How you can help your Clients Plan their Finances for 2021-22

Life insurance

Financial planning is an activity wherein individuals plan their finances so that their financial goals can be effectively met. Financial planning is important for you as well as your clients as it helps you to plan and meet your life’s financial obligations. As a financial advisor, you are qualified enough to help your clients meet their financial goals through effective financial planning. So, here’s how you can help your clients plan their finances for 2021-22 –

  • Help them identify their goals
  • The first step in financial planning is goal identification. Help your clients to identify their financial goals. While identifying the goals, ensure that the time horizon of each goal is also mentioned alongside it. This would help you categorize the goals as long term and short term goals so that you can plan for them accordingly.

  • Assess their disposable income
  • Once the goals are identified and listed as long-term or short term goals, the next step is to find out how much disposable income that your clients have to save towards the identified goals. For finding out the disposable income, aggregate all sources of income that your clients have and deduct the total monthly expenses. The amount that you are left with would be the disposable income that can be used towards investments.

  • Investing towards the identified goals
  • Now, when you know the amount of disposable income, it is time to allocate the income towards different avenues. Assess the horizon of each goal and then choose a suitable investment avenue for it. When choosing the investment avenues, keep your clients’ risk appetite in mind. Risk appetite means the capacity to take risks. Find out how much risk your clients are willing to take. If they don’t mind taking risks, you can pick equity-oriented investment avenues for attractive returns. On the other hand, if your clients are risk-averse, fixed income or low-risk investment avenues would be a better fit.

  • Reviewing the financial plan regularly
  • Financial planning is a continuous process because financial needs are dynamic. They keep changing as your clients go through the different stages of life. For example, when your clients are young and don’t have kids, their financial needs would be different compared to when they have children. So, you need to help your clients not only plan their finances but also to track and monitor the financial plan regularly. Through the regular review, you can help your clients make the necessary changes so that their financial plan stays on track and meets their changing financial needs. Try and review the plan every 6 to 12 months. This would also help you establish a continuous relationship with your clients and drive customer retention.

    These are some of the basic steps of financial planning which would help your clients create a suitable plan for their goals. There are some important aspects that you should keep in mind when planning your clients’ finances –

  • Risk profiling
  • Risk profiling is important because it would help you pick the right investments. Every client has different risk-taking ability. You need to assess this ability and then pick assets that suit their risk profile. Be careful when analysing your clients’ risk appetite because if you make a mistake, your clients’ financial plan would be skewed.

  • Asset allocation
  • Asset allocation simply means picking different investment avenues for meeting financial goals. Asset allocation helps in diversification and diversification reduces the investment risk. Just like a balanced meal is necessary for proper nutrition, a diversified portfolio is necessary to minimize the risks and maximize the returns. So, don’t play favourites with investments. Choose varied investment avenues and build up a diversified portfolio for your clients.

  • Emergency planning
  • While building a financial portfolio, having an emergency corpus is necessary so that unforeseen financial expenses can be easily met. So, always make a provision for an emergency corpus in your clients’ financial portfolio. In fact, insurance plans can be used to plan for emergencies. Let’s understand how –

    Insurance as a tool for emergency planning

    • Life insurance
    • Life insurance plans help in compensating for the financial loss suffered due to premature death. You can help your clients invest in a comprehensive term insurance policy that would help them create a corpus for their family in case of their sudden demise.

    • Health insurance
    • Health insurance plans help in meeting the costs of medical emergencies. They have become a must, given the rising incidence of illnesses and expensive medical treatments. So, ensure that your clients have a comprehensive health plan with an optimal sum insured for their medical emergencies.

The bottom line

Use these techniques and help create the best financial plan for your clients. This would also help you generate business as you can sell insurance policies to create an emergency plan for your clients’ rainy days. A well-developed financial plan would gain your clients’ trust and also help them achieve financial independence.

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