Integrated Financial

Planning

FOR MR. PREM RANJAN & MRS. SUDHA

BY VINAY KUMAR
Table of Contents
S. NO. Particulars Page No.
1 Engagement Letter 3-4
Executive Summary 5-12
2 Personal Information 5
3 Family Details 5
4 6 Steps Financial Planning Process 6
5 Components of Financial Planning 7
6 Current Net Worth Statement 8
7 Cash Flow Projections 9
8 Action Plan 10-11
9 Risk Profiling 12
Collection 13-15
10 Integrated Financial Planning 13
11 Investment Planning 13
12 Risk Management 14
13 Tax Planning 14
14 Retirement Planning 14
15 Estate Planning 15
16 Assumptions 16
Analysis 17-24
17 Personal Financial Management: 17
Income 17
Expenses 17
Investments 17
Contingency Fund 17
18 Tax Planning 18
19 Risk Planning: 18-19
Life Insurance 19
Health Insurance 20
Critical Illness 20
Property and Lability Insurance 20
20 Investment Planning: 21
Vacation Goal 21
Asset Management Strategies 21
21 Retirement Planning: 22-24
Retirement Corpus Calculation 22
Stress Test – 1 22
Stress Test – 2 23
Retirement Bucket Strategy 24
Synthesis and Recommendation 25-31
22 Personal Financial Management: 25-26

1
 Emergency Corpus 25
Kirti’s Acting Career 25
Kirti’s Career Launch 25
Rupesh’s Marriage Goal 26
Kirti’s Marriage Goal 26
Post-Retirement Work Life 26
23 Investment Planning: 26-28
Prioritize Action Steps 26
Vacation Goal 27
Investment Policy Statement 27-28
24 Insurance Planning 29
25 Retirement Planning: 30-31
Retirement Instruments 30
House Requirement after retirement 31
Car Goal after retirement 31
26 Estate Planning 31
Living Will 31
Self Will 31
Power of Attorney 31
Prem's Father Will 31
27 Triggers 32
28 Market Outlook 33
29 Disclaimers 34

2
 ENGAGEMENT LETTER

This Letter of Engagement is preparing on 18th of February, 2022 between XYZ Ltd. a SEBI
Registered Investment Advisor and Mr. Prem Ranjan for his ‘Integrated Financial Planning’.

Scope of Engagement

• We, provide you complete financial planning includes Tax Planning, Retirement
Planning, Investment Planning, Insurance and Risk Management, Estate Planning and
Personal Financial Management.
• All the instruments that are suggest to the Clients are based on their Risk Profile and
the duration of the investment.
• Review of Plan is done on half-yearly basis on the advisor level and a annual meeting
between Financial Planner and Client will happen.
• Here, we do not offer Cross-border Tax Planning. We can refer Client to some
trusted Law Firms and Investment Advisors for the Client’s Cross-border Tax and
Investment requirement.

Description of Fees

• Financial Planning fees payable by the client is Rs. 50,000 plus applicable GST, which
can be paid in two installments, first is after the 15 days of first meeting and half of
the remaining to be paid after the approval of the Financial Plan.
• Also, for Assets Under Management (AUM), fees payable by the Client shall be
computed as 0.25% of total AUM plus applicable GST to be paid at the end the of the
preceding Financial Year.

Conflict of Interest

• We do not receive any fees or commission from the referrals from other
professionals to whom Client may be referred.
• Financial Planner will keep all information regarding Client’s personal and financial
affairs strictly confidential. Client authorizes Advisor to share with third parties what
limited information is required for the third party to service Client’s Account.

Concluding Remarks

3
 • Client will, of course, be free to follow or disregard, in whole or in part, any
recommendations we make with respect to the implementation of your plan. You
are under no obligation to act on any recommendation.

• This engagement may be terminated without penalty or further obligation except for
the payment of fees for services performed and expenses incurred prior to
termination.

CONCLUDING REMARKS
You will, of course, be free to follow or disregard, in whole or in part, any recommendations
we make. You are under no obligation to act on any recommendation. Because you did not
engage us to assist you with the implementation of your personal financial plan, we cannot
be responsible for any decisions you make regarding implementation of the
recommendations

Signature
I/we hereby solemnly declare that I/we have carefully read, understood, and AGREE with all
the terms and conditions mentioned in this Agreement.

(Client) (Financial Planner)

Date:

4
 EXECUTIVE SUMMARY

Mr. Prem, you are presently 59 years old. Your spouse is presently 56 years of age.
You are earning Rs. 1,25,000 p.m. or Rs. 15 lacs p.a. Your spouse is earning 75,000 p.m. and
9 lacs p.a.
The expenses of the entire family are Rs. 93,250 p.m. or Rs. 11 lacs p.a.
Car Purchase is due in aug, 2023; You to vacant the company provided home in 3 months of
Retirement. Your Retirement is due in June, 23 but you want to work further either as a
marketing consultant or to help your wife in her boutique. As per your risk profiling, we
understand that both of you are a Moderate Investor. This implies that you are willing to
take some risk but would give more weight age to capital protection.

Personal Information

Particulars Self Spouse

First Name Prem Sudha
Surname Ranjan Ranjan
Age 59 56
Gender Male Female
Location Bokaro Bokaro

Family Details

Current
Name Relationship Age Male / Female Marital Status of Children Dependent
Meera Daughter 33 Female Married No
Rupesh Son 28 Male Unmarried No
Kirti Daughter 22 Female Unmarried Yes

Retirement Goals

Particulars Self Spouse

Current Age 59 56
Expected Retirement Age 60 67
Remaining Working Years 1 11
Life Expectancy 90 93
Retirement Phase 30 26

5
6 STEPS FINANCIAL PLANNING PROCESS:
Establish and define the client-adviser relationship.

We will clearly explain and document the services that we will provide to you and define
both our and your responsibilities during the financial planning process. We will explain
fully we will be paid and by whom. We will also agree on how long the professional
relationship should last and on how decisions will be made.

Getting to know you.

We will gather information about your financial situation. Together we will define your
personal and financial goals, understand the time frame for results and discuss how you
feel about risk.

Analyse and evaluate financial status.

We will analyse this information to assess your current position and determine what you
must do to meet your goals. Depending on what services you have asked for, this could
include analysing assets, liabilities and cash flow, current insurance coverage, retirement
planning, investments or tax strategies.

Develop and present financial planning recommendations and/or alternatives.

We will then offer recommendations that address your goals, based on the information
provided. We will discuss the recommendations with you to help you understand so that
you can make informed decisions. We will listen to your concerns and revise the
recommendations as appropriate.

Implement the financial planning recommendations.

We will then agree on how the recommendations will be carried out. We are likely to
carry out the recommendations and administer any contracts to be implemented. You
will be kept updated as to the progress of the implementation stage.

Monitor the financial planning recommendations.

On a regular basis we will review your situation including goals, risk profile, lifestyle and
other relevant changes. We also review the performance of your plans to assess the
levels of volatility and return. This process forms part of our ongoing planning
discussions with you to ensure that we are always working towards the achievement of
your financial and lifestyle objectives.

6
COMPONENTS OF FINANCIAL PLANNING:
The 6 Financial Planning Components described in FPSB’s Financial Planner Competency
Profile are:
1. Personal Financial Management
To truly understand your current assets, liabilities, and net worth; it is important to
identify in writing the status of your personal and professional income and expense
balance sheet. We include goal planning as part of this step because setting realistic
goals and achieving them is highly dependent on your ability to save for those goals.

2. Investment Planning
Investing is a strategy that takes your goals, your risk tolerance, and your timeline
into consideration. Then, developing the best investing strategy to meet those goals.
Your investing strategy should be the foundation for meeting your retirement goals,
education goals and other long-term goals.

3. Insurance Planning
An important and often overlooked component of financial planning is to evaluate
the kind of insurance you need to protect yourself and your assets with and your
loved ones. Insurance types can include life, disability, health, vehicle and property
insurance to name a few. Depending on your stage in life, your insurance needs (risk
management needs) will change and evolve.

4. Tax Planning
In order to maximize and preserve your investment returns, an eye toward tax
management is crucial. There are number of tax-reduction strategies and methods
for generating tax-free income and wealth transfer considerations; which can be
achieved by way of tax planning. No matter what your age is, one should consider,
understand and implement this in a proactive manner.

5. Retirement Planning
Retirement planning helps you set a goal for, when you want to retire and your
income and lifestyle objectives during retirement. Your advisor can determine, if
your current savings are on track and provide guidance on strategies to help achieve
those goals.

6. Estate Planning
No matter your age, estate planning is an integral component of long-term financial
planning. You can control the distribution of your assets, both during life and upon
death, with the right estate plan structures in place for your unique circumstances
and wishes. Furthermore, keeping your estate plan current is just as important as
creating it in the first place.

7
Current Net worth Statement

Particulars Amount

Asset

PF Balance ₹ 1,33,92,857.14

Superannuation Benefit 2400000

With-profit Insurance Policy 4000000

Business's FD 500000

Business's Cash 100000

Liquid Funds 400000

Total 20792857.14

Liabilities 0

Net Worth 20792857.14

Net Worth Statement

25000000

20000000

15000000

10000000

5000000

0
Total Assets Liabilities Net Worth

8
Cash Flow Projections

Particulars 2022-23 2023-24 2024-25 2025-26 2026-27

Gross Income 2870000 2139000 2181780 2225416 2269924
New Tax Regime 295867 140400 144612 148950 153419
After Tax Salary 2574133 1998600 2037168 2076465 2116505
Other Incomes
Pension - 432000 444960 458309 472058
Corporate Deposit - 30000 30000 30000 30000
SCSS - 55500 74000 74000 74000
PMVVY - 55485 73980 73980 73980
GOI Bonds - 53625 71500 71500 71500

Total Income 2574133 2625210 2731608 2784254 2838043

Expenses
Shop Rent 288000 288000 288000 296640 296640
Household Expenses 840000 882000 926100 972405 1021025
Vacation Expenses ₹ 1,00,000.00 104000 108160 112486 116986
Car & Maintenance 96000 98400 100860 103382 105966
Super-Top Up Premium 9657 9947 10245 10552 10869
Life Insurance Premium 67237 67237 67237 67237
Total Expenses 1400894 1449584 1500602 1562702 1551486
SIP for Kirti's Education Fund 274716 98400
SIP for Rupesh's Marriage Fund 310574 310574
SIP for Kirti's Marriage Fund 382155 420371 462408 508649 559513
SIP for Kirti's Career Launch 243204.2758 279685 321638
Total Investments 1210650 1109030 784045 508649 559513
Total Outflows 2611544 2558613 2284648 2071351 2111000
Carry Forward -37411 29186 476146 1189049
Balance -37411 29186 476146 1189049 1916093

9
Action Plan

Required Value Available Value

Particulars Prem ranjan Sudha
Prem Sudha Prem Sudha
Mr. Prem, you should have Rs. 5 lacs in your
cash reserve to take care of emergency
Contingency needs, equal to 6 months expenses. You have
5,06,442 5,06,442
Funds 2 lacs in savings account and remaining
should be in liquid or overnight funds i.e., 3
lakhs.
Mr. Prem, in case of any unforeseen events,
an initial Rs. 2 crore for yourself and Rs. 1.2
crore for your spouse (as per need-based
calculation) is required to support your
Risk survivors till the assumed life expectancy of
2 CR 1.21 CR 2.5cr 0.56 cr
Planning 90. After adjusting your needs, goals and
assets. But your spouse is under-insured by
60 lakhs (approx.) and we recommend you to
do not worry about the increasing the life
cover as you both are in a transition phase.
As this goal is due in only 2 months, we would
suggest you to pay first year fee i.e., 2 lakhs
from your savings account and for the
balance start SIP in debt fund @ 6.5% p.a.
Kirti's Acting
6,00,000 After analysing the FV of the goal, you and 6,42,980
Course
your spouse both need to invest Rs. 22,893
p.m. for first 14 months and 8,200 p.m. for
next 12 months combined, to achieve this
goal.
To launch Kirti's acting career, she required
10 lakhs after 3 years at her age of 25. To
Kirti's Acting accumulate this amount, we suggest Mr.
10,00,000 10,00,000
Career Prem to start a Step-up SIP in equity, by
investing 20,267 monthly and grow this
amount by 15% p.a. for the next 3 years.
Rupesh plans to be married in next 2 years
when he is 30 years old. For this gal, he
required 20 lakhs in current value and with
the inflation of 5%p.a. future value will be 22
Rupesh's
lakhs. To accumulate we suggest Mr. Prem to
Marriage 20,00,000 22,05,000
ask Rupesh if he can bear the 70% of the cost
Goal
of his marriage as he is working in US from
last few years and for the 30%, we ask him to
start a SIP in debt fund of 25,881 monthly for
next 2 years.

10
 Required Value Available Value
Particulars Prem ranjan Sudha
Prem Sudha Prem Sudha
Kirti plans to be married in next 6 years when
he is 28 years old. For this goal, she required
Kirti's 25 lakhs in current value and with the inflation
Marriage 25,00,000 of 5%p.a. future value will be 33.5 lakhs. To 33,50,240
Goal accumulate we suggest Mr. Prem to start a SIP
in equity fund of 31,846 monthly for next 6
years and increase it by 10% annually.

Mr. Prem has a company provided Health

Insurance with 10 Lakhs sum insured. We
Health
70,00,000 Suggest him to opt for a supe-top up policy of 70,00,000
Fund
50 lakhs with 10 lakhs deductible plus set aside
10 lakhs from his provident fund

We suggest him to bear the first 3 expenses

from his salary account and for the next 18
Vacation
12,43,000 years we made an investment of 9.33 lakhs 12,43,000
Goal
from his bonus accrued policy which will
mature in 2023.
He wants a mode to commute daily as
currently he uses a company provided car
which he has to return at retirement. Costing
Car Goal 10,00,000 10,00,000
of the new car will be 10 lakhs and we suggest
him to the maturity amount from his bonus
accrued policy and purchase a Car
Mr. Prem will retire next year in 2023, his
present annual expenses are 10 lakhs which
same post-retirement till the age of 70 after
those expenses will drop down to 70% till their
Retirement
2,66,12,912 life expectancy. We suggest him to invest his 2,66,12,912
Planning
provident fund in a way so that he can get
some fixed income as well as enjoy the benefit
of compounding in long-tern by investing some
amount in hybrid and PSU's funds.
Mr. Prem lives in company provided bungalow
which he has to vacant in 3 months after
Home Goal 40,00,000 retirement. We recommend him to purchase a 40,00,000
2BHK flat which can be available for 40 lakhs
from the provident fund.

11
Risk Profiling
A risk profile is an evaluation of an individual's willingness and ability to take risks. Risk
profile is broadly a factor of your risk capacity, your risk tolerance and the risk you need to
take to achieve your planned financial goals.
As per the Financial Planning data and answers given by couple during Risk Profile
Questionnaire couple following key points are observed:

• Mr. Prem will be retire in next year. So, he can not take much exposure to equity.
• Most of their goals have duration of less than 3 years.
• He will a lumpsum amount at retirement, and we have to follow systematic
investment plan (STP) for it, for post-retirement expenses.
• Couple do not have much experience in investments.
• They have less Human Capital based on their remaining working years.
• Couple do not contingency fund.

From the questionnaire and discussion with Mr. Prem and Sudha, we have identified him as
a Moderate Investor and suggest him a Balanced Portfolio.

Asset Allocation
Deposit and Debt
Types of investors Short-Term Government Instruments Alternative
Equity
Debt Bonds (TTM > by Private Instrument
Instruments 1 year) Sector Investment
VCI > 70% < 25% < 5% 0
CI < 20% < 70% < 20% < 10%
MI < 10% < 60% < 30% < 10%
AI < 10% < 40% < 40% < 20%
VAI < 5% < 30% > 60% < 30%

In Balanced Portfolio, we recommend:

• Upto 60% in Long-term Debt and Government Bonds.

• 10% in short-term Debt instruments.
• Maximum 30% of the total funds in Hybrid and Balanced Advantage Fund, we are
not recommending pure equity.
• Mr. Prem can ignore the Alternate Investment Fund (AIF), reason being his age.

12
 COLLECTION

First step of Financial Plan is to collect the quantitative and qualitative information from Mr.
Prem Ranjan and Mrs. Sudha:

Integrated Financial Planning

As per the discussion with Mr. Prem, here are the details of his present statements:

• Prem focuses on more on his children’s education and upbringing that is reason he
has very less amount of assets and investments.
• He has financial assets that are mainly the accrued bonuses on with-profit insurance
policies estimated at ₹40 lakh currently which will mature in June,2023.
• Prem’s salary account has 4 lakhs with a sweep facility.
• 6 lakhs in Sudha’s Business Account from which 5 lakhs in Fixed Deposit and 1 lakh in
Current Account.
• Mr. Prem expects a considerable amount to inherit after the death of his father
which is expected in present value is 36 lakhs and Sudha also expects a sum of
around 10 lakhs a part of her father’s financial assets.
• Mr. and Mrs. Ranjan wants to live the life to the fullest that’s the reason they have
high vacation expense and very low savings.

Investment Planning

• As per the income statements, 11.76 lakhs are available to invest to achieve the
goals. A 40 lakhs with-profit insurance policy will mature in June,2026.
• Till now Prem is not believing in the savings and investments and he has no
experience in the same.
• Here are the goals and their time horizon which Mr. Prem wants to achieve:
- Kirti’s (his daughter) Acting Course – it is ongoing will cost 2 lakhs per
annum for the total horizon of 3 years.
- Kirti’s Acting Career Launch – required amount is 10 lakhs after April,
2025.
- Kirti’s Marriage – current required amount is 25 lakhs and required after
6 years at the age of 28.
- Rupesh’s Marriage – current required amount is 20 lakhs and will be
required after 2 years at the age when Rupesh will be 30
• Also Mr. Prem wants to do vacation planning in which he wants to take an at least
one vacation every year, which will cost around 1 lakh per visit in today’s terms.

13
 • Mr. Prem’s investment style is mostly of a conservative investor till now but as per
the discussion with him and after the calculations of the time horizons of his goals he
asks us to invest some in equity also but only what is required after the 3 years.
• Prem’s current PF balance is around 1.33 crore which can be 1.5 crore on retirement
and superannuation benefit of 24 lakhs. Prem want to use this money to make the
retirement corpus and to fulfil his obligations toward his family.

Risk Management:

• In meeting with client, he disclosed that he and his spouse Mrs. Sudha both have
term insurance of 50 lakhs each but it will mature in 2026 after 4 years.
• They have a 40 lakhs worth of with-profit insurance policy, which will mature in
2023.
• Also, a company given Health Insurance Policy with a sum insured of 10 lakhs which
will not increase and insured him and his spouse till their life expectancy.
• Mr. Prem and his family likes to travel a lot. So, there is nothing serious about their
health.
• As of now, Mr. Prem and his family does not have any debt or financial obligations.

Tax Planning

• As per the discussion, Mr. Prem just want to minimize his tax liability and want to
more to achieve his goals and objectives.
• Mr. Prem’s father will leave a property for him and his siblings worth around 1.8
crores in today’s term.

Retirement Planning

• Prem wants to retire at 60 in June,2023 and life expectancy till 90.

• His pension fund will worth around 1.5 crore and superannuation benefit at 24 lakhs
on retirement. With annuity of 36000 monthly which is incremental at 3% per
annum.
• Post – Retirement his annual expenses will be 10,17,000 which will incremental as
the same rate as inflation.
• After Retirement Mr. Prem wants to work as a marketing consultant or may be join
Sudha at her business. This is yet to be decide.
• He has to vacant the company given house in 3 months after retirement.

14
Estate Planning

• Mr. Prem will get house from his father and Mrs. Sudha will get a part of her father’s
financial assets.
• Their children are well-off except Kirti she is too young to earn by herself. Prem just
want to help Kirti financially and want to left some estate for his children.
• Mr. Prem do not want to take any debt at this stage of life, he wants to be debt free
his remaining life.
• As of now, Mr. Prem does not have any will or power of attorney.

15
ASSUMPTIONS
Interest Rates and time horizons that are assumed for future preference that are assumed
while making this plan and for implementing of it effectively and efficiently.
Time horizon of this plan will be around 30 – 40 years or till the life expectancy to both of
the spouse.
Financial rates:
- Equity & Equity MF schemes - 12.00%
- Balanced Mutual fund - 9.50%
- Bonds/ Debt MF schemes - 6.50%
- Inflation - 5.00%
- Higher Education cost escalation - 7.00%
Risk Management
- Health factors of the family
- Risk appetite of Mr. Prem & Mrs. Sudha
- Investment Behaviour of Prem
Tax Planning
- Tax rates and rules are as per the current scenario
- Tax calculations of estate transferring are also as per the current
legislation
Retirement Planning
- Mr. Prem will retire in June,23 from his current company with the
Pension Fund of 1.5 crores.
- Post-Retirement:
o Till 70
▪ Inflation Rate – 5%
▪ Growth in Assets – 6.5%
o After 70
▪ Inflation Rate – 3.5%
▪ Growth in Assets – 6.5%
▪ Expenses Required – 70% of current household expenses

16
 ANALYSIS

Here we discuss about the potential opportunities and constraints and assess information to
develop strategies for Mr. Prem and his family:
Personal Financial Management
Systematic analysis and evaluation of Mr. Prem’s cash flow for planning purposes:
- Income:
o Prem’s Salary – 14.8 lakhs (post-tax)
o Sudha’s Business – 11 lakhs (post-tax)
- Expenses:
o Shop Rent - 288000
o Household Expenses - 840000
o Vacation Expenses - 1,00,000.
o Car & Maintenance - 96000
o Life Insurance Premium – 67237
- Investments:
o SIP for Kirti's Education Fund - 274716
o SIP for Rupesh's Marriage Fund - 309545
o SIP for Kirti's Marriage Fund - 389525
o SIP for Kirti's Career Launch – 243204
Contingency Fund
- Current monthly Household Expenses
o Household Expenses - 70000
o Life Insurance - 5603
o Car Expenses - 8000
It is still advisable to maintain sufficient contingency fund equivalent of 6-months
expense which will be utilized in case of any unforeseen circumstances.
Required amount will be – 5 lakhs
Balance available in Prem’s Saving Bank A/c – 200000
Balance will also be accumulated in Savings Banks Account – 3 lakhs
Tax Benefit - Money kept in savings bank account will qualify for deduction of ₹
10,000 under section 80TTA.

17
Tax Planning
Any assessee having income other than Income under head profits and gains of business and
profession has option to choose between New Tax Regime and Old Tax Regime every year.

- Old Tax Regime

o Prem – 286837
o Sudha – 169544
- New-tax Regime
o Prem – 195832
o Sudha – 100029
As per the calculation, both of them lies in 30% tax bracket with 4% Education cess. Mr.
Prem and Sudha can opt the new tax regime as in that their tax liability will deduct by 30%
for Prem and for Sudha it will be 40%.
Post – Retirement Mr. Prem opt for Old Tax Regime because of the investment in various
instruments offered by Government of India in which he can save taxes under various
sections.

Tax Payable (FY 22-23)

350000

300000

250000

200000

150000

100000

50000

0
Prem Sudha

Old Regime New Regime

Risk PLANNING

• Insurance is a tool to protect the family from financial Losses. To calculate the
amount of insurance required we need to assess economic value that is attached to
human life.
• Mr. Prem and Sudha has Term Insurance of 50 lakhs each which can be tax-free at
maturity only if the premium paid is less than 10% of sum assured. In case of Mr.
Prem the premium is 36,548 and for the Sudha’s Term Insurance it is 31,589, which
is clearly less than 10% of Sum Assured. So, the assured amount is completely tax-
free u/s 10 (10D).
18
 • In the situation of Prem and Sudha they do not have any kind of liability insurance.

Life Insurance
Need-Based Approach
The needs approach to life insurance planning is used to estimate the amount of
insurance coverage an individual needs. The needs approach considers the amount
of money needed to pay-off debts and obligations such as mortgages or college
expenses and deduct the assets and present insurance cover from the total
obligations.
• Here, Mr. Prem has sufficient cover need to take extra coverage in case any
mishappening
• But in case of Sudha, she required additional insurance of 65 lakhs to cover
her all obligations.

Particulars Prem Sudha

Total Requirement 19791437.65 12065271.34
Assets 20192857.14 600000
Present Life Cover 5000000 5000000
Surplus/Deficit 5401419.498 -6465271.342

Insurance Cover
25000000

20000000

15000000

10000000

5000000

0
Prem Sudha
-5000000

-10000000

Total Requirement Assets Present Life Cover Surplus/Deficit

19
Health Insurance
A health insurance policy extends coverage against medical expenses incurred owing to
accidents, illness or injury. An individual can avail such a policy against monthly or annual
premium payments, for a specified tenure.

• Health insurance is must for the wealth protection, if a client invests his money very
well but does not have any health insurance then in case of any unforeseen event,
he can wipe off his whole portfolio.
• Here, a company provided policy Mr. Prem has which has Sum Insured of 10 lakhs
fixed till the life expectancy of him and his spouse which is very less amount in
today’s scenario with a medical inflation of 14% per annum.

Critical Illness
A Critical Illness Insurance policy covers the insured against life-threatening critical diseases
such as cancer, heart attack, renal failure etc.

• Mr. Prem and his spouse does not have any critical illness cover in case of they
treated with the life threating diseases.
• As the couple mentioned in the meeting that they are in very good state of health
but the future in very unforeseen and we analyse that they should require a critical
illness rider.

Property and Liability Insurance

Liability insurance policies cover the insured against any claims due to causing bodily injuries
and damages to the property of unknown people. If a member of the insured organization is
held responsible for third-party injuries or property damage then liability insurance cover
can be a saver.

• As of now, Mr. Prem does not have any liability or property on his name.
• But liability insurance is not the most important risk cover but it can be handy in case
of damage of property of another person.

20
Investment Planning
• As an investment Mr. Prem has major amount in his EPF account, which is
around 64% or his and his spouse’s total net worth.
• He has to vacant the company provided bungalow within 3 months after
retirement which means either we have to suggest him to go rent or to buy
an affordable housing option.
o Buying a house after retirement gets him more for his money than
renting. However, homeownership also entails substantial financial
risks. Issues such as fluctuations in market value, unexpected
maintenance expenses, and insurance deductibles can increase costs
over and above those of renting and whichever option you pick,
don’t forget to plan for inflation—rent, taxes, and insurance costs all
go up over time.
• Also, currently he travels in car that is company provided too. He wants to
purchase a transportation mode also after retirement but we analyse and
suggest him to buy or use the public transport or if his pocket allows then
when is the best time to purchase a car.
Vacation Goal

• Mr. Prem and his family are enthusiast travellers, they go on vacation
every year and he want to set up a fund for the same. For which he
requires 1 lakh every year and this amount is incremental by 3% p.a.
• This fund is required for the period of 30 years.
Asset Management/ Investment Planning Strategies
Mentioned strategies are used in the financial plan of Mr. Prem:

• Asset Allocation - Asset allocation involves dividing your investments among

different assets, such as stocks, bonds, and cash. The asset allocation decision is a
personal one. The allocation that works best for you changes at different times in
your life, depending on how long you have to invest and your ability to tolerate risk.
• Step-up SIP - Step-up SIP is also known as top-up SIP. You are essentially topping up
your SIP by a certain percentage every year – for instance, 5000 in 2022, 5000+15%
in 2023 and so on. You can do this in line with your current income, prospective
yearly increments and of course financial goals
• Rebalancing Portfolio - Rebalancing is the process of realigning the weightings of a
portfolio of assets. Rebalancing involves periodically buying or selling assets in a
portfolio to maintain an original or desired level of asset allocation or risk.

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Retirement Planning
As per the data provided by Mr. Prem and his family, he mentioned that he will be retired at
the age of 60 which is next year. Retirement date will 31 june,2023.
His current expenses are near 10 lakhs annually and post-retirement these expenses will be
required at the inflated value till age 70 and after the required amount will be reduced to
70% of current expenses.
He health is in good shape so we expected his life expectancy till 90 years of age.

Particulars Self Spouse • Total Required corpus at the retirement will be

Current Age 59 56 2.66 crores
Expected Retirement Age 60 67 • Available corpus is 3.05 crores
Remaining Working Years 1 11 • So, the surplus balance is 39 lakhs
Life Expectancy 90 93
Retirement Phase 30 26

Stress Test – 1
First Scenario – If the expenses required post-retirement will be only 85% of current
expenses and market is also doing good. Debt funds are producing 6.5% annually. Then
the corpus can be last till the Sudha’s age of 100

Particulars Self Spouse

Current Age 59 56
Expected Retirement Age 60 67
Remaining Working Years 1 11
Life Expectancy 90 95.7974325
Retirement Phase 30 28.7974325

Expenses at the
Current Expenses After Retirement
Particular Time of
Expenses (85%)
Retirement
Household Expense 840000 ₹ 8,82,000.00 ₹ 7,49,700.00
Car Expenses 96000 ₹ 1,00,800.00 ₹ 85,680.00
Super top up Premium 9647 ₹ 10,129.35 ₹ 8,609.95
Life Insurance Premium 67237 ₹ 67,237.00 ₹ 57,151.45
Total 1012884 ₹ 10,60,166.35 ₹ 9,01,141.40

Particulars Amount • As the calculations show, corpus for this stress

Corpus Available ₹ 2,15,49,665.04 test can be enough till the age of 100.
Corpus Required today ₹ 2,15,49,665.04
surplus/ Deficit ₹ -0.00

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Stress Test – 2
What if the market will not perform as per the expectations in future? Then the survival is
possible but they have to shrunk their expenses little to the extent of 75% of current annual
expenses.

Particulars Self Spouse

Current Age 59 56
Expected Retirement Age 60 67
Remaining Working Years 1 11
Life Expectancy 90 97.97508058
Retirement Phase 30 30.97508058

Expenses at the
Current Expenses After Retirement
Particular Time of
Expenses (75%)
Retirement
Household Expense 840000 ₹ 8,82,000.00 ₹ 6,61,500.00
Car Expenses 96000 ₹ 1,00,800.00 ₹ 75,600.00
Super top up Premium 9647 ₹ 10,129.35 ₹ 7,597.01
Life Insurance Premium 67237 ₹ 67,237.00 ₹ 50,427.75
Total 1012884 ₹ 10,60,166.35 795124.7625

Particulars Amount
Corpus Available ₹ 2,29,57,118.21
Corpus Required today ₹ 2,29,57,118.21
surplus/ Deficit ₹ -0.00

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Retirement Bucketing Strategy
A retirement bucketing strategy can also be used for retirement planning wherein we keep
funds under different funds.

Name Prem Ranjan Sudha

Current Age 59 56
Retirement Age 60 67
Life Expectancy 90 93
Time to Retire 1 11
Retirement Period 30 23
Annual Expenses 1012884

Bucket Strategy for Retirement

Bucket 1 Bucket 2 Bucket 3
Returns 6.5% 9.00% 12%
Inflation 5% 5% 5%
Real Rate of Return 1.43% 3.81% 6.67%
No. of Years 5 10 15
Pre-Retirement Term 1 1 1
Post-Retirement Term 30 30 30
Annual Expenses ₹ 10,63,528.20 ₹ 13,57,361.43 ₹ 22,10,998.74
PV of Corpus ₹ 51,69,943.24 ₹ 1,15,37,967.98 ₹ 2,19,39,743.87
PV of Corpus at Retirement Age ₹ 51,69,943.24 ₹ 74,98,887.53 ₹ 40,08,309.18
Total Corpus Required at Retirement ₹ 1,66,77,139.94

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 SYNTHESIS AND RECOMMENDATION

Up to this point, the focus and analysis was on each of the financial planning components
separately. Different strategies and alternatives were developed from the analysis of each
financial planning component. These strategies are now integrated and presented as
recommendations after being optimized and prioritized relative to the client’s goals and
objectives.
PERSONNAL FINANCIAL MANAGEMENT
Emergency Corpus
As per the calculations and the data the Mr. Prem shared with us we recommend him to at
least have 4 months of expenses in a savings bank account for the emergency purpose.

• As of now his monthly expenses are 84,407 and we recommend him to have at least
3.37 lakhs as an emergency corpus.
• 2 lakhs of the required 3.37 lakhs can be gathered from Prem’s Savings Account
balance and the remaining can be accumulate in liquid or overnight funds.
Kirti’s Acting Course
Kirti required 2 lakhs p.a. for 3 years starting from 1 Apr,2022 to 1 Apr,2024.

• First year will be paid from the Prem’s Savings Account i.e., 2 lakhs
• Second Year, inflated amount will be 2.14 lakhs and we suggest him to start a SIP in
Debt instrument for 14 months of amount 14,693 starting from now.
• For third year, inflated amount will be 2.3 lakhs and we suggest him to start a SIP in
Debt instrument for 26 months of amount 8,200 starting from now.
Kirti’s Acting Career Launch
She wants to launch her acting career at the age of 25 in year 2025 and Mr. Prem is ready to
support her to fulfil her ambition.

• Amount required at the age of 25 will be 10 lakhs.

• As this amount is required after 3 years, we have no hesitation in recommending to
invest funds in Equities.
• But the issue here is that Mr. Prem does not enough funds to invest today so we
suggest him start a Step-Up SIP which will be grow @ 15% annually.

Monthly SIP Annual SIP Expected Return Value at end

₹ 20,267.02 ₹ 2,43,204.28 ₹ 15,534.63 ₹ 2,58,738.91
₹ 23,307.08 ₹ 2,79,684.92 ₹ 3,07,652.40 ₹ 5,87,337.32
₹ 26,803.14 ₹ 3,21,637.65 ₹ 6,78,362.35 ₹ 10,00,000.00

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Rupesh’s Marriage Goal

• For the purpose of Rupesh’s Marriage, funds will be required when the Rupesh’s age
is 30, which will be in 2 years and the amount required for the same in 20 lakhs in
current value.
• Inflated value will be 22 lakhs, as Rupesh is working in US from the last few years.
One possible solution would be to afford 70% of required amount by Rupesh and the
remaining balance that is 6.6 lakhs will be facilitate on the part of Mr. Prem.
• Monthly Sip in debt instrument @ 6.5% as the tenure is less than 3 years would be
great for this goal. Prem has to invest monthly amount of 25,881 for the period of 24
months to accumulate the required amount.

Kirti’s Marriage

• For this goal also the best course of action would be investing the amount in Step-up
Sip in equity as the tenure is 6 years. Kirti wants to marry after the valid career in
acting. Mr. Prem expect it all will tale around 5 to 6 years.
• So, we suggest him to invest 31,846 monthly in first year and increase it by 10%
annually to accumulate 31.5 lakhs as inflated value after 6 years.
Post-Retirement Work Life
Mr. Prem currently working as a marketing professional very passionately and wants to
work after retirement as well.
And we recommend him to either work as a marketing consultant in any MNC or help Sudha
in boutique. As she wants to expand the boutique as well and if Prem stand beside her that
would be great for her.

INVESTMENT PLANNING
Prioritize Action Steps

• At the very early stage he should start investing for their children’s education and
marriage goal.
• Then to start finding his new home in Bokaro which is required 16 months from now.
• After that, he will have to invest money for post-retirement expenses.
• Lastly and most important, Prem have to decide whether he wants to work as a
consultant in Marketing Company or help his spouse Sudha in her boutique.
Vacation Goal

• Expenses of first 3 years could be bear by Mr. Prem’ salary account.

• For the remaining years i.e., 18 years required fund would be 10.6 lakhs and we
suggest him to transfer the required amount in debt funds for 2 years.

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 • Final required value is 9.33 lakhs, which can be invested through the maturity of
bonus accrued policy of 40 lakhs.

Investment Policy Statement

Prem Ranjan, Individual Investor, age 59

Portfolio: Individual, Taxable

State: Bokaro

Current Assets: 2.08 crore

Return Goal: 6.5%

One year loss limit (worst case scenario): 15-18%

Objectives:

• Children’s education and Marriage

• Risk profile: Moderate Investor
• Time horizon: Less than five years
• Short-term liquidity needs: More than few
• Long-term rate of return expectation: 6.5% (based upon historical rates of return)

Financial Advisor Duties and Responsibilities:

• Fiduciary, non-biased third-party charged with helping clients meet financial goals.
• Confer with client to create asset allocation.
• Select assets in accordance with asset allocation providing sufficient diversification
of risk and returns.
• Control and report all investment costs.
• Monitor all investment options and portfolio custodian. (Custodian is responsible
for safekeeping of client’s assets)
• Value all portfolio holdings on a regular basis.
• Provide monthly reports that include securities, cash flow, income, and the monthly
change in value.

Portfolio Selection Guidelines:

• In general, long term investment performance is determined by asset performance.

Historically, stock assets offer higher rates of return along with greater volatility.
Fixed assets generally yield lower rates of return, lower correlation with equities
and less risk. Diversification across asset geography and size is recommended.
• Based on the client’s moderate risk profile, the portfolio asset allocation will be 60%
equity mutual funds and 40% fixed or debt.
• The individual composition of holdings will be selected from index
funds and exchange-traded funds from the following asset classes:

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Equity

• High-Dividend
• Value
• Large Cap

Fixed

• Senior Citizen Savings Scheme (SCSS)

• Corporate Deposits
• Government Floating Interest Rates bonds
• Pradhan Mantri Vaya Vandana Yojana (PMVVY)
• Banking PSU’s Funds (Yield @ 6%)
• Dynamic Asset Allocation Funds (Yield @ 8.5%)
• Guaranteed Non-Par Product with lumpsum Maturity Amount

Rebalancing of Asset Allocation:

According to data from Moneycontrol, there is no universally agreed upon asset allocation.
Neither there is data to recommend rebalancing more frequently than annually. Thus, the
portfolio will be rebalanced annually, while attempting to minimize the tax consequences
of asset sales.

Performance Monitoring:

• Each mutual fund returns will be compared with their related benchmark. Any
deviation from that benchmark will be evaluated and discussed annually. The
holdings will also be compared with peer group funds.
• The parameters for selling a fund due to poor performance include one year of
greater than 1% deviation from the benchmark and/or falling in the bottom half.
• Costs will be monitored annually to ensure that total costs do not surpass 1% of all
investable assets.
• Fixed options will provide the returns that the mentioned earlier except the GOI
Floating Bonds, that too will not deviate too much from the present interest rate
because it has the backing of Government of India.
• Annually, at a minimum, the overall portfolio will be monitored to consider whether
initial goals are in place or have changed. Performance and fees will also be
included in this conference. Together, Mr. Prem Ranjan and the planner will
determine the future portfolio direction.

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INSURANCE PLANNING

Health Insurance

As we know Mr. Prem has only medical insurance with a sum insured of only 10 lakh per
annum for him, Sudha his wife and his younger daughter Kirti which is far than enough for
all the members.

We suggest him to opt for a Super-top up policy of 50 lakhs with 10 lakhs deductible means
if he wants to avail any claim of more than 10 lakhs than his super-top up policy will enable
and the claim of extra amount than 10 lakhs will be given by the insurer.

Life Insurance

Mr. Prem is over insured by 50 lakhs because of his EPF balance. So, there is not any
requirement to suggest him to increase his life cover.

In case of Mrs. Sudha, she is under-insured by 1.15 crores. We would like to recommend
her to not take any more life insurance cover as they do not have any liability or obligation
to pay.

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RETIREMENT PLANNING

We suggest Prem to invest various fixed income and market linked dynamic asset allocation
fund to diversify his risk and a consistent income through the post-retirement period.

Name of the Schemes Amount

Senior Citizens Savings Scheme (SCSS) @7.4% (payable quarterly) ₹ 10,00,000
Pradhan Mantri Vaya Vandana Yojana (PMVVY) @ 7.4% (payable monthly) ₹ 10,00,000
Investment in 3 different Banking PSU's Debt Funds @ Rs. 5 Lacs each ₹ 10,00,000
Floating Rate Savings Bonds @ 7.15% (payable half yearly) ₹ 10,00,000
Investment in 3 different Dynamic Asset Allocation Funds @ Rs. 5 Lacs each ₹ 15,00,000
Traditional Guaranteed Plan (Paying Term is 5 years and Pay-out term is lumpsum
after 15 years from today) ₹ 25,00,000
Health Fund ₹ 10,00,000
Corporate FD @ 6%p.a. ₹ 5,00,000
Balance left in Savings Bank A/c - as a Emergency Corpus ₹ 5,00,000
Cash Reserve for Retirement (in liquid funds) ₹ 10,00,000
1,10,00,000
2 BHK Flat in Bokaro ₹ 40,00,000
Pension Fund at Retirement ₹1,50,00,000

Inflows from all these instruments are as follows:

Inflows All these values are in annual basis

Annual Pension ₹ 4,32,000
Pension Incremental rate 3%
SCSS (Quarterly Income) ₹ 74,000
PMVVY (monthly income) ₹ 73,980
Floating Rate Bonds ₹ 71,500
Corporate Deposit Interest ₹ 30,000
Maturity Value of Traditional Plan ₹ 52,32,500

Banking PSU funds Growth

1 ₹ 5,95,508
2 ₹ 6,69,113
3 ₹ 7,51,815

Dynamic Asset Allocation Funds

1 ₹ 8,15,734
2 ₹ 35,42,287
3 ₹ 49,09,109

For the complete calculation please refer excel worksheet, sheet named Retirement
Calculation

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House Requirement after Retirement
We used only 1.1 crores from the Pension fund of 1.5 crores for investment purpose of
post-Retirement expenses and balance i.e., 40 lakhs will be used to purchase a 2BHK flat in
the Bokaro.
Requirement of mode of transport after retirement
Mr. Prem has to return the car that he uses currently as it is company provided car. To
commute daily he requires a car for that purpose we suggest him to use some amount
from the maturity of bonus accrued policy.
Car will cost him around 10 lakhs in future value which will be required after 31 June, 2023.

ESTATE PLANNING
Living Will - A Living Will is a legal document that empowers people to express their desire,
in advance, on how they want to spend the last days of their life. It is an advanced directive
by an individual stating that they not be put on artificial life support, if they slip into an
incurable comma in the future.
It is hard to suggest something like LIVING WILL but it is totally depended on the client. We
can only explain him what is this and what is its requirement.
Self Will – As per the discussion, Mr. Prem wants to distribute his property amongst his 3
children in a ratio of 4:3:3, 40% of his total assets for younger daughter Kirti as she is most
lovable amongst the siblings, 30% each for Rupesh and elder daughter Meera.
Power of Attorney - Power of Attorney is a legal document executed by one or more persons
giving an authority to one or more persons to act on his or her behalf. The person giving
authority is called the attorney of the party giving the authority. The person receiving powers
is called Power of Attorney holder.
Prem’s Father Will – His father lives in a house which has a current value of 1.8 crore and in
a will of Prem’s father it is proposed that the after the death of his father the property will
be split among the 5 children of his father included him. It means 36 lakhs will be Prem’s at
the inflated value after his father.
Sudha’s parents also wants to leave an equal part for her as their 2 other children. As of
current value, they have financial assets of worth 40 lakhs.

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Triggers

A regular review of financial plan increases the possibility of fulfilling goals. This enables you
to incorporate changes in economic and personal condition. It helps keep a track on
whether financial plan is aligned with the targeted goals.

Although the plan will be reviewed on quarterly basis but following changes will trigger need
to review of plan: -

• Change in income: - Positive changes in income such as salary hike, increase in

business income may help you achieve goal sooner than expected.
• Change in tax status: -Any change in tax laws may have implications on your income.
For instance, you could move into a different tax bracket, or it may have an impact
on the income you earn from a particular investment.
• Change in goals: - As you age and evolve, your outlook towards money changes. Your
financial priorities could be different than before. As a result, the risk-return
expectations may change. may require more expenses post-retirement, child
education or marriage goal may change.
• Change in economic environment: - Market and economic condition may be due to
political changes other changes that effect the economic environment.
• Medical Emergencies: - Sudden medical emergencies can hamper the financial plan
and goals and they need to be realigned.
• Change in marital status: - Change in marital status also major event new goals and
may be added like child education, no of dependent may increase.

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 Market Outlook
• Global economy is in a phase of cyclical expansion. The last such phase was from 2002 to
2008 when commodities rallied followed by Equities, EM currencies and Gold.
• EM Equities, EM currencies outperformed DM counterparts
• Cyclical, core economy businesses outperformed fancy, expensive businesses. Value
outperformed growth
• We are in a similar phase today. Markets are concerned about Russia – Ukraine – NATO
issue. Will a war happen? USA and Russia have never ever fought a war
• Upcoming rate hikes by Central Banks are priced into bond yields. Inflation will start
moderating in DMs due to high base effect in next few months
• RBI seems to be diverging from DM Central Banks. A growth-focused Union Budget 2022,
rising energy prices and selling by FPIs and MFs in Debt markets, led to spike in yields in India
• RBI however held rates in its policy meet in Feb and increased the VRRR limit for FPIs in G-
Secs from Rs. 1.5 trillion to Rs. 2.5 trillion leading to a relief rally in bonds

Equity Outlook

• Earnings growth strong, lot of room left for earnings to rise as a percentage of GDP
• Cyclicals lead revival in earnings growth, turnaround seen in Banks, automobiles,
industrials and discretionary
• Rising input costs and energy prices remain a key risk to earnings growth, margins
likely to come under pressure, need stronger sales growth to drive earnings going
forward.
• Valuations supported by low interest rates, easy liquidity and prospects of a strong
recovery in corporate earnings.
• Oil prices are rising sharply
Fixed Income Outlook

• Bond yields have started rising

• Difficult time for a fixed income investor
• One needs to be extremely careful of taking credit risk
• Arbitrage funds compare favourably with liquid or money market funds. If time
horizon is 3 to 12 months – both on pre-tax as well as post-tax returns.
• Fixed Income investor with horizon of 2 years or more and looking to bet inflation
may consider hybrid funds – Conservative hybrid (20-25% Equity) or Equity Savings
(30-40% equity).

33
Disclaimer
We have analysed your financial situation and provided recommendations to guide you
towards the achievement of your financial goals. These recommendations are solely based
on the information provided by you. You must understand that the information regarding
specific issues not revealed by you to us may have a direct impact on your overall Financial
Assessment. The responsibility for financial decisions is yours and you are under no
obligation to follow, either wholly or partially, any recommendations or suggestions
provided by us. We cannot guarantee the accuracy of the information or success of the
recommendations that it may provide. However, the advice is based upon such
investigations and research as we deem reasonable, and that we are not liable for errors of
fact or judgment as long as it acts in good faith. You also need to keep in mind that past
performance is no guarantee of future returns. We have used estimates in making the
Financial Assessment and we are not liable for any deviations from projected results

34