Managing expenses is a tough task if you have not budgeted for it. But what about unknown expenses that hit us out of the blue. At times, even expert investors find it difficult to manage such expenses

Stay On Track: Key To Achieving Your Goals in Life

How would you consider your life to be meaningful and successful? I am sure that many would not prefer or will not be able to put a monetary figure here. Success for many of us would mean achieving our dreams in life or helping others achieve their dreams in life. Truth be told, we all have our own dreams in life, like owning a house, our kids foreign education, going on long vacations, comfortable retirement with respect and the likes. The question really is, do we know what exactly are our dreams, how much will they cost and most importantly, whether we are on track to achieve them?

Why Define Goals in life?

Unless you don't define your goals with proper details, you are unlikely to achieve the same. Same is the case with your life dreams. Most of us often invest for our future goals so that we have the money to fulfill them when they arrive. The problem is that most of these investments are generalized, the exact time available for every goal is not known, target amount needed is also unknown and lastly, there is no link between our investments and our goals. How can we be sure that our goals will be achieved if we do not know these important aspects? How can we know if we are on track or there is a gap in our investments? How can we best plan goals to make them feasible and practical? These are important questions needed to be answered.

Enter, your financial advisor or the preciouswealth Wealth Partner. The person who can help you identify and define proper financial needs or goals in life. He/she would also help map /earmark your existing mutual fund investments towards these goals. These are the important activities which will unravel the future plan you will need to adopt to achieve your goals.

How To Track My Financial Goals?

To make your life easier and to help you get organized with your goals and your investments, preciouswealth has brought to you the 'Family Needs Progress Report' on your Client Desk. Firstly, you have to sit with your advisor and do proper estimation and defining work for your goals. Thereafter, the advisor will enter goals and map existing mutual fund investments into the system.

And there you go! you will have your Family Needs Progress Report ready – simple, meaningful and actionable for use! Here is a quick snapshot of what it will look like...

Following is the important information available in the report:

1. List of all your Life Goals + Maturity Date & Time left

2. Target Amount required at a future date for goal achievement + Gap in the same as per current investments done

3. Projected Need for investments: SIP or Lumpsum to ensure goals are on track.

4. Graphical representation for easy understanding and knowing if you are on Track!

Lets' take an example to understand better, the above image shows the Family Needs Progress Report of an investor .

This investor is approaching his retirement. On the top, he has his retirement goal, for which he needs Rs 7.50 Cr in 2 years and five months. He is running an SIP of Rs. 10,000 per month dedicated to his retirement and the current value of his investment is Rs 3.15 Cr. This investment is expected to yield 12% return p.a. and hence when he approaches his retirement, this investment will yield him Rs 4.14 Cr, as against Rs 7.50 Cr required, so there is a gap of Rs. 3.36 Cr.

Now the tool has shown him the Gap in Progress towards his Retirement Goal, and has given him two options to fulfill this gap: (i) he needs to do an SIP of Rs 10,03045. His current SIP is of Rs 10,000, so he needs to do an additional SIP of Rs 9,93,045 or (ii) he has to do a lumpsum investment of Rs 2,55,65,393.

Thus, the investor is very clear where he stands today, where he will reach in the future and what he needs to do to achieve the destination he wants to reach. At the bottom of the report, is a simple consolidation of all the above data along with the amount of mutual fund investments already mapped and yet to be mapped to goals.

Benefits of knowing your progress...

So, hopefully this sample has imparted clarity on how this report can help you manage your family needs. The Family Needs Progress Report helps you in the following ways:

1. Organized: You don't need papers or excel workbooks to mange your family needs. This report has a very simple to understand interface and will have detailed information of all your family needs as shown above. So, it saves you from all the clutter and your universe is just a few clicks away.

2. In Control: This report will show you the Gap in your Progress, and the Plan of Action you need, to ensure that you are always on the right track and at the right speed, so that you reach your target in time.

3. Discipline in investment behavior: This report will help you focus on your goals instead on short term needs or market fluctuations / noise. It will also help you stay on course of your investment planning and remove any short term anxieties. Needless to say, it will bring more maturity, direction and discipline in your investment behavior along with a commitment to achieve your long term dreams.

So the crux is, we can achieve our life goals, if we plan for them and manage them effectively. preciouswealth's Family Needs Progress Report is a tool designed to help you in carrying out your job of goal management conveniently.

You can view this report as: Home page of Client Desk as Family Need Progress Report and in detail format under Consolidated > Family Need Valuation

We hope that this report will contribute to enhancing your financial planning and investing experience.

Date : 12 May 2017

What happens when you go into your bank to deposit a large sum of money or if you have a huge balance in your savings bank account. Probably someone from the bank staff would approach you with an excellent investment option for your cash or your bank balance. This person is your Relationship Manager. You'll be told to divert your money into a product as the money that is lying in your account is generating very low return while their investment product will deliver way better returns.

So, shall you do as he says? Since he's your banker and there exists a relationship of trust between the bank and the customer, and you entrust your hard earned money with the bank, because you trust the bank.

The answer to this is simple, “No”

We often hear about instances wherein individuals were fooled by their Relationship Managers, and were made to invest in a product which were far from suitable for them.

A 60 year old man approached his RM, he wanted to invest a part of his retirement corpus in a product which could give him a better rate of return than his saving account. He wanted to keep this money as his emergency fund, so there should be safety of principal and flexibility of withdrawal.

The RM sold him a long term single premium endowment plan.

Now what will the poor old guy do with this policy. He has to dedicate a huge amount today which will be locked in for a long period of time, probably until he dies. Moreover, it didn't serve the purpose of an Emergency Fund. And the worst part is, he didn't even know that he bought an insurance policy.

In another instance, a 32 year old man who was on the lookout for a good tax saving option, asked his Relationship Manager for advice. The RM suggested him a product which had the following features:

1. The investment is eligible for deduction u/s 80C and 10D

2. He would get a life insurance cover of Rs 15 Lacs

3. He will get a fixed return of 12% p.a.

What else could he ask for? The RM was a Messiah for him.

Was he really?

Probably Not.

The reality was, the first two points were true. The third point had a small glitch, and that was Fixed Return, it was actually a return of upto 12%. It could be 4%, 5%, anything below 12%. And another very important point that the RM forgot to mention was, this product had a lock-in of 22 years.

The investor was quite confident about the product, but then he decided to consult his wise uncle before investing. This decision helped him from being screwed up big time. The Uncle could sense there's something fishy because of the over enticing features of the product. So, he researched and revealed the truth to this investor, that this product was not just meant for him.

There is no end to such mis-selling stories. Your bank RM should be the last person to seek investment advice from. The advice can cost you dearly.

But why do the Relationship Managers sell the wrong product to the investors?

So, they mis-sell because of the following three factors:

1. The Relationship Managers get Commissions on the investments that you do through them. And each investment product has a different commission percentage attached to it. And generally, the commission paid on a product and the quality of the product are inversely related. This means an investment product which bears a high risk and offers low return will offer a higher commission, compared to a product which bears a lower risk and offers high returns. So it goes unsaid, that the RM will pitch that product which will bring him the highest Commission.

2. The Relationship Managers get sales Targets. They get overall targets as well as targets to sell specific products. So, in order to achieve their targets, the RM would make you as their target, and will try to sell those products to you, where they are falling behind.

3. The Relationship Manager will offer those products to you which are lying on his shelf. The bank will have a tie – up with limited number of companies, so they have only those products to offer which are offered by those companies. For Eg. You want to buy a Term Plan. Now you ask your bank RM to suggest the best Term Plan for you. Since your bank has a tie up with let's say two Insurance Companies, so your RM will give you options from those two companies only. Whereas, there are so many Term Plans available in the market which are way better than the ones suggested by him. But because he has only two options to offer, so he would advise you to go for either one of them.

So to conclude, your investment is a product of the RM's Commission, his targets and the products available with him.

The only way to avoid falling prey to the trap is be updated, and take a well researched and informed decision. The idea is you should not blindly trust anyone when it is about your hard earned money and not that after reading this article, you look at your Relationship Manager with an eye of suspicion and run away whenever he comes towards you. It is because not everyone mis-sells, he might have something good for you. You should rather research, consult your financial advisor whenever you get investment advisory from someone else.

So, the crux is banks are a good place for taking loans, for depositing money, but not for seeking investment advice.

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