommendations

All final (and proposed) recommendations should be in writing, stating the assumptions upon which they
are based, projected benefits, and potential problems.

12. Implementation Plan

The plan implementation section should delineate the individuals responsible for implementing each
identified task, whether it be you, your financial planner, accountant, attorney, or some other expert.

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1.13 6 PRINCIPLES OF FINANCE RELATING TO FINANCIAL MARKETS.

• The first principle of finance is that money has a time value.

In other words, a dollar earned today will be more valuable than a dollar earned in the future.
Therefore, money can be invested in order to make more money. Inflation is the continual increase in
the average price levels of goods and services.

• The second principle of finance explains the relationship between risk and reward.

The higher the reward, the greater the risk. This principle suggests that making a high-risk investment
is a waste of resources if the return is small. For example, if Jim has the choice to invest in a fully
backed government bond or a junk bond that is not secured, the risk will be low for the government
bond and high for the unsecured bond. A junk bond is a bond that is not rated highly, which means
that there is a high chance that there will be a default on the investment. If Jim invests in the junk
bond, he may not be paid. On the other hand, the government guarantees that the holder of a
government bond will get their money back. Secured bonds are also considered low risk because they
are backed by an asset, such as a car or house, that a lender can claim ownership of should the
borrower default on the loan. This is important, since it reduces the risk of the investor losing their
gains.

• The third principle of finance states that diversification of investments, or distributing investments
and risk over many different businesses, can reduce the investor's overall risk.

This is important because lack of investment diversity can increase the investor's market risk. For
example, if Jim only invests in oil stocks and there is a shortage of oil in the marketplace, all of his
holdings will be affected. However, if Jim diversifies his portfolio to include grocery stores and
music recording companies, he can expect more stability because his risk is distributed across the
marketplace and not concentrated in one type of business.
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• The fourth principle of finance states that financial markets are efficient in pricing securities.

The market follows news on a company, future forecasts, supply and demand, and other factors.
Depending on historical information, this principle may not be the best strategy for investors, since
financial markets are efficient in themselves and the financial environment is always changing.

• The fifth principle of finance is that a manager's and stockholders' objectives may differ.

The manager is doing what they believe is best for the business. On the other hand, the stockholder
wants the value of the stock to go up so that the stockholder can sell the stock at a higher price to
maximize their wealth.

• The sixth principle of finance states that reputation matters.

Reputation has a significant influence on an investor's decision whether or not to invest in a financial
instrument. A financial instrument is a legal document representing the right to receive an asset
such as cash, a contractual right to deliver or receive cash, or another form of owned equity that can
be traded. Companies with good reputations will inspire more people to buy their stocks. Companies
with bad reputations may have difficulty convincing people to buy stocks. For example, investors
would rather buy shares in Microsoft than Enron. In the past, Enron's lack of ethical behavior called
its reputation into question. Ethical behavior is behavior that is consistent with what society,
businesses, and individuals typically think are good values. Investors are wary of companies such as
Enron, which manipulated its financial statements to make its position appear better than it was. This
kind of unethical behavior costs investors a large amount of money in a short period. Consequently,
Enron went out of business when its fraudulent activities were discovered.

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 CHAPTER 2: RESEARCH METHODOLOGY

Research is the systematic design, collection, analysis and reporting of data and finding relevant
solution to a specific situation or problem. Research is thus an original contribution to the existing
stock of knowledge making for its advancement. The purpose of research is to discover answers to
the questions through the application of scientific procedures.

Research Methodology is the specific procedures or techniques used to identify, select, process, and
analyse information about a topic.

This research study is about the effect in financial practices with advancement in technology. This
research study will describe how technological improvement has affected the change in financial
practices done by people. Hence this is a descriptive type of research in which a survey has been carried
out to know people’s response on such development in the field of finance. Survey is done by the way of
questionnaire method. Several questions were asked relevant to the topic and responses are recorded.

Questions are asked by way of survey (Google) forms. Source of data collection is primary as well as
secondary data.

Responses are collected by way of primary data collection method and evolution is studied by way of
secondary data collection method. Sample size for data collection is 100-120 people. The samples are
restricted to Mumbai and Navi Mumbai area. The sample included people from different age groups.

2.1 STATEMENT OF THE PROBLEM:

A detailed study on personal financial planning in Mumbai & Navi Mumbai.

2.2. OBJECTIVE OF THE STUDY

• To study the concept of personal financial planning.

• To study awareness level of customers towards personal financial planning.
• To evaluate the factors considered during personal financial planning.
• To Estimate the total capital required
• To determine the sources, availability, and timing of funds
• To determine the business capital structure
• To Avoid excess generation of funds
• To Counter strategies for Risks
• To know how the technology has evolved in the field of finance
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 • To learn about new innovation brought in the world to carry out financial practices.
• To know how people respond to such changes.
• To know how many people have adapted such changes in their day to day life.
• To study the limitations attached with such changes.
• To know how such limitations can be improved
• To know how far our country has adapted new technology.
• To know people’s opinion on such changes.
• To know the reasons of those people who haven’t changed with the technology

2.3. SCOPE OF STUDY

This study will analyse the aspects of personal financial planning and its importance towards individuals.

• Confine itself to Financial Planners who work in the long-term insurance industry

• Establish principles of practice management as they relate to the personal financial planning process.

• Identify the top three practice management principles used in the personal financial planning process.

• Identify the top two issues challenging Financial Planners in practice management today.

This discipline covers the fundamental areas related to the economic welfare of a person or a family
which covers the eight(8) basic needs of man. These are:

➢ Basic Financial Planning – Savings & Loans

➢ Essential Assets Planning- Homes
➢ Insurance Planning - insurance
➢ Investment Planning – investments
➢ Retirement Planning – Retirement/pensions
➢ Estate Planning - Homes
➢ Tax Planning – Taxation
➢ Health planning – Health

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CONCEPTUAL SCOPE

Personal financial planning is the financial management which an individual or a family unit performs to
budget, save, and spend monetary resources over time, taking into account various financial risks and
future life events.

When planning personal finances, the individual would consider the suitability to his or her needs of a
range of banking products (checking, savings accounts, credit cards and consumer loans) or investment in
private equity, (stock market, bonds, mutual funds) and insurance (life insurance, health insurance,
disability insurance) products or participation and monitoring of and- or employer-sponsored retirement
plans, social security benefits, and income tax management.

GEOGRAPHICAL SCOPE

This study is concerned with investors in Mumbai & Navi Mumbai region.

According to United Nations, as of 2018, Mumbai was the second most populous city in India after Delhi
and the seventh most populous city in the world with a population of 19.98 million. As per Indian
government population census of 2011, Mumbai was the most populous city in India with an estimated
city proper population of 12.5 million living under Municipal Corporation of Greater Mumbai. Mumbai
is the cent of the Mumbai Metropolitan Region, the sixth most populous metropolitan area in the world
with a population of over 23.64 million.

2.4. LIMITATION OF THE STUDY

While preparing the report following were the problem faced-

o Time was major constraint.
o Many people were not interested.
o Proper secondary data was not available.
o The recommendations are the outcome of an analysis made individually.
o The lack of information sources for the analysis part.
o The data provided by the prospects may not be accurate as they too have their
limitations.
o The sample customers or sales persons comments may not be resemble to entire
population of consumers.
o Only Navi Mumbai and Mumbai area is selected for the study.
o The study is an effort to find out perception level of earning individuals towards personal
financial planning.
o This study took place in the testing time of the COVID-19 pandemic

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 o The lack of previous academic research and theory meant that the research was
exploratory in nature and used quantitative methods to establish a hypothesis.
o The population of relevance which is Financial Planners employed by Standard Bank had
the potential to exhibit a bias about their environment as it pertains to Standard Bank and
not the industry as a whole.
o The population of relevance chosen may not be large enough given the overall size of the
industry and the number of Financial Planners currently licensed.
o Although no sampling methodology was adopted the research relied on the population of
relevance to complete and return the survey, this brought into play the response rate from
respondents and the ability of the research to reach conclusions which can be broadly
applied to practice management.

2.5. SIGNIFICANCE OF THE STUDY

Financial planning enables a person to identify their goals assess the current position and take necessary
steps to achieve the goals. It helps us to understand how financial decisions made effect our life. Personal
financial planning is not just about investment planning but it is also about life time planning. Thus,
through proper personal financial planning a person can have an easy and secured financial life.

Financial Planning is process of framing objectives, policies, procedures, programmes and budgets
regarding the financial activities of a concern. This ensures effective and adequate financial and
investment policies. The importance can be outlined as-

1. Adequate funds have to be ensured.

2. Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so
that stability is maintained.
3. Financial Planning ensures that the suppliers of funds are easily investing in companies which
exercise financial planning.
4. Financial Planning helps in making growth and expansion programmes which helps in long-run
survival of the company.
5. Financial Planning reduces uncertainties with regards to changing market trends which can be
faced easily through enough funds.
6. 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.

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2.6 SAMPLE DESIGN
a. Universe of the study: Navi Mumbai & Mumbai area.
b. Sampling unit: - The population of the study is resident residing in and around Mumbai & Navi
Mumbai.
c. Sample size: - 100 Respondents
d. Sampling technique
To study the relationship each 50 respondents has been selected from population. The population in this
study consists of resident of Panvel. Non-probability convenient sampling process has been followed to
select the respondents from the entire population.

Male 48
Female 52
Total 100

2.7 DATA COLLECTION TECHNIQUE

The data is collected in 2 forms primary data & secondary data. Primary data is collected through
questionnaire method. Secondary data is collected through internal and external method in the form of
reports, research paper, publication, book, website etc. The data analysis tools utilities for interpretation
of data is percentile method.

➢ PRIMARY DATA: A primary data source is an original data source, that is, one in
which the data are collected first hand by the researcher for a specific research purpose or
project. Primary data can be collected in a number of ways. However, the most common
techniques are self-administered surveys, interviews, field observation, and experiments.
Primary data collection is quite expensive and time consuming compared to secondary data
collection. Not with standing primary data collection may be the only suitable method for
some types of research. Several methods of collecting primary data are as follows:
1. Observation Method: It is commonly used in studies relating to
behavioural science .Under these method observation becomes a scientific
tool and the method of data collection for the researcher when it serves a
formulated research purpose and is systematically planned and subjected to
checks and controls.

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 2. Interview Method: The method of collecting data involves presentation of
oral verbal responses it can be achieved in two ways i.e. personal interview
and telephonic interview.
3. Questionnaire: In this method a questionnaire is sent to the concerned
respondents who are expected to read and understand and reply on their own
and return the questionnaire .It consist a number of questions printed on
typed in a definite order on a form on set of forms. It is advisable to conduct
a pilot study which is the rehearsal of main survey by experts for testing the
questionnaire for weakness of the questions and techniques used.
4. Schedules: The method of data collection is similar to questionnaire
method with the difference that schedules are being filled by enumerations
specially appointed for the purpose. Enumeration explains the aims and
objects of the investigation and may remove any misunderstanding and help
the respondent to record answer.

SECONDARY DATA: When the data are collected by someone else for a purpose other than
the researcher’s current project and has already undergone the statistical analysis is called as
Secondary Data. The secondary data are readily available from the other sources and as such, there
are no specific collection methods. The researcher can obtain data from the sources both internal
and external to the organization. The internal sources of secondary data are as follows:
Sales report
Financial statements
Customer details like name, age ,contact details
Company information
Report and feedback from dealer, retailers and distributors
Management information System
There are several external sources from where the secondary data are collected. These are:
Business Journal
Social Books
Business Magazines
Libraries
Internet where wide knowledge about different areas is easily available.

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2.8 Purpose Of Basic Financial Planning
Basic financial planning is the most elementary part of personal finance. It consists of the plans, activities
and actions of a person in his regular day to day money use: cash management, checking account,
credit/debit cards, personal balance, budget, income and expense statement, etc. Financial planning will
provide the tools and processes to carry out these tasks in a tidy and systematic way.

2.9 Need to study personal financial planning:

Here are ten powerful reasons why financial planning – with the help of an expert financial advisor – will
get you where you want to be.

1. Income: It's possible to manage income more effectively through planning. Managing income
helps you understand how much money you'll need for tax payments, other monthly expenditures
and savings.
2. Cash Flow: Increase cash flows by carefully monitoring your spending patterns and expenses.
Tax planning, prudent spending and careful budgeting will help you keep more of your hard
earned cash.

3. Capital: An increase in cash flow, can lead to an increase in capital. Allowing you to consider
investments to improve your overall financial well-being.

4. Family Security: Providing for your family's financial security is an important part of the
financial planning process. Having the proper insurance coverage and policies in place can
provide peace of mind for you and your loved ones.

5. Investment: A proper financial plan considers your personal circumstances, objectives and risk
tolerance. It acts as a guide in helping choose the right types of investments to fit your needs,
personality, and goals.

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 6. Standard of Living: The savings created from good planning can prove beneficial in difficult
times. For example, you can make sure there is enough insurance coverage to replace any lost
income should a family bread winner become unable to work.

7. Financial Understanding: Better financial understanding can be achieved when measurable

financial goals are set, the effects of decisions understood, and results reviewed. Giving you a
whole new approach to your budget and improving control over your financial lifestyle.

8. Assets: A nice 'cushion' in the form of assets is desirable. But many assets come with liabilities
attached. So, it becomes important to determine the real value of an asset. The knowledge of
settling or canceling the liabilities, comes with the understanding of your finances. The overall
process helps build assets that don't become a burden in the future.

9. Savings: It used to be called saving for a rainy day. But sudden financial changes can still throw
you off track. It is good to have some investments with high liquidity. These investments can be
utilized in times of emergency or for educational purposes.

10. Ongoing Advice: Establishing a relationship with a financial advisor you can trust is critical to
achieving your goals. Your financial advisor will meet with you to assess your current financial
circumstances and develop a comprehensive plan customized for you.

2.10 HYPOTHESIS OF THE STUDY

Hypothesis is an idea or explanation that you then test through study and experimentation. Outside
science, a theory or guess can also be called a hypothesis. A hypothesis is something more than a wild
guess but less than a well-established theory. Anyone who uses the word hypothesis is making a guess.

Following is the hypothesis for the same:

H1: A significant relationship exists between the factors affecting savings and investments and personal
financial planning.

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H2: A significant relationship exists between personal financial planning and the annual income of a
person.

2.11 Statistical tool used for analysis of data

Statistical tool used for analysis of data are as follows:

Table:

A list of facts or figures usually arranged in rows and columns down a page.

Charts:

A Chart is a graphical representation of data in which the data is represented in symbols such as bars in
bar chart lines in line chart.

Graphs:

Graphs are a mathematical representation of a network and it describes the relationship between lines and
points.

2.12 RESEARCH PARADIGMS

A paradigm is a framework that people apply in a scientific process based on their philosophies and
assumptions of the world and the nature of knowledge. In the context of research it would influence the
way research is done (Hussey & Hussey, 1997). The two paradigms of research methodology are the
quantitative paradigm and qualitative paradigm and different terms are used to indicate them. These are
listed in Figure below.

Figure: Opposite approaches to main research paradigms

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 QUANTITATIVE QUALITATIVE
Tends to produce quantitative data Tends to produce qualitative data
Uses large samples. Uses small samples.
Concerned with Hypothesis testing. Concerned with generating theories.
Data is specific and precise. Data is rich and subjective.
Location is artificial. subjective The location is natural.
Reliability is high. Reliability is low.
Validity is low. Validity is high.
Generalises from sample population. Generalises from one setting to another.
Source: Adapted from Hussey and Hussey (1997, p. 54)

A summary of the main features of the two paradigms is described below.

Welman and Kruger (2001) have distinguished between the two paradigms by noting differences around
intervention. Quantitative research design exposes participants to an intervention that they would not
have been subjected to in the normal course of events. Qualitative research design does not create
interventions, but uses existing sources and interprets information about events which have already taken
place. Criticism of the qualitative paradigm suggests the researcher does not observe reality but an
interpretation of reality as they become absorbed in the research process and the excessive dependence of
relying on secondary sources of information. Criticism of the quantitative paradigm is that it is difficult to
capture a complex issue in a single measure and placing a numeric number on a human behaviour is not
always possible.

2.13 RESEARCH INSTRUMENT

In order to gather primary data on the research objectives, a self-administered survey was constructed.
Principles of survey design were followed and took into account the order and flow of questions so that
they would be logical to the respondent, ensure ease of answering, have visual appeal, be simple, have
clear and concise instructions and not appear to be too long (Saunders et al, 2003).

In addition to this, an acknowledged expert on practice management was asked to review the questions
on practice management in the survey as additional validation.

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 • Demographic Information

This included items such as age, gender and income, broken up into specific units where the respondent
was asked to indicate the matching unit to their own demographic. Seven demographic questions were
asked of each respondent.

• Open Ended Questions

Three open ended questions were asked. The first question asked respondents to select and rank
statements on practice management used in the survey. The second asked 42 respondents to describe the
biggest issue facing their practice and the third asked for general comments.

2.14 MAIN CONTRIBUTIONS OF THIS RESEARCH

The main contribution of this research was to increase the information available regarding practice
management principles in the personal financial planning process. These contributions can be
summarised as follows:

• Exploratory research in to the principles of practice management has been undertaken.

• A research instrument has been developed and can be used to replicate the research.

• Principles of practice management have been placed in the context of a service system model and four
components have been identified.

• Specific principles of practice management have been identified for use by Financial Planners.

• The personal financial planning process has been articulated and placed in an appropriate context.

2.15 SUMMARY OF RESEARCH

The personal financial planning process, which individuals use to achieve future financial goals, has
generated the need for products and services to assist the individual achieve these future financial goals.
The complexity of making financial decisions resulted in individuals requiring the services of Financial
Planners to assist them to make the correct financial decisions on an ongoing basis. Adding an additional
layer of complexity to this environment is the recent promulgation of legislation which ensures that the
Financial Planner acts in the best interest of individuals and gives the best service to the individual at all
times. The many requirements that have to be met are often approached in an unstructured way resulting
in inconsistent service delivery to the individual. It is this inconsistency that has motivated this research.
The focus of this research is to establish principles that Financial Planners can use to improve service
delivery to the individual and achieve personal financial success. In broad terms this is known practice
55
management and this research will attempt to develop a greater understanding of practice management
and provide a basis for further research on practice management. To do this in a meaningful way this
research has two structured phases. The first phase was a theoretical study that provided the basis for the
design of a research instrument. The second phase was an empirical study that was done 97 on the
responses received on the research instrument to establish principles of practice management.

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 CHAPTER 3: REVIEW OF LITERATURE

Literature review is a comprehensive summary of previous research on a topic. The literature review
surveys scholarly articles, books, and other sources relevant to a particular area of research. The review
should enumerate, describe, summarize, objectively evaluate and clarify this previous research. It gives a
theoretical base for the research and help the author to determine the nature of your research. The
literature review acknowledges the work of previous researchers, and by doing so, assures that the reader
has well-conceived the research work conducted previously.

A Literature Review is "a systematic, explicit, and reproducible method for identifying, evaluating, and
synthesizing the existing body of completed and recorded work produced by researchers, scholars, and
practitioners."- From Conducting Research Literature Reviews: From Internet to Paper, by Arlene

Burtless, G. (2006) Workers who anticipate reaching old age must make three choices about their
retirement. They must decide at what age they will retire, the percentage of their wages to set aside so
they can live comfortably when earnings cease, and the allocation of their retirement savings across
different kinds of investments, such as stocks, bonds, bank and insurance accounts, and real estate. The
three decisions are interrelated.

Williams Amy (2008) has explained the importance of financial planning and literacy in college
students. Study found that mistakes done by majority of the students who graduate lack in financial
knowledge; they delay repayment of student loans, accumulation of unnecessary debt, high credit card
debts and their failure to save. Other objective was to outline the essential of financial planning for
college graduates. Study has thrown light to various concepts like principle of investing, power of
compounding, investment avenues like equity, bonds, Mutual Funds, ETFs, Concept of diversification,
Retirement planning, Real Estate. This study serves as a theoretical background for further studies.

Ming Lei, wei- Khong Tan (2009) has examined attitudes of Malaysians towards Financial Planning.
Which encompasses money management, insurance planning, investment planning, retirement planning
and estate planning. Study showed that people manages money seriously. They spend money carefully
and manage them very well. Study also revealed that Chinese scores high on money management in
compare to Indians and Malay respondents. Study showed the result that job status of respondent is the
primary factor for in influencing attitudes towards personal financial planning and frequency in managing
for various aspect of financial planning. Demographic characteristics such as age, race, gender, marital
57
status, educational level are the secondary factors influencing personal financial planning. Lack of active
participation in personal financial planning shows that there is a need of awareness regarding overall
personal financial planning.

David S. Murphy, Scott Yetmar, (2010): “Personal financial planning attitudes: a preliminary study of
graduate students”, the purpose of this paper to report the Personal Financial Planning attitudes of MBA
students in USA. Participants are asked about the level of their knowledge, their preparation regarding
components of financial plan, their confidence in their plan to meet their long term needs, and their
likelihood for implementation of such plan, Study also indicated there is strong need of Financial Planner
to manage their financials.

Pravin Mahamuni, Santosh Apte, Anand Jumle(2011) has done study on Personal Financial Planning
for IT sector in Pune, India. Objectives of the research were to study interest of investors towards
financial planning and to study preference of financial products on magnitude of age. 150 Samples were
collected from IT sector in Pune using convenience sampling method. Study finds that awareness of
financial products amongst sample is good but investors are not much aware about non-conventional
investment avenues. Inclination of people is towards saving rather than investing. One very interesting
found by researcher is that respondents are confused about tax planning and financial planning. Main
focus of investors is of tax planning and not overall personal financial planning. From study it is also
found that there is positive relation with age and investment in FD and negative relation with age and
investment in stock market.

Dr.P.V.Mohini Prof.P.Veni(2018) Financial awareness equips the individual investors with the ability
to know, monitor, and effectively use financial resources to enhance the well-being and economic
security for the self, family, and one's business. The understanding of financial needs enable one to know
the structure, related literacy at various stages.

Rosilyn H Overton, Journal of Personal Finance 7 (1), 2008

Although it appears that a theoretical body of knowledge for the Financial Planning Profession has
always existed, until recently theory was not often explored as such, and there was no written common
understanding or agreement on the theoretical basis of the financial planning profession. A survey of the
financial planning literature over the past 50 years was performed, and certain basic theories from many
existing disciplines were identified, although their application in personal financial planning has
sometimes resulted in modifications. The theories identified from the literature were compared with the
financial planning educational topics list of the CFP Board of Standards and the core financial planning
process was explored in detail. A definition of financial planning as values and goals-driven strategic
management of the client's financial resources was fashioned and the financial planning process as the
58
strategic planning process applied to the financial and economic resources of the person or family was
also defined.

Dirk Brounen, Kees G Koedijk, Rachel AJ Pownall

Journal of International Money and Finance 69, 95-107, 2016

Greater personal responsibility toward financial decision-making is being advocated on a global basis.
Individuals and households are encouraged to take a more active approach to personal finance. In this
paper, we examine behavioral factors, which lead households toward savings and financial planning
across a panel of 1253 Dutch households. In line with the available literature, we find that an individual's
propensity to save decreases with age and is higher among the financial literate.

Lewis Altfest

The American Economist 48 (2), 53-60, 2004

Personal financial planning (PFP) is a fairly new and growing discipline. Its origins are in the
underacknowledged contribution by Modigliani, and by Becker and Markowitz. PFP deserves academic
recognition and additional academic research in the area. It would be extremely useful if a separate
personal financial planning theory were articulated. The author presents building blocks for that theory.
Furthermore, PFP coursework and textbooks should be elevated in academic content to place them on a
par with the corporate finance and investments areas. With proper support, PFP is likely to achieve the
greater prominence it deserves alongside other well-recognized academic financial areas and other
professional disciplines

Kenneth Black Jr, Conard S Ciccotello, Harold D Skipper Jr

Increasing numbers of firms within the financial services industry continue to organize around the
concept of delivering comprehensive personal financial planning (PFP) services. PFP delivery models
reflect the desire to control client relationship and realize economies of scope. In this article, we argue
that the need for comprehensive PFP is well grounded theoretically, although research to guide the
appropriate application of the theory remains lacking. Comprehensive PFP is not without its potential
costs, including risks associated with lessened advisor diversification at the client level, reduced
transparency, and agency problems. To address these risks, consumers likely will turn to credentials as a
proxy for quality and trustworthiness.

59
Benedict Koh: FT Press, 2012

If you are like most people, you may desire to achieve many financial goals such as owning assets,
saving money for emergency purposes, protecting yourself and your loved ones with insurance, and
many more. Nonetheless, achieving these goals with limited resources can be challenging, especially
given the complexity of modern financial markets. In this fourth and latest edition, Personal Financial
Planning expands on the important skill of financial planning, covering more topics than before. This
volume is designed to help you formulate financial goals and develop specific financial plans to achieve
your goals. Topics covered in this volume include the benefits of personal financial planning, financial
planning tools.

Sherman D Hanna, Suzanne Lindamood

Financial Services Review 19 (2), 2010

To estimate the monetary value of ideal financial planning advice, we address three types of benefits that
planners provide: increasing wealth, preventing loss, and smoothing consumption. We discuss, then
reject the possibility of using survey data to obtain valid estimates of the benefit of financial planning
advice. We instead use theoretical examples based on comparisons of optimal decisions to naive
alternatives. We find that the value of advice varies with a client's risk aversion and the percentage of
wealth that could be gained or lost. In general, the most risk averse households should place the highest
value on comprehensive financial planning advice. Financial planners can use our results to better
articulate the value of advice.

Thomas Warschauer, Donald Sciglimpaglia

Financial Services Review 21 (3), 2012

Prior research has attempted to value the component services that may be included in a personal financial
plan on a theoretical level. This research attempts to measure how those component services are actually
valued by consumers based upon a national survey of consumers. It clearly shows that the various
financial planning services are valued quite differently by consumers as a whole. In addition, these
services are valued differently by different consumer groups. The article concludes that these finding
could be used to tailor the services planning firms provide and those they emphasize in their marketing
efforts

60
Natalie Chieffe, Ganas K Rakes

Financial Services Review 8 (4), 261-268, 1999

Financial planning is a broad subject that requires an integrating overview. The Model for Financial
Planning incorporates the time and the expected nature of financial events. The categories of the model
include 1) money management issues that the individual faces as short-term expected events, 2) issues of
meeting unexpected financial events through an emergency fund and insurance, 3) investing to reach the
individual’s intermediate and long-term goals, 4) transference planning and other long-term issues whose
time frame is unknown.

Haiyang Chen, Ronald P Volpe

Financial services review 11 (3), 289-307, 2002

Surveying financial literacy among college students, we find that women generally have less knowledge
about personal finance topics. Gender differences remain statistically significant after controlling for
other factors such as participants” majors, class rank, work experience, and age. We do find, however,
that education and experience can have a significant impact on the financial literacy of both men and
women. We observe that women generally have less enthusiasm for, lower confidence in, and less
willingness to learn about personal finance.

Hanna, SD, Waller, W., & Finke, M.(2008).

The concept of risk tolerance in personal financial planning. Journal of Personal Finance 7 (1), 96-
108, 2011

Assessment of risk tolerance is fundamental to proper asset allocation within a household portfolio. It is
also a frequently misunderstood concept and difficult to measure practically. We discuss the relationship
between risk aversion and portfolio recommendations based on an expected utility approach, review
selected empirical research on risk tolerance, and propose to separate risk capacity, expectations, and
other factors from the concept of risk tolerance.

61
CHAPTER 04: DATA ANALYSIS, INTERPRETATION AND PRESENTATION

1. Name

100 respondents

2. Gender

Gender Responses
Male 48%
Female 52%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 48% of the people were male.
• 52% of people were female.

62
 3. Age group

Age group Responses

20-30 34%
31-40 35%
41-50 22%
51 and above 9%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 34% of the people were of age group between 20-30.
• 35% of people were of age group between 31-40.
• 22% of people were of age group between 41-50.
• 9% of people were of age group 51 and above.

Almost 69% of respondent were from age group 20years to 40years this is considered to be most active
age group. With a greater portion of such population included in data collection a greater degree of
understanding can be gained how financial planning is done by young India.

63
 4. Employment status

Employment status Responses

Business 12%
Profession 25%
Government Job 23%
Private Job 39%
Student 1%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 12% of the people were from business.
• 25% of the people were professionals.
• 23% of the people were from government jobs.
• 39% of the people were from private jobs.
• 1% of the people were students.

The above graph shows that maximum investors are from private job sector.

64
 5. Annual income range

Annual income range Responses

1 lakhs to 2 lakhs 3%
2 lakhs to 3 lakhs 16%
3 lakhs to 4 lakhs 44%
5 lakhs and above 37%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 3% of people had an annual income range between 1 lakh - 2 lakhs.
• 16% of people had an annual income range between 2lakhs – 3 lakhs.
• 44% of people had an annual income range between 3 lakhs – 4 lakhs.
• 37% of people had an annual income range of 5 lakhs and above.

Financial planning is about accessing our present cash flow, estimating the required cash flow after a
certain period of time and to determine the steps required to achieve this over a period. The above graph
shows that a major portion of respondent are in the income slap of 3 lakhs to 4 lakh p.a. this indicates that
the person may be in the beginning stage of career.

65
 6. Have you ever utilized personal financial planning services?

Financial services Responses

Yes 100%
No 0
Total 100%

Interpretation
From the above chart, we have interpreted that:
As the respondents were all investors, therefore they have utilized personal financial services.

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 7. Which source is utilized for financial planning advice?

Financial planning advise source Responses

Portfolio Manager 35%
Financial Advisor 34%
Chartered Accountant 31%
Other 0
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 35% of the people choose portfolio manager for their financial planning.
• 34% of the people choose financial advisor for their financial planning.
• 31% of the people choose chartered accountant for their financial planning.
• 0% of the people choose other.
According to the above graph maximum investors prefer portfolio managers and financial advisers for
personal financial planning advice.

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 8. Does your financial planner specialize in certain type of clients?

Specialize in clients Responses

Yes 62%
No 38%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 62% of people said their financial planner specialize in certain type of clients.
• 38% of people said no for the same.
Higher number of respondents said that their financial planner are specialized in certain types of client.

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 9. Does your financial planner use investment benchmark?

Benchmark Responses
Yes 68%
No 32%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 68% of people said their planner uses investment benchmark.
• 32% of them said no.

The above shows that majority of financial planners use investment benchmark.

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 10. Does your financial planner update you with all the investments and changes made in the
portfolio?

Update on changes Responses

Yes 65%
No 35%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 65% of the people said yes, that their planner keeps them updated.
• Remaining 35% said No.

The above graph depicts that a good number of investors are updated with all the investments and
changes made in the portfolio by their personal financial planner.

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 11. How often do you communicate with your financial planner?

Communication with planner Responses

Monthly 34%
Quarterly 50%
Yearly 16%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 34% of people communicate on monthly basis.
• 50% of people communicate on quarterly basis.
• 16% of people communicate on yearly basis.
It is to observe that most of investors communicate with their financial planners on quarterly basis.

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 12. On what basis do you pay your financial planner for the services provided?

Payment Responses
Monthly 32%
Quarterly 33%
Yearly 35%
Total 100%

• Interpretation
• From the above chart, we have interpreted that:
• 32% of people pay their planner on monthly basis.
• 33% of people pay their planner on quarterly basis.
• 35% of people pay their planner on yearly basis.
Most of the financial planner are paid on yearly basis.

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 13. Your primary personal financial planning objective is to-

Objective Responses
Principle safety 16%
Maintain standard of living 29%
Meet financial goals 33%
Safeguard against contingencies 22%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 16% of people said their primary goal is principle safety.
• 29% of people said their primary goal is to maintain standard of living.
• 33% of people said their primary goal is to meet financial goals.
• 22% of people said their primary goal is to safe guard against contingencies.

Investment objective to greater extend determine the investment tenure and the avenues. Different
investment objectives have different investments avenue to meet them. By determining the objective we
can easily determine the investment vehicle of investors. By seeing the above graph we conclude
majority of investors invest to meet their financial goals.

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 14. Are you satisfied with your personal financial planning?

Satisfaction Responses
Yes 72%
No 28%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 72% of people said they were satisfied with their financial planning.
• 28% of people said the were not satisfied with their financial planning.

A major portion of respondents are satisfied with the current investment planning. This reflects that
investment decisions are taken properly.

74
 15. How will you describe your knowledge about ‘Personal Finance’?

Financial knowledge Responses

Basic 26%
Intermediate 47%
Advance 24%
Expert 3%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 26% described their knowledge about personal finance as basic.
• 47% described their knowledge about personal finance as intermediate.
• 24% described their knowledge about personal finance as advance.
• 3% described their knowledge about personal finance as expert.

With highest 47% of respondents individuals agreed to having intermediate knowledge of personal
financial planning

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 16. Do you think ‘Personal Financial Planning’ is important for an individual?

Importance Responses
Extremely important 65%
Somewhat important 26%
Not so important 2%
I am not sure 7%
Total 100%

Interpretation
From the above chart, we have interpreted that:
• 65% of people said personal financial planning is extremely important.
• 26% of people said personal financial planning is somewhat important.
• 2% of people said personal financial planning is not so important.
• 7% of people said they are not sure.

65% of respondents agree on personal financial planning being extremely important for an individual.

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 17. Do you have a five year saving/budget plan?

Saving/Budget Plan Responses

Yes 57%
No 43%

60%

50%

40%

30%

20%

10%

0%
YES
NO

Interpretation:

From the above chart, we have interpreted that:

• 57% of the people have a specific savings/budget plan for the next 5 years.
• 43% of the people do not have a specific savings/budget plan for the next 5 years.

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 18. On the basis of your experience, will you recommend financial planning to a friend?

Recommendation Responses
Yes 91%
No 9%

100%

80%

60%

40%

20%

0%
YES
NO

Interpretation:

From the above chart, we have interpreted that:

• 91% of the people would recommend financial planning to a friend.
• 9% of the people would not recommend financial planning to a friend.

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 19. How important is it for you to save for retirement?
IMPORTANCE RESPONSES
Extremely Important 30%
Somewhat Important 41%
Not so Important 19%
I am not sure 10%

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Extremely
Important Somewhat
Important Not so
Important Not Sure

Interpretation:

From the above chart, we have interpreted that:

• 30% people think its extremely important to save for retirement.
• 41% of people think its somewhat important to save for retirement.
• 19% of people think its not so important to save for retirement.
• 10% of the people are not so sure.

79
 20. At what age do you plan to retire?
AGE RESPONSES
<40 11%
40-50 13%
50-60 51%
60+ 25%

60%

50%

40%

30%

20%

10%

0%
<40 40-50 50-60 60+

Interpretation:

From the above chart, we have interpreted that:

• 11% of the people plan to retire before the age of 40.
• 13% of the people plan to retire between the age of 40-50.
• 51% of the people plan to retire between the age of 50-60.
• 25% of the people plan to retire after the age of 60.

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 CHAPTER 05: FINDINGS, CONCLUSIONS AND SUGGESTIONS.

FINDINGS:

• 52% OF PEOPLE WERE FEMALE.

• 35% OF PEOPLE WERE OF AGE GROUP BETWEEN 31-40.

• 39% OF THE PEOPLE WERE FROM PRIVATE JOBS.

• 44% OF PEOPLE HAD AN ANNUAL INCOME RANGE BETWEEN 3 LAKHS – 4 LAKHS.

• 100% PEOPLE UTILIZED FINANCIAL PLANNING SERVICES .

• 35% OF THE PEOPLE CHOOSE PORTFOLIO MANAGER FOR THEIR FINANCIAL PLANNING.

• 62% OF PEOPLE SAID THEIR FINANCIAL PLANNER SPECIALIZE IN CERTAIN TYPE OF

CLIENTS.

• 68% OF PEOPLE SAID THEIR PLANNER USES INVESTMENT BENCHMARK .

• 65% OF THE PEOPLE SAID YES, THAT THEIR PLANNER KEEPS THEM UPDATED.

• 50% OF PEOPLE COMMUNICATE ON QUARTERLY BASIS .

• 35% OF PEOPLE PAY THEIR PLANNER ON YEARLY BASIS .

• 33% OF PEOPLE SAID THEIR PRIMARY GOAL IS TO MEET FINANCIAL GOALS

• 72% OF PEOPLE SAID THEY WERE SATISFIED WITH THEIR FINANCIAL PLANNING.

• 47% DESCRIBED THEIR KNOWLEDGE ABOUT PERSONAL FINANCE AS INTERMEDIATE .

• 65% OF PEOPLE SAID PERSONAL FINANCIAL PLANNING IS EXTREMELY IMPORTANT .

• 57% OF THE PEOPLE HAD A FIVE YEAR SAVING/BUDGET PLAN.

• 91% OF THE PEOPLE WOULD RECOMMEND FINANCIAL PLANNING TO THEIR FRIENDS .

• 41% OF PEOPLE THINK THAT SAVING FOR RETIREMENT IS SOMEWHAT IMPORTANT FOR
THEM.

• 51% OF THE PEOPLE PLAN TO RETIRE BETWEEN THE AGE OF 50-60.

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CONCLUSION:

Financial literacy is an important predictor of financial behavior in the developing countries around the
world. Indeed, even within the relatively homogenous Indian population, levels of financial literacy vary
greatly, and that financial literacy predicts financial behavior. From this empirical study it has been
observed that most of the investors have intermediate financial literacy. Similarly, the study reveals that
young investors in the age category of 20 to 40 years are more interested in investing in financial market
products, than the adult investors in age grouping of 50 years and above.

The elaborate data analysis also reveals the fact that the primary objective of investors is to meet their
financial goals. Moreover, the study identified that financial advisors and portfolio manager are most
preferred for financial planning advice the study results also concluded that maximum number of
investors are satisfied with their current investment pattern. Based on the empirical findings of the study,
it is apt to conclude that financial education is increasingly important, and not just for investors. It is
becoming essential for the average family trying to decide how to balance its budget, buy a home, fund
the children’s education and ensure an income when the Of course people have always been responsible
for managing their own finances on a day to day basis – spend on a holiday or save for new furniture;
how much to put aside for a child’s education or to set them up in life – but recent developments have
made financial education and awareness increasingly important for financial well-being. The household
individuals must gain more financial knowledge for the effective financial management and planning.
The Government of India, should educate the everybody about the importance of financial literacy and
planning. These determine the nature and rate of saving in an economy which, in turn, implies the rate of
economic growth.

Four components of practice management were identified in the research. These were personal attributes,
personal skills, customer strategies and business strategies. All four components integrate with each other
and a weakness in one will impact on another. The implications for Financial Planners are that to
improve service delivery the four components need to be managed and developed as a single unit. It also
means that existing measuring systems, which tend to focus on activity and financial measures, need to
be expanded to allow for monitoring of all the components in the practice. Twenty specific principles of
practice management were identified and classified into one of the four components.

There was high levels of agreement from Financial Planners that all the identified principles were
relevant to a practice management environment. It was noted that these twenty principles were a starting
point for the development of a body of theory surrounding practice management and not a final list. The
implications for a financial planner are that the range of skills which are required are very broad.

82
To be good in a particular aspect of practice management will probably result in failure as a whole over
98 the long-term. How Financial Planners are able to adapt in this environment will be a determinant of
success. The single most important practice management principle from the perspective of both
individuals and Financial Planners was identified. This was without question the need for high levels of
integrity, ethics and trust. The implications for Financial Planners are that no breach of these standards
should be tolerated at any cost. It also brings into question the current recruitment practices of entities
that employ Financial Planners.

Most recruitment procedures are based on assessing sales ability and sometimes other competencies.
Testing for personal attributes is rarely done, but these attributes together with those already mentioned
were the highest ranked principles in the research results. It is recommended that ethics testing and
training should be introduced in a formalised way to meet the requirements that this principle of practice
management suggests. Three demographic drivers of income were identified. These were levels of
education, number of existing clients and number of years as a Financial Planner. The research results for
two of the demographics, levels of education and numbers of years as a Financial Planner, had significant
positive correlations. This meant that higher levels of education and increased years as a financial planner
resulted in increased levels of earnings.

The implications of these findings are applicable at both a personal and business level. At a personal
level the case for engagement in ongoing education is clearly made. At a business level organisations
should be testing for this trait at recruitment 99 stage and making opportunities for further study or
development available. Further, the need to retain Financial Planners in the industry over an extended
period of time will be of benefit.

The third demographic of number of existing clients poses two questions. These are, what is the ideal size
for number of clients per Financial Planner and how does a Financial Planner manage the client base to
an efficient level? These questions require detailed research and fall outside the scope of this research
project. However, is recommended that information be gathered by Financial Planners that will assist in
the answering of these questions.

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SUGGESTION:

People need to need to be educated and informed about personal financial planning and this provides a
greater opportunity to financial product distributer. Companies can arrange for seminar and secessions
through which they can provide information to people and in return can get prospective clients from the
audience. In this way both the investors and the company can also be benefited.

Personal financial planning is not a onetime activity the initiative should be taken by the financial planner
to put this forward to their client. Regular meeting should be conducted between the financial planner and
client to review the investment portfolio this will ensure that the investment objective are achieved. It
will create goodwill for the financial planner and his company. This is not one area where many planner
are lacking today. Follow up is the need of our and it should be understood by the financial service
provider.

Goal should be properly divided into short term, medium term and long term. Proper allocation should be
done in various instruments according to the time period of goal. There are various instruments available
which can site different time period need. If investments are giving regular returns or are going to get
matured should be reinvested properly.

If an investor is seeking help from advisor then he should collect enough information of the product from
different sources. It will help to take proper investment decisions and choose a right advisor. It is also
necessary that the advisor should have enough experience. Thus the ultimate responsibility is on the
investor when it comes to taking investment decisions. All the documents related to investments made
should be complete and need to be preserved.

84
 BIBLIOGRAPHY

https://www.businessgyan.com/bpo

https://www.mywealthguide.com/contact

https://www.investopedia.com/personal-finance-4427760

https://thepersonalfinancialguide.com/

https://thefinancetwins.com/personalfinance101/

https://www.thebalance.com/financial-planning-basics-personal-finance-101-1289798

REFERENCES

Burtless, G. (2006). Social norms, rules of thumb, and retirement: Evidence for rationality in
retirement planning. In K. W. Schaie & L. L. Carstensen (Eds.), Societal impact on aging series. Social
structures, aging, and self-regulation in the elderly (p. 123–188). Springer Publishing Co.

Amy Williams (2008), “The Essentials of Financial Planning for College Graduates”, thesis submitted to
Liberty University.

Ming-Ming Lai, Wei-Khong Tan (2009) “An empirical analysis of Personal Financial Planning in
emerging economy”, European Journal of Economics, Finance and Administrative sciences, Issue. 16,
ISSN 1450 -2275.

David S. Murphy, Scott Yetmar, (2010): “Personal financial planning attitudes: a preliminary study of
graduate students”, Management Research Review, Vol. 33 Iss: 8, pp.811 – 817

Pravin Mahamuni, Santosh Apte, Anand Jumle ( 2011), “ A study on PFP for IT sector investor in
Pune”, International journal of Management, IT, Engineering, Vol. 1, Issue 5, pp. 74 -89.

Dr.P.V.Mohini Prof.P.Veni(2018) A Study on Awareness of Personal Financial Planning Among

Households IJEMR – April 2018 - Vol 8 Issue 04 - Online - ISSN 2249–2585 Print - ISSN 2249-8672

85
 APPENDIX

1. Name
100 Respondents

2. Gender
▪ Male
▪ Female

3. Age group
▪ 20-30
▪ 31-40
▪ 41-50
▪ 50 & above

4. Employment status
▪ Business
▪ Profession
▪ Salaried
▪ Other

5. Annual income range

▪ 1 lakhs to 2 lakhs
▪ 2 lakhs to 3 lakhs
▪ 3 lakhs to 4 lakhs
▪ 4 lakhs to 5 lakhs
▪ 5 lakhs & above

6. Have you ever utilized personal financial planning services?

▪ Yes
▪ No

86
7. Which source is utilized for financial planning advice?
▪ Portfolio Manager
▪ Financial Advisor
▪ Chartered Accountant
▪ Other

8. Does your financial planner specialize in certain type of clients?

▪ Yes
▪ No

9. Does your financial planner use investment benchmark?

▪ Yes
▪ No

10. Does your financial planner updates you with all the investment and changes made in the
portfolio?
▪ Yes
▪ No

11. How often do you communicate with your financial planner?

▪ Monthly
▪ Quarterly
▪ Yearly

12. On what basis do you pay your financial planner for the services provided?
▪ Monthly
▪ Quarterly
▪ Yearly

13. Your primary personal financial planning objective is?

▪ Principle safety
▪ Maintain standard of living
▪ Meet financial goals
▪ Safeguard against contingencies

87
14. Are you satisfied with your personal financial planning?
▪ Yes
▪ No

15. How will you describe your knowledge about ‘Personal Finance’?
▪ Basic
▪ Intermediate
▪ Advance
▪ Expert

16. Do you think ‘Personal Financial Planning’ is important for an individual?

▪ Extremely important
▪ Somewhat important
▪ Not so important
▪ I am not sure

17. Do you have a five year saving/budget plan?

▪ Yes
▪ No

18. On the basis of your experience, will you recommend financial planning to a friend?
▪ Yes
▪ No

19. How important is it for you to save for retirement?

▪ Extremely Important
▪ Somewhat Important
▪ Not so Important
▪ I am not sure

88
20. At what age do you plan to retire?
▪ <40
▪ 40-50
▪ 50-60
▪ 60+

89