Lecture 02


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Lecture 02

  1. 1. Islamic Wealth Planning and Management By Md. Shahedur Rahaman Chowdhury
  2. 2. Topic Two: Nature and scope of wealth planning
  3. 3. Define Wealth Planning <ul><ul><li>Definition: </li></ul></ul><ul><ul><ul><li>A process whereby an individual plans to achieve his financial goals through a comprehensive programs. </li></ul></ul></ul><ul><ul><ul><li>An overall plan to achieve one's financial goals that can be used to guide all retirement, estate, tax ,education and investment planning decision. </li></ul></ul></ul>
  4. 4. Aspects of Wealth Planning <ul><ul><li>Investment Planning </li></ul></ul><ul><ul><li>Tax Planning </li></ul></ul><ul><ul><li>Retirement Planning </li></ul></ul><ul><ul><li>Estate Planning </li></ul></ul><ul><ul><li>Education Planning </li></ul></ul>
  5. 5. Describe the differences and similarities between wealth planning and financial planning <ul><ul><li>Similarities: </li></ul></ul><ul><ul><ul><li>Both aim at enhancing the value of wealth or resources </li></ul></ul></ul><ul><ul><ul><li>Both use similar methods to enhance or preserve value </li></ul></ul></ul><ul><ul><ul><li>Both have specific objectives when formulating plans </li></ul></ul></ul><ul><ul><li>Differences: </li></ul></ul><ul><ul><ul><li>FP is for specific projects or periods. WP is for the end of the period </li></ul></ul></ul><ul><ul><ul><li>FP is for relatively shorter term but WP is for long term </li></ul></ul></ul><ul><ul><ul><li>FP is meant to have enough for all periods but WP is for future </li></ul></ul></ul>
  6. 6. Explain the differences and similarities between the objectives of conventional and Islamic wealth planning <ul><ul><li>Similarities: </li></ul></ul><ul><ul><ul><li>Both contain functions of generation, accumulation, protection or preservation, enhancement and distribution </li></ul></ul></ul><ul><ul><ul><li>Both aim to have a good life during retirement </li></ul></ul></ul><ul><ul><li>Differences: </li></ul></ul><ul><ul><ul><li>Islamic: need to do cleansing (zakat, etc) </li></ul></ul></ul><ul><ul><ul><li>Islamic: cannot contravene Shariah </li></ul></ul></ul>
  7. 7. Describe the significance of the different stages in wealth planning process <ul><ul><li>Inventory taking </li></ul></ul><ul><ul><li>Analysis & Evaluation </li></ul></ul><ul><ul><li>Plan Designing </li></ul></ul><ul><ul><li>Implementation </li></ul></ul><ul><ul><li>Monitoring and Reviewing </li></ul></ul>
  8. 8. Explain the trade-off concept and its relevance in the preparation of a comprehensive wealth management plan. <ul><ul><li>Trade-off between risk and return </li></ul></ul><ul><ul><ul><li>May not get the rate of return expected </li></ul></ul></ul><ul><ul><ul><li>Client may have different risk appetite </li></ul></ul></ul><ul><ul><ul><li>Risk-free concept means return is very low </li></ul></ul></ul><ul><ul><ul><li>Consistency of performance </li></ul></ul></ul><ul><ul><ul><li>Asset allocation can improve or worsen return </li></ul></ul></ul><ul><ul><ul><li>Trade-off between service and return </li></ul></ul></ul><ul><ul><ul><li>Trade-off between this world and the next </li></ul></ul></ul>
  9. 9. How different is the conventional trade-off concept from the Islamic concept? <ul><ul><li>Trade-off between this world and the next </li></ul></ul><ul><ul><li>A Muslim believes in fate and destiny (qadha’ and qadar) </li></ul></ul><ul><ul><li>There is effort (ikhtiar) and leaving it to Allah (Tawakkul) </li></ul></ul>
  10. 10. Explain the similarities and differences between the conventional and Islamic “Trade-off Concept” in relation to wealth planning. <ul><ul><li>Similar answer to the previous question </li></ul></ul>
  11. 11. Critical Thinking….. <ul><li>“ And to Allâh belongs all that is in the heavens and all that is in the earth. And all matters go back (for decision) to Allâh. [Quran: Chapter 3 ( Surah Al-E-Imran ): Verse 109] </li></ul><ul><li>Based on the above verse from the Holy Quran: </li></ul><ul><ul><li>can you explain the concept of wealth ownership in Islam; </li></ul></ul><ul><ul><li>what implications do you think the second part of the verse has on the generation and utilization of wealth in Islam? </li></ul></ul><ul><ul><li>what should the objectives of wealth planning in Islam be and relate its importance especially in the modern world. </li></ul></ul>
  12. 12. Critical Thinking <ul><ul><li>To Allah belongs all creations and hence all resources and wealth and man is just the trustee who has the right to use in accordance with His Will </li></ul></ul><ul><ul><li>We are accountable for all our actions </li></ul></ul><ul><ul><li>To generate and accumulate wealth in order to be closer to Him in whatever way. E.g. spend in His way, sharing with others, etc. </li></ul></ul>
  13. 13. Story of Alexander the Great <ul><ul><li>Alexander the Great is known as the most powerful military leader and conqueror of the ancient world. Before he turned 30 years old he conquered an empire stretching over 3,000 miles from Greece to India. He was born in 356 BC in Macedonia, known today as northern Greece. </li></ul></ul>
  14. 14. Story of Alexander the Great <ul><ul><li>On his sickbed and during his last hour alive, Alexander the Great told his generals &quot;After my death, when you put my body in the casket, let my arms hang over the edges with my palms wide open, so the public can see my empty hands while I am leaving the world.&quot; After he died, many dignitaries came to view the royal funeral and were very surprised to see his arms hanging over the edge of the casket with his palms wide open. They asked questions about this unique scene. A wise man told them &quot;O People, Alexander the Great is telling us that when he ruled the world, great treasures of gold, silver and wealth came to be under his possession. Yet, indeed he is leaving the world empty handed.&quot; </li></ul></ul><ul><ul><li>Source: Partially extracted from the writings of JC Pinkerton. </li></ul></ul>
  15. 15. End <ul><li>Q & A </li></ul>