Chief Financial Officer or the CFO in a corporate environment occupies a very important position as he is the person who designs, and implements effective financial strategy of a company. He is a visionary responsible for the financial health of the company.
The number of middle class families is growing in India and their incomes too are rising. The rising affluence provides an opportunity for a financial planner to become the CFO of the families of his/her clients. These families are in need of financial advisory but are either reluctant to admit or are ignorant of the necessity of financial planning.
A financial planner should position himself as the family CFO and help clients manage family finances and assist in achieving the family financial goals and objectives.
To provide effective financial advice to a family, a financial planner’s role is multifaceted and he needs to don several caps of:
- Financial Coordinator
- Guide and Mentor
- Trusted Advisor
The first and foremost duty of a family’s CFO is to discuss in great detail the goals and objectives of a family. This will help the financial planner in preparing an investment strategy for the family to try and help them achieve all their ambitions and aspirations in life. For this, the family CFO needs to help the family prepare its mission statement. A mission statement helps the family and the financial planner to gain clarity about the family’s financial goals and objectives.
The next step for the CFO of a family is to help the family in analysing their expenses and spending habits. For example, the CFO can help the family to control their credit card spending and take stock of their debt status vis-à-vis the credit card dues of all the family members. The CFO needs to emphasise on the importance of rational spending and not give in to the momentary happiness of having acquired a luxury item that the family could have done without in the short-term. In these uncertain times when the world is just coming out of a crippling recession it is very important that the CFO gives a very candid and prudent advice on healthy spending to the family whose finances he is overseeing.
Finally a very important step in the context of the Indian family is that everyone ranging from relatives to friends and neighbours have the habit of giving free financial advice based on hearsay and not on any kind of study done on the various financial products and services in the market. A family CFO should have the ability to inspire confidence in the family so that his financial judgement is respected and adhered to.
An Important Cog in the Wheel
The family CFO can play a very important role as a financial planner advising when and where to invest and help meet short, medium and long term goals of the family. He will also need to study the family investments on a regular basis and be flexible to change or devise a new strategy and adjust investments when and wherever necessary.
A family also requires coordination between areas such as taxes, home loan, retirement, debt management, legacies and inheritances to family members and charities etc. Who better to take care of and advice on such issues than the family financial planner since he knows the big picture and is very well aware of the finances and investments of the family. Therefore, one can see that a family planner or a CFO is a very important cog in a family’s financial wheel.
Trained and certified financial planner and advisor:
- Handholds the family through the financial and investment maze
- Is an objective observer and prudent advisor on investment decisions
- Educates on the healthy spending habits
- Spreads awareness about new financial and insurance products and services
- Constantly evaluates investment portfolio
- Is well conversant with financial and legal issues
To be a successful family CFO a tactical, strategic and flexible mind is as important as an in-depth knowledge of financial and insurance products along with keeping abreast with the continuously changing taxation and other related laws. The ever expanding Indian middle class with rising income is bound to need prudent and sound financial advice to achieve their financial goals.
