Financial planning is not a perfect science. At best it is like a Google Map – a very good indicator of the route to take, and the time estimate required to reach there.
However, Google does not know if you will stick to the map or go away on a different road, or stop for a long time for food, sleep, etc.
For people who are not obsessed with large cap, small cap, midcap, goal setting, asset allocation and such things, it is as painful an experience as visiting the dentist.
Also when an investor meets a financial planner (potential), for the first time, and the two of them are in completely different zones? If the client is from Venus and the planner is from Mars what exactly happens between them?
Planner: Where do you work and how much do you earn?
C: About R50 lakh is the gross salary between my wife and me, and our take home is Rs 2 lakh and Rs 1 lakh, respectively.
Now the Planner, who has an income of R8 lakh a year, thinks that the client should spend Rs 1 lakh pm and save Rs 2 lakh pm…and that R1 lakh should include the EMI.
The client thinks he should spend Rs 2 lakh pm including EMI, the Rs 1 lakh should be used for vacations, and anyway Provident Fund is for retirement!!
Financial Planners make life sound like there is nothing to do except to make plans, do Systematic Investment Plans, write a will…and then review it once a month at least. Switch once in a year…..phew exhausting is it not?
In the end, it is like going to a dentist who says
a) you have not been brushing regularly,
b) when did you last floss your teeth
c) even scaling you have delayed it by a month or two
d) 2 more of your teeth need to be removed, and we need to put an implant.
Sorry, that will cost Rs 94,000.
How many of us will like that experience (not me, my dentist is a good singer and she even sings for me when she is removing my tooth!!). Financial planning is of course worse.
It has math. And the planner asks “Do you know how much investing Rs 40 a day will become if you invest for 30 years..no no make it 35..” and just when the client is recovering…he says 4,54,65,425! Wow.
The client is feeling worse. OMG I wasted 18 years of my life not knowing this.
He is then shown how he needs R3 crore for his daughter’s education in India, R8 crore for her to study abroad, R6 crore for her marriage and R28 crore for his retirement. Assuming that he has only one kid. OH, another is on its way? Just double all the numbers.
Financial planning is good for you. However, the process through which a planner can put you through is not so great!
What happens when you do not go to a financial planner? Well, you need to do it yourself of course.
You need to have the discipline to learn about investing, keeping records, doing asset allocation, knowing when to remove from equities, and when to invest in equities,…etc. etc. That is not really easy.
Take your option – which way do you want to go?
PV Subramanyam
writes at www.subramoney.com and has authored the best seller ‘Retire
Rich - Invest C40 a day’