3. 2011
Dear Mr Pal
We appreciate you having spent time with us on the profiling exercise and appreciate your
cooperation in making this a fulfilling and holistic exercise. Today's financial environment is
complex and in many regards, uncertain. The decisions you make regarding work, spending,
investment, and retirement, both now and in the future, will significantly affect your financial
condition over the long term.
We are pleased to present you with your Personalised Financial Plan. The purpose of this plan is to
help lay out a roadmap for achieving your goals and objectives. Based on the information that you
have provided, and assumptions we have made about the future, we have analysed your current
financial situation and outlined an action plan that should help you achieve your goals and
objectives.
Our recommendations are based on your investment and risk profile, your financial and lifestyle
goals, net worth and financial budgets. This plan also states your areas of "risk" and recommends
solutions that will protect your family and your financial assets against future hurdles. Needs or
deficiencies are suitably identified, and recommendations are included to illustrate how you may
improve your arrangements.
This confidential report was created for your personal use and future reference only. Each section
is designed to give you a better understanding of your financial circumstances, and what's
projected for the future. The report reflects your financial standing today and where you are likely to
be in the event of your disability, death or retirement. It will provide valuable information for years to
come.
As your financial situation or goals may change overtime, this report should not be considered final
or definitive, but as part of an ongoing, long term planning process. As changes occur in your
financial situation, it is important to update your personal information in order to re-evaluate
whether you are on track to meeting your goals. This plan needs to be reviewed and updated every
6 months to enable you to account for changes in your financial situation or other market related
factors.
This plan is meant to be educational, interactive and easy to understand. Please feel free to contact
us if you have any queries.
We look forward to reviewing and implementing these recommendations with you and we thank you
for giving us an opportunity to assist you in planning for your long-term financial success.
With Warm Regards
On Behalf of CWM Financial Planning Team
5. 2011
WHY HAVE A WRITTEN FINANCIAL PLAN
Managing personal finances in today’s complex and rapidly changing world is a very daunting task
for most people.
Unfortunately, many people choose not to manage important elements of their financial affairs
because they believe the benefits of having an exhaustive financial plan are not worth the effort it
takes to complete it. Therefore they ignore their realities in the hope that they will somehow go
away. This is especially true for people trying to manage their investing themselves.
In today’s marketplace, with the continuous entry of new products, services and tax legislation, it is
next to impossible to stay emotionally detached and make prudent decisions.
A well organized process for completing a comprehensive written financial plan is a very effective
way to guard against this tendency to ignore reality by making the task more manageable so more
people are willing to complete the task.
There are several compelling reasons why most people should have a written financial plan.
1. Helps Control Stress and Emotions
A written financial plan that is carefully prepared, and reviewed at least annually to reflect your
changing needs, will bring you powerful peace of mind, especially when the going gets tough. The
discipline of committing your plans to writing takes a huge burden off. You no longer feel that you
need to manage all your financial concerns and risks in your head, especially when you are under
stress. Without a financial plan, your emotions can have an undue influence on your choices.
2. Provides a Modular Framework for Making Decisions
Your needs, wants and concerns are the foundation for your written financial plan. By fully
understanding your situation alongwith your family’s participation, and what impact your goals and
dreams will have on your finances, your financial plan becomes the solid framework upon which to
make all important decisions.
3. Consolidates the Work of All Your Professional Advisors
A comprehensive written financial plan provides you with a central point of reference to coordinate
and manage the activities of all your investment, financial, taxation and legal advisors. Your
financial advisor is in the best position to provide this central coordination because of the broad
scope of their involvement. Having a coordinated approach with the help of your financial advisor
will be of great benefit to you and your family.
6. 2011
The Financial Planning Process
The Six Step Process of Personal Financial Planning
Personal financial planning focuses on the individual. In order to best serve an individual’s needs,
the professional financial planning practitioner employs a complete Financial Planning Process
comprising these six distinct steps:
Step 1
Clarify Your Present Situation
The financial planner clarifies the your present situation by collecting and assessing all relevant
financial data such as lists of assets and liabilities, tax returns, records of transactions, insurance
policies, , pension plans etc.
Step 2
Identify Goals and Objectives
The financial planner helps you identify both financial and personal goals and objectives as well as
clarify your financial and personal values and attitudes. These may include providing for children’s
education, supporting elderly parents or relieving immediate financial pressures which would help
maintain your current lifestyle and provide for retirement. These considerations are important in
determining the best financial planning strategy for you.
Step 3
Identify Financial Problems
The financial planner identifies financial problems that create barriers to achieving financial
independence. Problem areas can include too little or too much insurance coverage, or a high tax
burden. Your cash flow may be inadequate, or the current investments may not be winning the
battle with changing economic times. These possible problem areas must be identified before
solutions can be found.
Step 4
Recommendations
The financial planner provides written recommendations and alternative solutions. The length of
the recommendations will vary with the complexity of your situation, but they should always be
structured to meet the your needs without undue emphasis on purchasing certain investment
products.
Step 5
Implement Strategies
A financial plan is only helpful if the recommendations are put into action. Implementing the right
strategy will help you reach the desired goals and objectives. The financial planner should assist
you in either actually executing the recommendations, or in coordinating their execution with other
knowledgeable professionals.
Step 6
Monitor and Review
The financial planner provides periodic review and revision your financial plan to assure that the
goals are achieved. Your financial situation should be re-assessed at least once a year to account
for changes in your life and current economic conditions.
7. 2011
Executive Summary
This report uses financial models to present a picture of your current financial situation and
illustrations of possible directions your finances may take. Future economic and market conditions
are unknown, and will change.
The assumptions used are representative of economic and market conditions that could occur, and
are designed to promote a discussion of appropriate actions that may need to be taken, now or in
the future, to help you manage and maintain your financial situation under changeable conditions.
Your Current Situation:
Your Goals:
Analysis Details:
Retirement Analysis
You have assets of approximately xxxxx
You have liabilities of approximately xxxx
Your net worth is approximately xxx
To meet your education goals you need to save xxxx annually (xxxx monthly).
You will need the income until the last life expectancy of age xxxx.
Monthly after-tax income needed at that time is xxxxx.
Using the information you provided, calculations have been made to estimate whether your current
retirement plan will meet your stated retirement goals. The analysis begins now and extends
through life expectancy.
The analysis calculates growth and depletion of capital assets over time. This analysis is the basis
for the following summarized statement.
Asset Allocation: Type of Investor - Somewhat Aggressive
Long-term care assets at risk: xxxxx
Net Estimated Life Insurance Needs Shortage: xxxx
Actions:
The analysis projects that you will have xxxx left at your life expectancy (not including insurance
proceeds). This amount should be considered marginal, since your analysis may not have
considered the possibility of expensive long-term care during the final years, premature disability
or some other economic downturn that might affect your investments.
8. 2011
Risk Profile Assumed
Your Investment Profile
Before embarking on a savings and investment strategy, you need to choose an investment style
that best suits your circumstances. Factors affecting your individual risk profile include:
Your willingness to take risk
Investments and risk go hand in hand, and the relationship between potential return and amount of
risk is called the risk/return ratio. The smaller the risk, the smaller the potential return; the
greater the risk, the greater the potential for profit. For your financial plan to be successful it must
take into account your willingness – or unwillingness - to accept risk. Generally, there are three
distinct investment objectives, with correspondingly different risk factors:
1. Safety
You want minimal risk and are willing to trade off lower returns. You want to protect your capital
typically because your time horizon is relatively short or you are uncomfortable with risk.
2. Income
You are willing to accept a moderate degree of risk in exchange for the potential of having regular
income added to your plan.
3. Growth
You are willing to accept higher risk to maximize the potential returns. Typically you will have a
longer time horizon or sufficient assets to accommodate the increased risk.
Your time horizon
The younger you are, the more time you have for your investments to grow. Typically, this means
the more risk you may be willing to accept in exchange for the potential of higher returns. The older
you are, the less time you have to weather the ups and downs. As a result, you may be more
comfortable with predictable investments as opposed to more volatile, potentially higher growth
opportunities.
Your financial position
The higher your income and net worth, the more risk you may be willing to accept since potential
losses from riskier investments in your portfolio are more easily absorbed if you have other cash
and asset reserves.
Your level of investment knowledge
Generally, the higher your knowledge about investments, the higher the risk you would be willing to
take.
ASSUMED RISK PROFILE
Risk Profile Assessed by us
Risk Profile Suggested by you
Ultimate Risk Profile Adopted
9. 2011
Income Expenses – Current Picture
Income Split
Expense Split
Rs. Lakh Rs. Lakh
Vacation
s, 4.0 Utilities,
1.2
Own inc,
Rent, 0 Food, 1.2
30
Spouse Transpor
inc, 0 t, 1.8
EMIs,
10.8
10. 2011
Your Current Networth Statement
Why Prepare a Net Worth Statement?
Your net worth is the difference between all the things of value that you own, and all the debts
you owe. In financial terms, your net worth is your assets minus your liabilities. Before you
can reach a financial goal, you need to know where you stand now. Your net worth is a
reference point on your financial road map. Once you know your net worth, you can set a
budget to reach your goals. There are several good practical reasons for knowing your
financial worth:
Money Management
You can make better use of your income and maintain better control of your expenditures if
you have a clear idea of what you own and what you owe. A net worth statement will show
how much liquidity you have and identify the best sources for cash, should you need it.
Saving
Knowing precisely how much is left over after deducting current liabilities provides a strong
incentive to save. As you see your net worth increase, you will be encouraged to help it
grow.
Financial Planning
Net worth is an essential component of all financial planning. It helps you make appropriate
decisions about your investments and lets you judge how much to set aside for buying a home,
paying your children’s education, establishing a new career or business of your own or providing
for retirement.
Estate Planning
Everyone needs to make a will, and almost everyone needs to know how much he or she is worth
before deciding how the wealth is to be divided up.
Insurance Planning
You’ll be better able to protect assets. Determining the worth of your valuables is not only
necessary to figure out your net worth, it also helps you get the proper insurance coverage.
Borrowing
If you need to borrow cash or arrange a loan, you will be required to provide the lender with an
accurate and up-to-date account of your existing assets and liabilities. Your net worth will
determine the credit limit that the lender is prepared to offer.
11. 2011
Current Net Worth
The Following is a consolidated picture of all your assets and loans as disclosed during our
meeting.
Asset Type Rs. Lakh % of NW
Bank Account
Short Term Debt/ Debt Funds
Long Term Debt – Locked
Long Term debt – On Call
Equity and Equity Funds
Portfolio Management Schemes
Commodity & Gold Investments
Real Estate – self occupied
Real estate investment
Provident Fund Accumulation
Gratuity Accumulation
Other total
Total Assets
Type of loan Rs. Lakh % of NW
Home Loan
Car
Personal Loan
Total Loans
Net-worth Rs. Lakh % of NW
Net-worth
Comment
12. 2011
Liquid & Contingency Fund
We recommend a safety net of in terms of liquid assets you should have to deal with emergencies,
unforeseen changes in your financial set-up and such other contingencies. You should ideally set
aside 6 months’ of expenses:
Rs.(Lakh)
Your Current Savings Account Balance
Current Liquid Investments
Your Required Balance
You should increase the savings account balance by xxxx lakh
The contingency reserve should be held in easy to liquidate assets e.g. fixed deposits, liquid plus
funds, short term debt funds etc. At present we are recommending the following instruments being
suitable for the same:
Recommended Investments Rs.(Lakhs)
13. 2011
Key Goals
The table below shows your milestones:
Amount in
Horizon Inflation Rate Inflation adjusted
Goal today's rupees
(months) Expected Amount
(in lacs)
The following table shows your preparedness towards each goal:
Amount in Current Gap to be Level of
Goal
today's rupees Contribution filled Criticality
14. 2011
Retirement Plan Status
Retirement Tradeoffs
Planning for retirement involves tradeoffs. The amount of retirement capital you need will often
depend on when you start investing, when you retire, the return on your investments, your income
expectations, your current saving levels and the amount of pension income you expect to receive.
An important aspect of your financial plan is to ensure that you are financially secure during your
retirement years.
In this retirement plan, we compare your income needs to your income sources during retirement
to determine if you have enough capital to sustain your desired lifestyle.
Based on the information you provided and the assumptions outlined on the attached page, the
results of your retirement plan are summarized below:
Key Assumptions:
Life Expectancy
Inflation pre retirement
Inflation post retirement
Monthly Income required after retirement to maintain lifestyle
Analysis:
Long Term Asset Buildup
No. Of Annual Planned
Instrument Current Value Growth Projected Value
Years Additions
Total Need
Resources Available
Funding Deficit
Observation:
Your current savings will not be sufficient to meet your retirement goal.
15. 2011
Recommendation:
To meet the shortfall of 1.46 Cr you need to follow our recommended investment plan which is as
follows:
Year of No. of Years to Annual Growth
Target Corpus Funding Required
Goal achieve Assumed
Where to Invest:
Monthly
Product Contribution Characteristics
In case you follow our recommendations, your retirement corpus will look like this :
Annual Future Projected Value after 14 Return
Instrument Amount Invested
Additions Yrs Assumed
16. 2011
Children's Education - Current Picture
Investing for Education
Your children will need high levels of training and education to secure employment in a world that
is becoming increasingly competitive and technology driven. And that may have to be at any part of
the world.
Obtaining a post-secondary education to meet these demands is also becoming more expensive as
private education remains in high demand. The current cost for four years of university education
is approximately xxxxxx. This includes tuition, rent, food, books and additional fees. In eighteen
years in 2022, the total cost of a four-year university education will be xxxx , assuming costs
increase by 7.5% per year. If you start now and invest xxxx per month in an instrument that earns
xxxx% per year, you will be able to pay for your child’s university education.
Key Assumption: Rate of Inflation
Analysis:
Asset Base to be used:
No. Of Annual Planned Projected
Instrument Current Value Growth Years Additions Value
Total Need
Resources Available
Funding Deficit
Observation:
Your current savings will not be sufficient to meet your retirement goal.
Recommendation:
To meet the shortfall of xxx, you need to follow our recommended investment plan which is as
follows:
Monthly
No. of Years to Target Corpus(Rs. Annual Growth in
Year of Goal Contribution
achieve In Lakh) Contribution
required
18. 2011
Children's Marriage
Assumptions:
Rate of Inflation
Analysis:
Recommendation:
Target Monthly
No. of Years to Annual Growth in
Year of Goal Corpus(Rs. In Contribution
achieve Contribution
Lakh) required
2028 19 51 3000 10%
2031 23 61 2000 10%
Where to invest:
Monthly
Product Characteristics
Contribution
19. 2011
Asset Allocation
Asset Allocation is a tool designed to maximize the return on your portfolio (to meet your goals)
while minimizing risk (keeping in mind your risk profile and deficit status). It involves structuring a
diversified portfolio from four broad asset classes - Stocks, Bonds, Fixed Income and Cash – based
on your income and growth needs and your risk tolerance.
Research has shown that choosing among asset classes has a greater impact on your investment
returns than the specific investments you select or how well you time the market.
As per your discussion with us, the recommended asset allocation for your portfolio is as follows.
Asset class Allocation % Allocation Rs lakh
Current Targeted Current Targeted
1
2
3
4
5
6
7
8
Comments on Asset Allocation
20. 2011
Recommended Investments
As per the asset allocation and rebalancing required; following instruments are suggested
Asset
Instrument Manufacturer Amount (Rs lakh) Lock in LTCG
class
21. 2011
Cash Flow Projection
Why Prepare a Cash Flow Statement?
Controlling your financial affairs requires a budget or cash flow statement. Budgeting and tracking
your expenses gives you a strong sense of where your money goes and can help you reach your
financial goals, whether they are saving for a down payment on a house, starting a college fund for
your children, buying a new car, paying off the credit cards or planning for retirement. A cash flow
statement provides you with the following benefits:
Know where you stand
A cash flow statement allows you to know exactly how much money you have. The statement shows
you how your funds are allocated, how they are working for you, what your plans are for them, and
how far along you are toward reaching your goals.
The statement will also:
• Indicate your ability to save and invest
• Let you analyze your standard of living
• Indicate if you’re living within or beyond your means
• Highlight any problem areas
Control
A budget is the key to enabling you to take charge of your finances. With a budget, you have the
tools to decide exactly what is going to happen to your hard-earned money—and when.
Communication
A budget is a communication tool with other family members to discuss the priorities for where
your money should be spent.
Identify opportunities
Knowing the exact state of your personal monetary affairs, and being in control of them, allows you
to take advantage of opportunities that you might otherwise miss.
Extra money
A budget may produce extra money for you to do with as you wish. Unnecessary expenditures,
once identified, can be stripped out. Savings, even small ones, can be invested and made to work
for you.
Assumptions and workings (all numbers are real - not with inflation)
23. 2011
Life Insurance
What Insurance Pays For
Although the basic purpose of life insurance is to provide your dependents with a continuing
source of income if you die, it also provides for other financial needs.
• Pay off the mortgage on your home
• Pay off any outstanding taxes
• Provide for your children’s education
• Pay off any outstanding debts
• Maintain your family’s standard of living
Life insurance is one of the most important investments you can make to protect your family’s
financial security. It is used to guarantee that your family will have a lump sum to pay off large
financial obligations, a source of income to meet daily living expenses and be able to meet future
expenses such as your children’s education.
Life insurance benefits payable to a designated beneficiary are non-taxable.
You currently have the following policies:
Policy Name Sum Assured Annual Premium Maturity
Currently your total life insurance cover is Rs. lakhs and you pay annual premium of.xxxx.
Following table shows the insurance cover required:
Description Amount(in Lakhs)
Details Expected Expenses p.m.
26. 2011
Disclaimer
These recommendations are given for your benefit only and are subject to review at the
time of placement of your investments because circumstances law and economic
conditions can change.
Returns from each recommended investment will vary in line with market conditions and
investment policies of the fund manager. Income and growth assumptions are intended as a
guide only and should be treated with caution. No warranty is given for the accuracy of the
same. Most long equity/ growth investment are long term in nature and significant variations
including capital loss, may occur over shorter periods. Neither the authorized
representative nor the company guarantees the performance or return of capital on any of
these investments.
These recommendations are based on the information you have supplied. If any material
information has been withheld or any inaccurate, these recommendations could prove to be
inappropriate for you.
Matters relating to taxation should be cleared with your own Tax Consultant.
The information contained in this plan is strictly confidential and meant solely for the
selected recipient and may not be altered in any way, transmitted to, copied or distributed,
in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent.
The information contained herein is solely for informational purpose and may not be used or
considered as an offer document or solicitation of offer to buy or sell or subscribe for
securities or other financial instruments.
Nothing in this plan constitutes investment, legal, accounting and tax advice or a
representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this plan may not be
suitable for all investors, who must make their own investment decisions, based on their
own investment objectives, financial positions and needs of specific recipient.
This plan may not be taken in substitution for the exercise of independent judgment by any
recipient. The recipient should independently evaluate the investment risks.
The firm may receive applicable brokerage from all the above investments recommended
from the product providers.
The Investor should always be cognizant that they have the ultimate responsibility for the
investment of their own assets. The Advisor shall assist the Investor to discharge this
responsibility with due care, skill, prudence and diligence under the circumstances then
prevailing, that a prudent person, acting in a like capacity and familiar with such matters,
would use in such conduct with like aims.
![2011
Mr Sumantra Pal
Financial Plan Document
Confidential
Castanea Wealth Management
www.castaneawealth.com
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