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Cwm Financial Planning_sample_confidential

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  • 1. 2011 Mr Sumantra PalFinancial Plan Document Confidential Castanea Wealth Management www.castaneawealth.com [Type the phone number]
  • 2. 2011
  • 3. 2011Dear Mr PalWe appreciate you having spent time with us on the profiling exercise and appreciate yourcooperation in making this a fulfilling and holistic exercise. Todays financial environment iscomplex 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 financialcondition over the long term.We are pleased to present you with your Personalised Financial Plan. The purpose of this plan is tohelp lay out a roadmap for achieving your goals and objectives. Based on the information that youhave provided, and assumptions we have made about the future, we have analysed your currentfinancial situation and outlined an action plan that should help you achieve your goals andobjectives.Our recommendations are based on your investment and risk profile, your financial and lifestylegoals, net worth and financial budgets. This plan also states your areas of "risk" and recommendssolutions that will protect your family and your financial assets against future hurdles. Needs ordeficiencies are suitably identified, and recommendations are included to illustrate how you mayimprove your arrangements.This confidential report was created for your personal use and future reference only. Each sectionis designed to give you a better understanding of your financial circumstances, and whatsprojected for the future. The report reflects your financial standing today and where you are likely tobe in the event of your disability, death or retirement. It will provide valuable information for years tocome.As your financial situation or goals may change overtime, this report should not be considered finalor definitive, but as part of an ongoing, long term planning process. As changes occur in yourfinancial situation, it is important to update your personal information in order to re-evaluatewhether you are on track to meeting your goals. This plan needs to be reviewed and updated every6 months to enable you to account for changes in your financial situation or other market relatedfactors.This plan is meant to be educational, interactive and easy to understand. Please feel free to contactus if you have any queries.We look forward to reviewing and implementing these recommendations with you and we thank youfor giving us an opportunity to assist you in planning for your long-term financial success.With Warm RegardsOn Behalf of CWM Financial Planning Team
  • 4. 2011
  • 5. 2011WHY HAVE A WRITTEN FINANCIAL PLANManaging personal finances in today’s complex and rapidly changing world is a very daunting taskfor most people.Unfortunately, many people choose not to manage important elements of their financial affairsbecause they believe the benefits of having an exhaustive financial plan are not worth the effort ittakes to complete it. Therefore they ignore their realities in the hope that they will somehow goaway. 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 isnext to impossible to stay emotionally detached and make prudent decisions.A well organized process for completing a comprehensive written financial plan is a very effectiveway to guard against this tendency to ignore reality by making the task more manageable so morepeople 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 EmotionsA written financial plan that is carefully prepared, and reviewed at least annually to reflect yourchanging needs, will bring you powerful peace of mind, especially when the going gets tough. Thediscipline of committing your plans to writing takes a huge burden off. You no longer feel that youneed to manage all your financial concerns and risks in your head, especially when you are understress. Without a financial plan, your emotions can have an undue influence on your choices.2. Provides a Modular Framework for Making DecisionsYour needs, wants and concerns are the foundation for your written financial plan. By fullyunderstanding your situation alongwith your family’s participation, and what impact your goals anddreams will have on your finances, your financial plan becomes the solid framework upon which tomake all important decisions.3. Consolidates the Work of All Your Professional AdvisorsA comprehensive written financial plan provides you with a central point of reference to coordinateand manage the activities of all your investment, financial, taxation and legal advisors. Yourfinancial advisor is in the best position to provide this central coordination because of the broadscope of their involvement. Having a coordinated approach with the help of your financial advisorwill be of great benefit to you and your family.
  • 6. 2011The Financial Planning ProcessThe Six Step Process of Personal Financial PlanningPersonal 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 Processcomprising these six distinct steps:Step 1Clarify Your Present SituationThe financial planner clarifies the your present situation by collecting and assessing all relevantfinancial data such as lists of assets and liabilities, tax returns, records of transactions, insurancepolicies, , pension plans etc.Step 2Identify Goals and ObjectivesThe financial planner helps you identify both financial and personal goals and objectives as well asclarify your financial and personal values and attitudes. These may include providing for children’seducation, supporting elderly parents or relieving immediate financial pressures which would helpmaintain your current lifestyle and provide for retirement. These considerations are important indetermining the best financial planning strategy for you.Step 3Identify Financial ProblemsThe financial planner identifies financial problems that create barriers to achieving financialindependence. Problem areas can include too little or too much insurance coverage, or a high taxburden. Your cash flow may be inadequate, or the current investments may not be winning thebattle with changing economic times. These possible problem areas must be identified beforesolutions can be found.Step 4RecommendationsThe financial planner provides written recommendations and alternative solutions. The length ofthe recommendations will vary with the complexity of your situation, but they should always bestructured to meet the your needs without undue emphasis on purchasing certain investmentproducts.Step 5Implement StrategiesA financial plan is only helpful if the recommendations are put into action. Implementing the rightstrategy will help you reach the desired goals and objectives. The financial planner should assistyou in either actually executing the recommendations, or in coordinating their execution with otherknowledgeable professionals.Step 6Monitor and ReviewThe financial planner provides periodic review and revision your financial plan to assure that thegoals are achieved. Your financial situation should be re-assessed at least once a year to accountfor changes in your life and current economic conditions.
  • 7. 2011Executive SummaryThis report uses financial models to present a picture of your current financial situation andillustrations of possible directions your finances may take. Future economic and market conditionsare unknown, and will change.The assumptions used are representative of economic and market conditions that could occur, andare designed to promote a discussion of appropriate actions that may need to be taken, now or inthe future, to help you manage and maintain your financial situation under changeable conditions.Your Current Situation:Your Goals:Analysis Details:Retirement AnalysisYou have assets of approximately xxxxxYou have liabilities of approximately xxxxYour net worth is approximately xxxTo 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 currentretirement plan will meet your stated retirement goals. The analysis begins now and extendsthrough life expectancy.The analysis calculates growth and depletion of capital assets over time. This analysis is the basisfor the following summarized statement.Asset Allocation: Type of Investor - Somewhat AggressiveLong-term care assets at risk: xxxxxNet Estimated Life Insurance Needs Shortage: xxxxActions:The analysis projects that you will have xxxx left at your life expectancy (not including insuranceproceeds). This amount should be considered marginal, since your analysis may not haveconsidered the possibility of expensive long-term care during the final years, premature disabilityor some other economic downturn that might affect your investments.
  • 8. 2011Risk Profile AssumedYour Investment ProfileBefore embarking on a savings and investment strategy, you need to choose an investment stylethat best suits your circumstances. Factors affecting your individual risk profile include:Your willingness to take riskInvestments and risk go hand in hand, and the relationship between potential return and amount ofrisk is called the risk/return ratio. The smaller the risk, the smaller the potential return; thegreater the risk, the greater the potential for profit. For your financial plan to be successful it musttake into account your willingness – or unwillingness - to accept risk. Generally, there are threedistinct investment objectives, with correspondingly different risk factors:1. SafetyYou want minimal risk and are willing to trade off lower returns. You want to protect your capitaltypically because your time horizon is relatively short or you are uncomfortable with risk.2. IncomeYou are willing to accept a moderate degree of risk in exchange for the potential of having regularincome added to your plan.3. GrowthYou are willing to accept higher risk to maximize the potential returns. Typically you will have alonger time horizon or sufficient assets to accommodate the increased risk.Your time horizonThe younger you are, the more time you have for your investments to grow. Typically, this meansthe more risk you may be willing to accept in exchange for the potential of higher returns. The olderyou are, the less time you have to weather the ups and downs. As a result, you may be morecomfortable with predictable investments as opposed to more volatile, potentially higher growthopportunities.Your financial positionThe higher your income and net worth, the more risk you may be willing to accept since potentiallosses from riskier investments in your portfolio are more easily absorbed if you have other cashand asset reserves.Your level of investment knowledgeGenerally, the higher your knowledge about investments, the higher the risk you would be willing totake. ASSUMED RISK PROFILE Risk Profile Assessed by us Risk Profile Suggested by you Ultimate Risk Profile Adopted
  • 9. 2011Income 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. 2011Your Current Networth StatementWhy Prepare a Net Worth Statement?Your net worth is the difference between all the things of value that you own, and all the debtsyou owe. In financial terms, your net worth is your assets minus your liabilities. Before youcan reach a financial goal, you need to know where you stand now. Your net worth is areference point on your financial road map. Once you know your net worth, you can set abudget to reach your goals. There are several good practical reasons for knowing yourfinancial worth:Money ManagementYou can make better use of your income and maintain better control of your expenditures ifyou have a clear idea of what you own and what you owe. A net worth statement will showhow much liquidity you have and identify the best sources for cash, should you need it.SavingKnowing precisely how much is left over after deducting current liabilities provides a strongincentive to save. As you see your net worth increase, you will be encouraged to help itgrow.Financial PlanningNet worth is an essential component of all financial planning. It helps you make appropriatedecisions 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 providingfor retirement.Estate PlanningEveryone needs to make a will, and almost everyone needs to know how much he or she is worthbefore deciding how the wealth is to be divided up.Insurance PlanningYou’ll be better able to protect assets. Determining the worth of your valuables is not onlynecessary to figure out your net worth, it also helps you get the proper insurance coverage.BorrowingIf you need to borrow cash or arrange a loan, you will be required to provide the lender with anaccurate and up-to-date account of your existing assets and liabilities. Your net worth willdetermine the credit limit that the lender is prepared to offer.
  • 11. 2011Current Net WorthThe Following is a consolidated picture of all your assets and loans as disclosed during ourmeeting. 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-worthComment
  • 12. 2011Liquid & Contingency FundWe 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 setaside 6 months’ of expenses: Rs.(Lakh) Your Current Savings Account Balance Current Liquid Investments Your Required BalanceYou should increase the savings account balance by xxxx lakhThe contingency reserve should be held in easy to liquidate assets e.g. fixed deposits, liquid plusfunds, short term debt funds etc. At present we are recommending the following instruments beingsuitable for the same: Recommended Investments Rs.(Lakhs)
  • 13. 2011Key GoalsThe table below shows your milestones: Amount in Horizon Inflation Rate Inflation adjusted Goal todays rupees (months) Expected Amount (in lacs)The following table shows your preparedness towards each goal: Amount in Current Gap to be Level of Goal todays rupees Contribution filled Criticality
  • 14. 2011Retirement Plan StatusRetirement TradeoffsPlanning for retirement involves tradeoffs. The amount of retirement capital you need will oftendepend on when you start investing, when you retire, the return on your investments, your incomeexpectations, 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 yourretirement years.In this retirement plan, we compare your income needs to your income sources during retirementto 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, theresults of your retirement plan are summarized below:Key Assumptions: Life Expectancy Inflation pre retirement Inflation post retirement Monthly Income required after retirement to maintain lifestyleAnalysis:Long Term Asset Buildup No. Of Annual Planned Instrument Current Value Growth Projected Value Years Additions Total Need Resources Available Funding DeficitObservation:Your current savings will not be sufficient to meet your retirement goal.
  • 15. 2011Recommendation:To meet the shortfall of 1.46 Cr you need to follow our recommended investment plan which is asfollows: Year of No. of Years to Annual Growth Target Corpus Funding Required Goal achieve AssumedWhere to Invest: Monthly Product Contribution CharacteristicsIn 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. 2011Childrens Education - Current PictureInvesting for EducationYour children will need high levels of training and education to secure employment in a world thatis becoming increasingly competitive and technology driven. And that may have to be at any part ofthe world.Obtaining a post-secondary education to meet these demands is also becoming more expensive asprivate education remains in high demand. The current cost for four years of university educationis approximately xxxxxx. This includes tuition, rent, food, books and additional fees. In eighteenyears in 2022, the total cost of a four-year university education will be xxxx , assuming costsincrease by 7.5% per year. If you start now and invest xxxx per month in an instrument that earnsxxxx% per year, you will be able to pay for your child’s university education.Key Assumption: Rate of InflationAnalysis:Asset Base to be used: No. Of Annual Planned Projected Instrument Current Value Growth Years Additions Value Total Need Resources Available Funding DeficitObservation: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 asfollows: Monthly No. of Years to Target Corpus(Rs. Annual Growth in Year of Goal Contribution achieve In Lakh) Contribution required
  • 17. 2011Instruments RecommendedFollowing are the specific recommendations: Monthly Product Characteristics Contribution
  • 18. 2011Childrens MarriageAssumptions:Rate of InflationAnalysis: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. 2011Asset AllocationAsset 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 adiversified portfolio from four broad asset classes - Stocks, Bonds, Fixed Income and Cash – basedon your income and growth needs and your risk tolerance.Research has shown that choosing among asset classes has a greater impact on your investmentreturns 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 8Comments on Asset Allocation
  • 20. 2011Recommended InvestmentsAs per the asset allocation and rebalancing required; following instruments are suggested Asset Instrument Manufacturer Amount (Rs lakh) Lock in LTCG class
  • 21. 2011Cash Flow ProjectionWhy Prepare a Cash Flow Statement?Controlling your financial affairs requires a budget or cash flow statement. Budgeting and trackingyour expenses gives you a strong sense of where your money goes and can help you reach yourfinancial goals, whether they are saving for a down payment on a house, starting a college fund foryour children, buying a new car, paying off the credit cards or planning for retirement. A cash flowstatement provides you with the following benefits:Know where you standA cash flow statement allows you to know exactly how much money you have. The statement showsyou how your funds are allocated, how they are working for you, what your plans are for them, andhow 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 areasControlA budget is the key to enabling you to take charge of your finances. With a budget, you have thetools to decide exactly what is going to happen to your hard-earned money—and when.CommunicationA budget is a communication tool with other family members to discuss the priorities for whereyour money should be spent.Identify opportunitiesKnowing the exact state of your personal monetary affairs, and being in control of them, allows youto take advantage of opportunities that you might otherwise miss.Extra moneyA 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 workfor you.Assumptions and workings (all numbers are real - not with inflation)
  • 22. 2011Comments:Comments
  • 23. 2011Life InsuranceWhat Insurance Pays ForAlthough the basic purpose of life insurance is to provide your dependents with a continuingsource 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 livingLife insurance is one of the most important investments you can make to protect your family’sfinancial security. It is used to guarantee that your family will have a lump sum to pay off largefinancial obligations, a source of income to meet daily living expenses and be able to meet futureexpenses 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 MaturityCurrently 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.
  • 24. 2011Life Insurance Recommendations Insurance Required Existing Gap Recommended Policy Rationale Cover CoverComments:
  • 25. 2011Client Comments
  • 26. 2011Disclaimer  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.
  • 27. 2011X_________________________________________________________________________________Clients Signature Clients NameX_________________________________________________________________________________Clients Signature Clients NameSigned at ________________________________, _____________ (City/Town) (State)Planners Signature _____________________________Date ____________________