FINANCIAL PLANNING AND WEALTH MANAGEMENT

Financial Planning for Individual Clients

Submitted by: HARSHAL PATIL
Roll No: 2017221079
Section: F

Submitted to:
Prof. D. N. Panigrahi
Associate Professor, Finance
CLIENT-1 INFORMATION

Name Mrs. Asma Khan Age 32

Gender Female Marital Status married

Nature of Job
Occupation Service (Govt./PSU/Private Private
Sector)

Years of Work
11
Experience

Spouse Name: Mr. Nabeel Khan

Spouse (Working/Not If Working, Nature

Working Private
Working): of His/ Her Job:

LIST OF DEPENDENTS

Class of Study (For

S. No. Particulars Age
Child)
1 Child 1 6 II
MONTHLY CASH FLOW STATEMENT

Category Details AMOUNT

SALARY 25000
MONTHLY INCOME
BONUS
(ACTIVE/PRIMARY
INCOME COMMISSIONS
INCOME FROM Dividend Interest Income
OTHER SOURCES Rent
(PASSIVE/SECONDARY
INCOME) Any Other (Please Specify) (Business)

NET DEFICIT
(BALANCING FIGURE)

TOTAL INCOME 25000

FOOD 12000
RENT
MONTHLY LIVING
EXPENSES CLOTHING 4000

UTILITY BILLS 3000

HEALTHCARE EXPENSES
TUITION FEES 1000
INSURANCE PREMIUMS (LIFE,
OTHER HEALTH,ASSETS,ETC)

EMI (HOME LOAN, CAR, CREDIT CARD, ETC)

EXISTING INVESTMENTS (RD, FD, PPF, MF SIP)

LEISURE & ENTERTAINMENT EATING OUT

NON MANDATORY CLUB
MONTHLY EXP ANY OTHER (PLEASE SEPECIFY) 1500

NET INVESTIBLE
SURPLUS
(BALANCING FIGURE)

TOTAL EXPENSES 21500

Cash Flow

CASH OUTFLOW
CASH INFLOW (CIF) Rs. Rs.
(COF)
Active (Primary) Income Mandatory Expenses
Living Expenses (Food
& Clothing) 16000
Rent
(Salary, Income from 25000 Utility Bills 3000
Business/Profession) Insurance Premiums
Loan EMIs
Children’s Education 1000

Discretionary
Passive (Secondary) Income
Expenses

Investments – Existing

(Investment Income like 0 Entertainment

Interest, Dividend, Rental
Income) Leisure/Travel
Holiday
Eating Out 1500
Net Cash Flow
Net Cash Flow (Deficit)
(Surplus)
[Balancing Figure] [Balancing Figure]
TOTAL MONTHLY TOTAL MONTHLY
25000 21500
INCOME EXPENSES
ASSET (INVESTMENT) INFORMATION
CURRENT
PARTICULARS BOOK VALUE(Rs.)
VALUE(Rs.)

Cash/Savings Bank Account 2,00,000 2,00,000

Money Market (Liquid) Mutual Funds N.A N.A

Marketable Securities (Bonds and Shares) N.A N.A

Fixed Deposits (Bank/Post Office/Company) N.A N.A

Post Office MIS/SCSS/PMVVY N.A N.A

(RECURRING DEPOSIT)

Life Insurance

ULIP/ULPP Aviva life insurance

16000 PER YEAR
plus 35,00,000
Endowment/Money back Plans

Investment Real Estate

Land N.A N.A

Additional Home

Home owner & Auto Policies

Co. Name Policy Type Assets Covered Coverage

N.A N.A N.A N.A

Category Original Loan Tenure Amount EMI (Rupees) Current

(In Years) Outstanding
(Rs)
Housing N.A N.A N.A N.A N.A
Loan
Vehicle
Loan 5,00,000 5 yrs 4,00,000 10,000 4 yrs
 Category Amount Transaction
fees

1. Credit Card N.A N.A

Responsibilities and commitment towards dependents

Category Total Estimated Amount already Priority
(Current Rupees) accumulated (Low/medium/high)

Marriage (Dependents)
N.A N.A N.A

Higher Education N.A N.A N.A

(Dependents)
Hospitalization/Medical
N.A N.A N.A
(Not Covered Under Med
claim)
Any Other (Please Specify) N.A N.A N.A

Client’s Income Statement

Expense Rs. Income Rs.
Mandatory Expenses Active (Primary) Income
Living Expenses (Food &
Clothing) 1,92,000
Rent
Utility Bills 36000 (Salary, Income from 3,00,000
Insurance Premiums 16000 Business/Profession)
Loan EMIs 1,20,000
Children’s Education 12000

Passive (Secondary)
Discretionary Expenses
Income
Investments – Existing
Entertainment 18,000 (Investment Income like N.A
Leisure/Travel Interest, Dividend, Rental
Holiday Income)
Eating Out
Net Cash Flow (Surplus) Net Cash Flow (Deficit)
94,000
[Balancing Figure] [Balancing Figure]
TOTAL ANNUAL TOTAL ANNUAL
3,94,000 3,00,000
EXPENSES INCOME
 Client’s Balance Sheet
LIABILITIES Rs. ASSETS Rs.
Current liability Liquid or monetary assets
Insurance premiums 16,000
Mediclaim N.A (Savings Bank, Short term FD, 2,00,000
Loan EMIs for next 1 year 1,20,000 Liquid MF etc.)
Credit Card Dues N.A
Long term Financial
Term liability
investments

2,80,000 N.A
(All loans o/s less EMIs of next 1 (FD, Shares, Bonds, MFs, PF/
year) EPF /PPF etc.)

NET WORTH 18,84,000 Tangible assets

Land

(Household/Use assets like

House for Primary Residence,
(The Balancing Figure) 21,00,000
Car/Vehicle, Jewellery,
Furniture, Appliances)
Total Liabilities 4,16,000 Total Assets 23,00,000

Financial Ratios
Liquidity Ratio = Liquid assets/ Total current asset =2,00,000/23,00,000=0.08695
The Liquidity Ratio is quite low and hence the ability to pay debts or liabilities with existing
liquid asset is low i.e the client is dependent on future cash flows to pay its obligations.

Debt-to-asset Ratio = Total Debt or Liabilities/Total

asset=4,00,000/23,00,000=0.1739=17.39%
The Debt-to-Asset ratio is about 18% which is low i.e the assets are not being finance by debt
or borrwings.

Debt service-to-income Ratio = Total Monthly debt payments/ Monthly disposable income
=10,000/25,000= 0.4=40%
The debt-to-income (DTI) ratio is a personal finance measure that compares an individual’s
debt payment to his or her overall income. The debt-to-income ratio is 0.4, which is
moderately low. This good as the ability to pay the debt is good.
Solvency Ratio = Total net worth/ Total asset= 18,84,000/23,00,000=0.81913
The solvency ratio is 0.819, which shows proportion of asset being financed by net worth, it
indicates potential to withstand financial problems is good.

Fixed obligation-to-income Ratio = Total monthly fixed obligation/ Monthly disposable

income=22,000/25,000=0.88*100= 88%
Fixed Obligations to Income Ratio (FOIR) is the parameter used by banks and other financial
organizations to determine the eligibility for a loan of an individual. Here the Fixed
Obligations to Income Ratio is high and this may be a reason that banks may not approve
loans in future.

Savings Ratio = Total annual savings or cash surplus/ Annual salary after Taxes =-
94,000/3,00,000= -0.313
There is no savings but a deficit of 94,000 which is financed by the spouse as the spouse is
also working.

Uninsurable Contingencies/Rainy day fund/emergency planning

 Desired required fund on the basis of clients financial position [6 months’ mandatory
expenses] is ₹1,29,000. But the normative/desirable requirement is₹2,00,000 and
actual emergency fund size is nil.

Insurance Planning (Life Cover, Health Cover, Critical insurance cover,

Home insurance, Auto insurance)
 The client has two insurance i.e term life insurance and Family insurance.
 The need of insurance is fulfilled.
 Life insurance need analysis [Earnings multiplier approach and HLV – approach-
Asses the need and compare the actual life cover. Review and clean the insurance
portfolio from garbage like endowment and money back plans]
Earnings multiplier approach
Step1:
Human Life Value
Step1: 80% of the salary goes to family needs
80% of salary = 0.8*3,00,000= ₹2,40,000.
Step2: Considering Growth rate for the remaining years to be 10% and years to retire is 28
years
So the value of client = ₹34,61,038.
Step3: Applying discount factor i.e real rate 5.911% (considering inflation rate, as 4%)
So the final value is = ₹36,65,620.

Health insurance review [Adequate health insurance (personal) apart from health
insurance provided by employer. Better to go for family floater health insurance policy
than individual health insurance policy]
The client has a term insurance cover of ₹35,00,000 and also a family life cover of ₹3,00,000
from the employer.
The HLV and the insurance cover is matching so the client is sufficiently insured for the
future.

Check for two diseases IIMB and KILB

The client has term insurance and has not gone for endowment insurance plan. The client is
not mixing Insurance and Investment.

Client Risk Profiling [Conservative, Moderate and Aggressive]

A. Willingness to tolerate risk
The client

Investment Planning – After the fulfillment of all the basic needs.

 Goals should be defined and priortised dependig upon the needs of the client – Short
Term, Long Term and Medium Term
 Check with the surplus and help the client in identifying defining and prioritizing the
goals.
CLIENT-2 INFORMATION

Name Mr. Rajendra Patil Age 59

Gender Male Marital Status Married

Nature of Job
Occupation Advocate (Govt./PSU/Private Private
Sector)

Years of Work
7
Experience

Spouse Name: Mrs. Sadhana Patil

Spouse (Working/Not If Working, Nature

Working Business
Working): of His/ Her Job:

LIST OF DEPENDENTS

Class of Study (For

S. No. Particulars Age
Child)
1 Child 1 30 Post Graduation

2 Mother 78
MONTHLY CASH FLOW STATEMENT

Category Details AMOUNT

SALARY 33,000
MONTHLY INCOME
BONUS
(ACTIVE/PRIMARY
INCOME COMMISSIONS
INCOME FROM Dividend Interest Income
OTHER SOURCES Rent
(PASSIVE/SECONDARY
INCOME) Any Other (Please Specify) (Business)

NET DEFICIT
(BALANCING FIGURE)

TOTAL INCOME 33,000

FOOD 8,000
RENT 2,000
MONTHLY LIVING
EXPENSES CLOTHING 2,000

UTILITY BILLS 5,000

HEALTHCARE EXPENSES
TUITION FEES
INSURANCE PREMIUMS (LIFE,
OTHER HEALTH,ASSETS,ETC) 5,587

EMI (HOME LOAN, CAR, CREDIT CARD, ETC)

EXISTING INVESTMENTS (RD, FD, PPF, MF SIP) 40,000

LEISURE & ENTERTAINMENT EATING OUT

NON MANDATORY CLUB
MONTHLY EXP ANY OTHER (PLEASE SEPECIFY) 2,000

NET INVESTIBLE
SURPLUS
(BALANCING FIGURE)

TOTAL EXPENSES 27,000

Cash Flow

CASH OUTFLOW
CASH INFLOW (CIF) Rs. Rs.
(COF)
Active (Primary) Income Mandatory Expenses
Living Expenses (Food
& Clothing) 10,000
Rent 5,000
(Salary, Income from 33,000 Utility Bills 5,000
Business/Profession) Insurance Premiums 5587
Loan EMIs
Children’s Education

Discretionary
Passive (Secondary) Income
Expenses

Investments – Existing

(Investment Income like 0 Entertainment

Interest, Dividend, Rental
Income) Leisure/Travel
Holiday
Eating Out 2,000
Net Cash Flow
Net Cash Flow (Deficit)
(Surplus) 5,413
[Balancing Figure] [Balancing Figure]
TOTAL MONTHLY TOTAL MONTHLY
33,000 27,587
INCOME EXPENSES
ASSET (INVESTMENT) INFORMATION
CURRENT
PARTICULARS BOOK VALUE(Rs.)
VALUE(Rs.)

Cash/Savings Bank Account N.A N.A

Money Market (Liquid) Mutual Funds N.A N.A

Marketable Securities (Bonds and Shares) N.A N.A

Fixed Deposits (Bank/Post Office/Company) 40,000 53,000

Post Office MIS/SCSS/PMVVY N.A N.A

(RECURRING DEPOSIT)

Life Insurance

ULIP/ULPP LIC 2,40,000 27,468 PER YEAR

Endowment/Money back Plans

Investment Real Estate

Land 7,80,000 10,33,000

Additional Home
Other Assets

Home owner & Auto Policies

Co. Name Policy Type Assets Covered Coverage

N.A N.A N.A N.A

Category Original Loan Tenure Amount EMI (Rupees) Current

(In Years) Outstanding
(Rs)
Housing N.A N.A N.A N.A N.A
Loan
Vehicle N.A N.A N.A N.A N.A
Loan
Education
Loan 7,00,000 10 yrs 7,00,000 9,800 7,00,000
 Category Amount Transaction
fees

2. Credit Card N.A N.A

Responsibilities and commitment towards dependents

Category Total Estimated Amount already Priority
(Current Rupees) accumulated (Low/medium/high)

Marriage (Dependents)
20,00,000 50,000 Low

Higher Education 1 N.A N.A

(Dependents)
Hospitalization/Medical
1,00,000 50,000 Low
(Not Covered Under Med
claim)
Any Other (Please Specify) N.A N.A N.A

Client’s Income Statement

Expense Rs. Income Rs.
Mandatory Expenses Active (Primary) Income
Living Expenses (Food &
Clothing) 1,20,000
Rent 60,000
Utility Bills 60,000 (Salary, Income from 3,96,000
Insurance Premiums 67,044 Business/Profession)
Loan EMIs N.A
Children’s Education N.A

Passive (Secondary)
Discretionary Expenses
Income
Investments – Existing N.A
Entertainment 24,000 (Investment Income like N.A
Leisure/Travel N.A Interest, Dividend, Rental
Holiday N.A Income)
Eating Out N.A
Net Cash Flow (Surplus) Net Cash Flow (Deficit)
64,956
[Balancing Figure] [Balancing Figure]
TOTAL ANNUAL TOTAL ANNUAL
3,31,044 3,96,000
EXPENSES INCOME

Client’s Balance Sheet

LIABILITIES Rs. ASSETS Rs.
Current liability Liquid or monetary assets
Insurance premiums 27,468
Mediclaim N.A (Savings Bank, Short term FD, N.A
Loan EMIs for next 1 year 1,17,600 Liquid MF etc.)
Credit Card Dues N.A
Long term Financial
Term liability
investments

5,82,400 53,000
(All loans o/s less EMIs of next 1 (FD, Shares, Bonds, MFs, PF/
year) EPF /PPF etc.)

NET WORTH 10,58,532 Tangible assets 7,00,000

Land

(Household/Use assets like

House for Primary Residence,
(The Balancing Figure) 10,33,000
Car/Vehicle, Jewellery,
Furniture, Appliances)
Total Liabilities 727468 Total Assets 17,86,000

Financial Ratios

Liquidity Ratio = Liquid assets/ Total current asset

Measures ability to pay debts or liabilities with existing liquid asset

Debt-to-asset Ratio = Total Debt or Liabilities/Total asset

Indicates what percentage of one’s asset has been finance by borrowing

Debt service-to-income Ratio = Total Monthly debt payments/ Monthly disposable income

Solvency Ratio = Total net worth/ Total asset

Shows proportion of asset being financed by net worth, it indicates one’s potential to
withstand financial problems.
Fixed obligation-to-income Ratio = Total monthly fixed obligation/ Monthly disposable
income

Savings Ratio = Total annual savings or cash surplus/ Annual salary after Taxes