Financial Planning

Financial Planning
Financial Planning Financial planning is a process through which an individual can chart a roadmap to meet expected and unforeseen needs in life.
Financial Planning
Financial Planning involves setting and estimating financial goals and managing your income, expenses and wealth in order to be able to achieve these goals
Need for Financial Planning

Life cycle requirements Interest rates are varying from time to time. changing lifestyles Inflation Tax Implications contingencies like medical emergencies or unplanned expenditures that an individual might have to cope with. Investment options are also increasing. India is aligning with global markets.

Discipline has a part to play at every stage, from setting objectives to actually executing the plans that are meant to achieve those objectives Lack of it .. Ad-hoc approach while dealing with finances leads to distress among individuals and organizations

Financial planning can ensure that one is equipped to deal with the impact of inflation, especially in phases like retirement when expenses continue but income streams dry up Sound financial planning can enable him to easily mitigate such situations, without straining his finances

HOUSE HOLD EXPENSES Higher Life Expectancy House hold expenditure are on the rise
Inflation
New Products
Next slide
INFLATION ROBS YOUR PURCHASING POWER Assuming inflation @ 10% p.a. Rs.5,000 today 226,000
87,000
33,500 12,900
10yrs
20yrs
30yrs
Back
40yrs
Forward
REAL INCOME IS IMPORTANT FOR WEALTH CREATION Real rate of return from an investment 12% 10% 8% 6% 4% 2% 0% Return Inflation Tax Real return
Back
9%
12 %
3%
- 6%
Financial planning
The principles of financial planning
SAFETY You get your Money back.
LIQUIDITY You get your money back when you want it.
POST TAX RETURNS How much is really left for you post-tax
PLUS CONVENIENCE How easy is it to invest, disinvest & adjust to your needs.
Remember !!!!!! For the same liquidity Higher the Safety , Lower the Returns For the same safety - Higher the Liquidity, Lower the Returns.
The principles of financial planning

Setting objectives Safety of your investment Investing in line with one's risk appetite Securities / instruments Asset allocation Liquidity Profitability Diversity Are some of the fundamental principles of financial planning
The planning process

Your Starting Point: taking an inventory of the assets, income and expenses, and existing planning documents. Where are You're heading: setting and quantifying goals in terms of money, and the time you have to achieve them. Getting from Point A to Point B: determining a detailed plan to achieve your goals. Implementing the Plan: Doing it! Saying it's one thing, doing it's another. Monitoring the Plan: keeping your plan up to date in changing circumstances.
Financial Planning
Financial Planning Identify all short/medium and long term goals Next, identify all earnings (present and future) Identify the gap Then identify the risk personality of the investor Invest as per risk appetite Investment style Review the investment plan
Financial Planning
Time horizons
Individual Age Phase of life
Context of
Individual Organization
Ability to suggest asset allocation to investors through structured products of organizations and ensure its suitability to individual perspectives for success of marketing the products
Financial Planning
Current salary / income Increments /Change of job Return on investments Inheritance Present value in terms of inflation
Financial Planning
Projected expenses
Short term goals Medium term goals long term goals Minus
Projected earnings
Short term goals Medium term goals long term goals
Financial Planning
Age Income Education level Past experience in investing
Financial Planning
Asset allocation
Debt Equity Hybrid
Financial Planning
Predisposition of the investor Perception Confidence

Conceptual model
Financial Planning
Assessment of the performance of investments as a review Rebalancing portfolio
Identifying client needs: To decide on which investment would be suitable to different types of clients, the following information is to be obtained
Client origin. Personal details like age. Family circumstances. Profession residence & domicile. Income. Assets.
Liabilities.
Expectations. Invest requirements. Financial Planning.
INVESTMENT OPTIONS
FINANCIAL ASSETS NON FINANCIAL ASSETS
DEBT Deposits, Post office schemes, Debentures, Bonds PF/PPF Debt Mutual Funds EQUITY Shares, Equity Mutual Funds , ULIPs
Real Estate Gold - Physical - Electronic
Back
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
[Bank Deposits, Post office schemes, Debentures, RBI Bonds Debt Mutual Funds / money market mutual funds
Debt instruments are

generally safe interest bearing (except MMF) Term fixed
EQUITY
[Shares, Equity Mutual Funds and ULIPs
NON FINANCIAL ASSETS

Real Estate Gold
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
BANK DEPOSITS
Offered by banks Interest bearing Suitable for risk averse individuals Savings, recurring, fixed, hybrid High liquidity Interest is Taxable
EQUITY

Real Estate Gold
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
Post office schemes

Offered by PO Interest bearing Suitable for risk averse individuals Savings, recurring, fixed deposits, PPF NSC KVP Monthly income schemes Poor liquidity Interest is Taxable (except PPF)
EQUITY

Real Estate Gold
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
DEBENTURES
Offered by public limited companies Interest bearing Secured Term instrument Option of Convertibility to equity
EQUITY

Real Estate Gold
Interest is Taxable
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
RBI BONDS
Issued by RBI Fixed term Interest bearing Risk free Liquid Interest is Taxable
EQUITY

Real Estate Gold
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
[Bank Deposits, Post office schemes, Debentures, RBI Bonds Debt Mutual Funds or money market mutual funds
EQUITY
MONEY MARKET MUTUAL FUNDS The money market mutual funds can be defined as a investments in market for short-term money and financial assets that are near substitutes for money.
Liquid Also available in the form of FMP (Fixed maturity plans) Returns are market linked Returns are taxable Capital gains tax applicable

Real Estate Gold
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
Equity
Refers to investments in shares / stocks of public limited companies Bought through IPOs or at stock exchanges Demat a/c compulsory Risky asset
Returns are market linked
EQUITY

Real Estate Gold
Capital gains tax applicable
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
Equity mutual funds Refers to investments in shares / stocks through mutual fund companies
Sold in small units Professionally managed Tax and non tax Returns are market linked
EQUITY
[Shares, Equity Mutual Funds and ULIP

Real Estate Gold
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
[Bank Deposits, Post office schemes, Debentures, RBI Bonds Debt Mutual Funds / money market mutual funds ULIP Unit Linked Insurance Plans ULIP is also termed as Market Linked Insurance plan.
The premium payable has two components:
Risk premium Investment premium
EQUITY

Real Estate Gold
Liquidity Minimum policy term is 5 years ; lock in period is 3 years for withdrawal. Investment diversity. Returns are market linked switch between alternative investments equity and debt and hybrid / balances
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
NON FINANCIAL ASSETS Are investments in real assets such as real estate, gold etc.
EQUITY

Real Estate Gold
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
Real Estate Investment in land and building

Commercial Residential
EQUITY
REITs Real estate investment trusts promoted by mutual funds Securitised debts

Real Estate Gold
INVESTMENT OPTIONS
FINANCIAL ASSETS
DEBT
Gold / Bullion
Traditional investment avenue Available in the
Physical form such as ornamental form / coin form / bars / ingots etc Electronic form through ETF exchange traded funds
EQUITY

Real Estate Gold
Highly liquid Fairly stable in value Beats inflation
where people park their money

<25 years
Aggressive High risk taker Greater short term goals
Indicative Strategy In Equity 70% In Debt 20% In Liquid 10%

At 45 years
Moderate moderate risk taker Greater long term goals

Retirement(60 years)
Conservative Is not a risk taker Greater long term goals
Conceptual model - Illustration :

The following table tells where to park your money
Age Strategy Equity in % Debt in % Liquid in %
At 30 yrs
Aggressive
70
20
10
At 45 yrs
Moderate
50
30
20
Retirement (60 yrs)
Conservative
20
40
40
Lower the age -higher the risk taking ability thorough investments in equity Higher the age - need to preserve capital through investments in debt instruments Back
No Investment Product Is Superior A Mix is Essential This is what Asset Allocation is all about ! You need to choose a mix that suits your needs & risk taking capacity
Portfolio Aggressive
Growth Income Liquidity (Equity) (Bonds) (Banks) 75% 15% 10%
Balanced
Moderate
50%
35%
30%
45% 40%
20%
20% 40%
Conservativ 20% e
RISKS ASSOCIATED WITH INVESTMENTS

Stocks Mutual Funds
gold Fixed deposits NSC/PPF Level of risk
New Tax Rates

Tax Rate Slab for (a)Resident Individual other than (b) & (c ) Upto Rs. 160,000 (Increased from Rs. 150,000) Rs. 160,001 to Rs. 300,000 Rs. 300,001 to Rs. 500,000 Above Rs. 500,000 Slab for (b) Resident Women Upto Rs. 190,000 (Increased from Rs. 180,000) Rs. 190,001 to Rs. 300,000 Rs. 300,001 to Rs. 500,000 Above Rs. 500,000 Slab for (c ) Senior Citizen Upto Rs. 240,000 ( Increased from Rs. 195,000) Rs. 240,001 to Rs. 300,000 Rs. 300,001 to Rs. 500,000 Above Rs. 500,000 Nil
10%
20%
30%
- Surcharge/ Education Cess @ 3% on income tax

*-
Capital Gains
Short Term Long Term NIL Equity 15%*(16.995%)
Debt 30%(33.99%) 10%**/20%*** *(Surcharge @ 10% + 3%) **Without indexation ***With indexation
Financial planning and goal setting

First, estimate the cost of the goal at the date you plan to attain it. Take the current cost of the goal and adjust it for inflation up through the time you will reach the goal. Example After investigation, you believe that the cost of your goal (which is currently Rs50,000) will go up about 4.5 percent per year for the next 25 years. Assuming you want to reach the goal at the end of year 25, you have to have accumulated Rs150,270 to do so.

Second, take the amount of your current savings on hand that you will earmark for the goal and figure how much it will grow between now and the date on which you want to reach your goal. (The process of doing this is identical to that of figuring how much a particular item will increase in cost over time, except that instead of an estimated inflation rate, you'll use an estimated growth rate that should exceed inflation.)

Third, determine how much you will periodically save to reach your goal, and how much this investment will increase over time based on what you estimate its yield will be over the life of the investment. Unless you will accumulate these savings in a tax-free form (such as Govt bonds) or through a tax-deferred method (such as within a qualified retirement plan or an insurance policy), you should make this computation based on after-tax yields.

Fourth, add the amount of your projected investments as of the date you wish to attain the goal (amounts determined under the second and third steps, above) and compare this amount to the amount of your projected future cost of the goal.
If the amount of your projected investments is greater than the amount of your projected cost of the goal, you'll know your saving and investment plan should work out to allow you to attain your goal. (This will be true if the various assumptions you made in the course of setting up your plan are correct, and then do not change for the worse over the course of time). If the amount of the projected cost of your goal exceeds what your saving and investment plan will generate, you'll need to consider making changes necessary to reach your goal.
What Are Ethical Principles?

Involves concepts of
Right and wrong behaviors Fair and unfair actions Moral and immoral behaviors
Examples of ethical behaviors

Honesty Integrity Keeping ones word Respecting rights of others Practicing the Golden Rule
Beliefs about what is ethical serve as a moral compass to guide behaviors of individuals and companies
Concept of Business Ethics

Business ethics involves applying general ethical principles and standards to business behavior Ethical principles in business are not different from ethical principles in general Business actions are judged by
General ethical standards of society Not by mere permissive standards
Ethics in the Global Community

Notions of right and wrong, fair and unfair, moral and immoral, ethical and unethical exist in all societies Two schools of thought
Ethical universalism
Holds that human nature is the same everywhere and ethical rules are cross-cultural
Ethical relativism
Holds that different societal cultures and customs give rise to divergent values and ethical principles of right and wrong
Cross-Culture Variability in Ethical Standards

Apart from certain universal basics
Honesty Trustworthiness Fairness Avoiding unnecessary harm Respecting the environment
variations exist in what societies generally agree to be right and wrong in the conduct of business activities
Cross-Culture Variability in Ethical Standards

Factors affecting cross-cultural variability
Religious beliefs Historic traditions Social customs Prevailing political and economic doctrines
Cross-country variations also exist in the degree to which certain behaviors are considered unethical
Ethical vs. Unethical Conduct

What constitutes ethical or unethical conduct can vary according to
Time Circumstance Local cultural norms Religion
Thus, no objective way exists to prove that some cultures are correct and others wrong about proper business ethics Therefore, there is merit in the ethical relativism view that proper business ethics has to be viewed in the context of each countrys societal norms
Why Should Company Strategies Be Ethical?

An unethical strategy
Is morally wrong Reflects badly on the character of company personnel
An ethical strategy is
Good business In the self-interest of shareholders
Code of Ethics
Certified Financial Planner Board of Standards Inc. (CFP Board)
Preamble and Applicability The Code of Ethics and Professional Responsibility (Code of Ethics) has been adopted by CFP Board
to provide principles and rules to all persons whom it has recognized and certified to use the CFP [CERTIFIED FINANCIAL PLANNER]
Code of Ethics
These Code Of Ethics' Principles express the profession's recognition of its responsibilities to
the public to the clients to colleagues to the employers.
Principles of Code of Ethics

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence Principles of code of ethics lay the foundation of behaviour towards
the public to the clients to colleagues to the employers.

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence
Integrity demands honesty and candor which must not be subordinated to personal gain and advantage. Within the characteristic of integrity, allowance can be made for innocent error and legitimate difference of opinion

Integrity cannot co-exist with deceit or subordination of one's principles. It is essential to offer and provide professional services with integrity. .

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence To be objective in providing professional services to clients.
Objectivity requires
intellectual honesty impartiality

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence To provide services to clients competently maintain the necessary knowledge and skill.

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence One is competent only when he or she has attained and maintained an adequate level of knowledge and skill, and applies that knowledge effectively in providing services to clients..

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence Competence also includes the wisdom to recognize the limitations of that knowledge and when consultation or client referral is appropriate

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence Fairness is treating others in the same fashion that you would want to be treated is an essential trait of any professional.

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence To perform professional services in a manner that is fair and reasonable to
clients Principals partners Employers Shall disclose conflict(s) of interest in providing such services.

Fairness involves a subordination of one's own feelings, prejudices and desires so as to achieve a proper balance of conflicting interests. Fairness requires
impartiality intellectual honesty disclosure of conflict(s) of interest.

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence Not to disclose any confidential client information without the specific consent of the client Essential to ensure fulfilling the obligation placed Must ensure trust worthiness'

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence The conduct in all matters shall reflect credit upon the profession.

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence Professionalism requires
Diligence commitment Education of risk and return

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence Diligence is the provision of services in a reasonably prompt and thorough manner.

Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence To act in a manner that shows interest in executing the clients request Ensure prompt performance of the service Not to mislead the client Providing professional services.
Compliance/Anti Money Laundering Bill, Act 1999
Compliance
Prevention of Money Laundering Act, 2002 (the Act)

Prevention of Money Laundering Act, 2002 The Act came into effect from July 1, 2005. It extends to the whole of India Consequently,
RBI/SEBI has mandated that all financial institutions/intermediaries should formulate and implement a proper policy framework as per the guidelines on anti money laundering measures Also adopt a Know Your Customer (KYC) Policy.
Prevention of Money Laundering Act

OFFENCE OF MONEY-LAUNDERING Whoever Acquires Owns possesses or transfer any proceeds of crime; or

OFFENCE OF MONEY-LAUNDERING Whoever knowingly enters into any transaction which is related to proceeds of crime either directly or indirectly; or conceals or aids in the concealment of the proceeds of crime, commits the offence of money-laundering.

Punishment for money-laundering Whoever commits the offence of moneylaundering shall be punishable with
rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees:

ATTACHMENT OF PROPERTY INVOLVED IN MONEYLAUNDERING
Where the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, has reason to believe, on the basis of material in his possession, that any person is in possession of any proceeds of crime; such person has been charged of having committed a scheduled offence;

ATTACHMENT OF PROPERTY INVOLVED IN MONEY-LAUNDERING
And such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding ninety days from the date of the order, in the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) :

Adjudicating Authority (1) The Central Government shall, by notification, appoint one or more persons not below the rank of Joint Secretary to the Government of India as Adjudicating Authority or Adjudicating Authorities to exercise the jurisdiction, powers and authority conferred on an Adjudicating Authority by or under this Act.

Adjudicating Authority (2) The Central Government shall also specify in the notification referred to in sub-section (1) the matters and places in relation to which the Adjudicating Authority may exercise jurisdiction.

Vesting of property in Central Government Where an order of confiscation has been made under sub-section (6) of section 7 in respect of any property of a person, all the rights and title in such property shall vest absolutely in the Central Government free from all encumbrances:

Vesting of property in Central Government Provided that where the Adjudicating Authority, after giving an opportunity of being heard to any other person interested in the property attached under this Chapter or seized under Chapter V, is of the opinion that any encumbrance on the property or leasehold interest has been created with a view to defeat the provisions of this Chapter, it may, by order, declare such encumbrance or leasehold interest to be void and thereupon the aforesaid property shall vest in the Central Government free from such encumbrances or leasehold interest:

Vesting of property in Central Government
Provided further that nothing in this section shall operate to discharge any person from any liability in respect of such encumbrances which may be enforced against such person by a suit for damages.

OBLIGATIONS OF BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES Viz
Banking Companies Financial Institutions and intermediaries to maintain records

RECORDS TO BE MAINTAINED BY BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES Every banking company or financial institution and Intermediary shall- (a)
maintain a record of all transactions, the nature and value of which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions take place within a month;

RECORDS TO BE MAINTAINED BY BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES Every banking company or financial institution and Intermediary shall- (clause a as given in previous slide)
furnish information of transactions referred to in clause (a) to the Director within such time as may be prescribed; verify and maintain the records of the identity of all its clients, in such a manner as may be prescribed.

DURATION OF RECORDS TO BE MAINTAINED BY BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES Every banking company or financial institution and Intermediary shall (2) The records referred to in sub-section (1) shall be maintained for a period of five years from the date of cessation of the transactions between the clients and the banking company or financial institution or intermediary, as the case may be.

Powers of Director to impose fine The Director may, either of his own motion or on an application made by any authority, officer or person, call for records referred to in sub-section (1) of section 11 and may make such inquiry or cause such inquiry to he made, as he thinks fit.

Powers of Director to impose fine If the Director, in the course of any inquiry, finds that a banking company, financial institution or an intermediary or any of its officers has failed to maintain, or, retain records in accordance with the provisions contained in section 11, then without prejudice to any other action that may be taken under any other provisions of this Act, be may, by an order, levy a fine on such banking company or financial institution or intermediary which shall not be less than ten thousand rupees but may extend to one lakh rupees.

Powers of Director to impose fine The Director shall forward a copy of the order passed under sub-section (2) to every banking company, financial institution or intermediary or person who is a party to the proceedings under that subsection.
Know Your Customer" (KYC) guidelines

Guidelines on "Know Your Customer norms As part of Know Your Customer (KYC) principle, RBI has issued Several guidelines relating to identification of depositors Banks have to put in place systems and procedures to help control financial frauds identify money laundering and suspicious activities for scrutiny/monitoring of large value cash transactions. Instructions have also been issued by the RBI from time to time advising banks to be vigilant while opening accounts for new customers to prevent misuse of the banking system for perpetration of frauds.

"Know Your Customer" (KYC) guidelines for New accounts The following KYC guidelines will be applicable to all new accounts (i) "Know Your Customer (KYC) procedure should be the key principle for identification of an individual/ corporate opening an account. The customer identification should entail verification through an introductory reference from an existing account holder/a person known to the bank or on the basis of documents provided by the customer.

Customer identification The objectives of the KYC framework should be two fold, (i) to ensure appropriate customer identification and (ii) to monitor transactions of a suspicious nature. Banks should obtain all information necessary to establish the identity/legal existence of each new customer, based preferably on disclosures by customers themselves. Typically easy means of establishing identity would be documents such as passport, driving license etc. However where such documents are not available, verification by existing account holders or introduction by a person known to the bank may suffice. It should be ensured that the procedure adopted does not lead to denial of access to the general public for banking services

Ceiling and monitoring of cash transactions The extant RBI guidelines on the subject are as under : Banks are required to issue travellers cheques, demand drafts, mail transfers, and telegraphic transfers for Rs.50,000 and above only by debit to customers accounts or against cheques and not against cash Further, the applicants (whether customers or not) for the above transactions for amount exceeding Rs.50,000 should affix permanent account number on the applications

The banks are required to keep a close watch of cash withdrawals and deposits for Rs.10 lakhs and above in deposit, cash credit or overdraft accounts and keep record of details of these large cash transactions in a separate register. Branches of banks are required to report all cash deposits and withdrawals of Rs.10 lakhs and above as well as transactions of suspicious nature with full details in fortnightly statements to their controlling offices.

Internal Control Systems Duties and responsibilities should be explicitly allocated for ensuring that policies and procedures are managed effectively and that there is full commitment and compliance to an effective KYC programme in respect of both existing and prospective deposit accounts.

Terrorism Finance RBI has been circulating lists of terrorist entities notified by the Government of India to banks so that banks may exercise caution if any transaction is detected with such entities. There should be a system at the branch level to ensure that such lists are consulted in order to determine whether a person/organization involved in a prospective or existing business relationship appears on such a list.

Identification and Reporting of Suspicious Transactions Banks should ensure that the branches and controlling offices report transactions of suspicious nature to the appropriate law enforcement authorities designated under the relevant laws governing such activities. There should be well laid down systems for freezing of accounts as directed by such authority and reporting thereof to the controlling office and head office. Being matters of sensitive nature, there must be a quarterly reporting of such aspects to the audit committee of the board or the board of directors.

Adherence to Foreign Contribution Regulation Act (FCRA), 1976 Banks should also adhere to the instructions on the provisions of the Foreign Contribution Regulation Act, 1976 cautioning them to open accounts or collect cheques only in favour of association which are registered under the Act ibid by Government of India. A certificate to the effect that the association is registered with the Government of India should be obtained from the concerned associations at the time of opening of the account or collection of cheques. Branches of the banks should be advised to exercise due care to ensure compliance and desist from opening accounts in the name of banned organizations and those without requisite registration.

Record Keeping Financial intermediaries should prepare and maintain documentation on their customer relationships and transactions to meet the requirements of relevant laws and regulations, to enable any transaction effected through them to be reconstructed. In the case of wire transfer transactions, the records of electronic payments and messages must be treated in the same way as other records in support of entries in the account. All financial transactions records should be retained for at least five years after the transaction has taken place and should be available for perusal and scrutiny of audit functionaries as well as regulators as and when required

Training of staff and management It is crucial that all the operating and management staff fully understand the need for strict adherence to KYC norms. All institutions must, therefore, have an ongoing training programme so that staff are adequately trained for their roles and responsibilities as appropriate to their hierarchical level in complying with anti-money laundering guidelines and for implementing KYC policies consistently.
Financial Economics An introduction

Financial economics is the branch of economics studying the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. Financial economics concentrates on influences of real economic variables on financial ones, in contrast to pure finance.
Financial Economics
Financial economics studies: Valuation - Determination of the fair value of an asset
How risky is the asset? (identification of the asset appropriate discount rate) What cash flows will it produce? (discounting of relevant cash flows) How does the market price compare to similar assets? (relative valuation) Are the cash flows dependent on some other asset or event? (derivatives, contingent claim valuation)
Financial Economics
Financial markets and instruments
Commodities Stocks Bonds Money market instruments Derivatives
Financial institutions and regulation
Financial institutions and intermediaries in India

Organized sector
Capital market intermediaries Development Banks Insurance companies UTI Govt. PF, NSC Industrial Reconstruction Bank of India Exim Bank NBFC Hire Purchase Leasing Investment cos Finance Cos Money market intermediaries Indigenous bankers RBI Commercial Banks Co-operative banks P.O SB Government Treasury Bills
Un-Organized sector
Money lenders
Pawn Brokers
Traders and Land lords
Financial Risk Management

Financial risk management is the practice of creating economic value in a firm by using financial instruments to manage exposure to risk, particularly Credit risk and market risk.
Other types include
Foreign exchange Sharpe Volatility Sector Liquidity Inflation risks, etc.

As a specialization of risk management, financial risk management focuses on when and how to hedge using financial instruments to manage costly exposures to risk. financial risk management requires
identifying its sources measuring it And plans to address them.

In the banking sector worldwide, the Basel Accords are generally adopted by internationally active banks for
tracking Reporting exposing operational, credit and market risks.
RISKS
TYPES OF RISK MANAGING RISK
MARKET
DIVERSIFICATION
SIP
INFLATION
CREDIT
EXCHANGE RATE
INTEREST RATE
EMPLOYMENT
INVESTMENT
GOVERNMENT POLICY
Market Risk
At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the stock prices of both an outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is due to "market risk".
Inflation risk
Sometimes referred to as "loss of purchasing power." Whenever inflation sprints forward faster than the earnings on your investment, you run the risk that you'll actually be able to buy less, not more. Inflation risk also occurs when prices rise faster than your returns
Credit risk
Credit risk refers to
How stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised? Repay your principal when the investment matures?
Interest Rates Risk

Changing interest rates affect both equities and bonds in many ways. Investors are reminded that "predicting" which way rates will go is rarely successful. A diversified portfolio can help in offseting these changes
Exchange rate risk

A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative impact on companies which in turn would have an effect on the investment of the fund.
Government policy risk

Changes in Government policy especially in regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund
Investment risk
The sectoral fund schemes, investments will be predominantly in equities of select companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities
Employment risk
An industries' key asset is often the personnel who run the business i.e. intellectual properties of the key employees of the respective companies. Given the ever-changing complexion of few industries and the high obsolescence levels, availability of qualified, trained and motivated personnel is very critical for the success of industries in few sectors. It is, therefore, necessary to attract key personnel and also to retain them to meet the changing environment and challenges the sector offers. Failure or inability to attract/retain such qualified key personnel may impact the prospects of the companies in the particular sector in which the fund invests.
THANK YOU

Financial Planning

Enviado por

Dados do documento

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Financial Planning

Enviado por

Direitos autorais:

Formatos disponíveis

Financial Planning

Need for Financial Planning

Need for Financial Planning

Need for Financial Planning

Need for Financial Planning

The principles of financial planning

SAFETY You get your Money back.

The principles of financial planning

The planning process

Age Income Education level Past experience in investing

Predisposition of the investor Perception Confidence

Assessment of the performance of investments as a review Rebalancing portfolio

Real Estate Gold - Physical - Electronic

Debt instruments are

NON FINANCIAL ASSETS

NON FINANCIAL ASSETS

Post office schemes

NON FINANCIAL ASSETS

NON FINANCIAL ASSETS

NON FINANCIAL ASSETS

NON FINANCIAL ASSETS

NON FINANCIAL ASSETS

Capital gains tax applicable

NON FINANCIAL ASSETS

NON FINANCIAL ASSETS

NON FINANCIAL ASSETS

Real Estate Investment in land and building

NON FINANCIAL ASSETS

NON FINANCIAL ASSETS

Highly liquid Fairly stable in value Beats inflation

where people park their money

Indicative Strategy In Equity 70% In Debt 20% In Liquid 10%

where people park their money

Indicative Strategy In Equity 50% In Debt 30% In Liquid 20%

where people park their money

Indicative Strategy In Equity 20% In Debt 40% In Liquid 40%

Conceptual model - Illustration :

Retirement (60 yrs)

Growth Income Liquidity (Equity) (Bonds) (Banks) 75% 15% 10%

RISKS ASSOCIATED WITH INVESTMENTS

gold Fixed deposits NSC/PPF Level of risk

New Tax Rates

- Surcharge/ Education Cess @ 3% on income tax

Financial planning and goal setting

Financial planning and goal setting

Financial planning and goal setting

Financial planning and goal setting

What Are Ethical Principles?

Examples of ethical behaviors

Concept of Business Ethics

Ethics in the Global Community

Cross-Culture Variability in Ethical Standards

Cross-Culture Variability in Ethical Standards

Ethical vs. Unethical Conduct

Why Should Company Strategies Be Ethical?

Principles of Code of Ethics

Principles of Code of Ethics

Principles of Code of Ethics

Principles of Code of Ethics

Principles of Code of Ethics

Principles of Code of Ethics

Principles of Code of Ethics

Principles of Code of Ethics

Principles of Code of Ethics