Financial Planning

& Wealth
Management
Sunder Ram Korivi,
National Institute of Securities Markets, Navi
Mumbai
 Presentation Structure
Financial Planning and Types of Roles
Processes, Products, Prospects, Importance to Banking
Sector
Wealth Management
Tax Planning
Financial Planning and Types of Roles

Financial Planner
Investment Advisor
Distributor, Agent/Broker
Wealth Manager

In reality, roles may overlap

In some countries, roles are separated by regulation
 Processes
Goal: to help clients achieve their financial objectives
Unfortunately, the financial sector engages in product pushing
(elephant story)
This causes the purpose to be lost
Hence, the importance of processes
No two clients requirements are identical (allopathy v homoeopathy)
In reality, very little time is allotted to planning
Thorough diagnosis is required
Plans need to maintain a balance between discipline and flexibility
 Life Cycle Hypothesis
Education
Two wheeler
Business
House
Investment
Retirement
Estate
 Products
Liability Products
Asset Products
 Liability Products
Credit: Personal and Business Loans
Life Insurance, General Insurance, Health Insurance
 Asset Products: Varying risk-reward
(each having tax-saving potential)
Bank Deposits
Company Fixed Deposits
Post Office Savings
Public Provident Fund
Employers Provident Fund
NPS
Mutual Funds: Debt, Balanced, Equity
Equities
Gold
Real Estate
 Goals
Life Protection
Capital Protection
Growth
Inflation Protection
 Lifestyle Wrap
Allocate as per your lifestyle:
Life Insurance
Bonds
Equities, Equity Mutual Funds
Gold
Tobins two-mutual fund theorem
Equities: Risk, Reward, Time. Rule of 100, Rule of 72. Tax benefits from
Equity & MF investing
Diversified portfolio, focused portfolio
Retain flexibility, lower transaction costs, add tax planning edge
 Wealth Management
Periodic Diagnosis
Debt Balancing
Consolidation of Funds
Windfall Gains: Inheritances, Gratuity, Gifts, Capital
Gains, Lottery
 Tax Planning
Evasion v Avoidance v Planning
At the maximum tax rate, 30% is quite significant and
could lead to potentially large outflows
Tax planning is a legitimate way of availing of provisions
within the Income Tax law to minimize the tax outflow
Done effectively, every rupee of tax saved can be
reinvested to maximize wealth
 Scope for Tax Planning
Exemptions (S 10)
Deductions from Heads of Income (S 29-37)
Deductions from Gross Total Income (S 80)
Rebates (S 87A, 88)
 Exemptions
Interest on notified tax-free bonds
Dividends from domestic companies
Income from equity-oriented mutual funds
Long-term capital gains on shares
 Deductions from Heads of
Income
Salaries
House Property (Interest on Housing Loan for SOP)
Business & Profession (Repairs, Depreciation etc)
Capital Gains (Short Term)
Other Income (Interest etc.)

Set off and carry forward of losses

Deductions from Gross Total Income
S 80C
Insurance Premia, notified deposit and savings schemes
Contributions to provident funds
Principal portion of housing loan instalment
Equity Linked Savings Schemes

Limit: Rs.1,50,000
 S 80D, 80E, 80EE, 80QQA,
80QQB
Health Insurance Premia: Limit: Rs.15,000
Education Loan Interest
Interest on housing loan (affordable housing criteria)
Income of Authors of textbooks in Indian languages
Income of authors of other books
 Scheme of Taxation
Gross Receipts
Less: Exemptions
=Income under various Heads of Income
Less Deductions under various Heads of Income
=Gross Total Income
Less: Deductions from Gross Total Income
= Taxable Income
Apply tax rates = Tax Payable
Less: Rebates
Less: Tax Credits (at Source / Advance Taxes Paid
= Net Tax Payable)
 Future Trends
Cashless or less cash transacting
Digital trail
Larger tax base, Lower tax rates
Pigou v Laffer v Piketty
Reduction in Exemptions, Deductions and Rebates
Lower interest rates on interest-bearing investments
Alternative investment avenues: Equities, Mutual Funds,
Alternates
 General Advice
Good housekeeping
Helps in claiming exemptions, deductions and rebates
Avoid too many bank accounts. Go cashless
Pay a reasonable amount of taxes
Do not overdo tax planning. Beware of tax phobia
Do not overdo insurance
Avoid bundled products and complex products
Accumulate legitimate wealth
Nominations
Write a will
Clients value trust and knowledge