Clients come in all shapes and sizes. A few of your clients may not have regular income. Hence, planning their finances will be different from planning for your clients with a steady source of income.
So, what is the best way to invest?
It looks like there is no one single ‘best’ way of investing.
Advisors say SIP makes a good investment tool for investors with irregular income also though convincing clients with irregular income to go for SIPs is harder than clients with regular income.
Tejal Gandhi of Money Matters says that in this scenario, advisors can persuade their clients to go for the minimum SIP. “Advisors can come to a convenient SIP amount for their clients by taking a look at their monthly surplus. It is important to set up a SIP for at least 10 years. Once the clients starts his/her SIP, it is important to increase the SIP amount in a systematic manner,” says Tejal.
However, Deepali Sen of Srujan Financial Advisers feels STP is a better approach for such clients. “We first figure their possible lowest monthly income. Based on that we build a STP. As the investible amount keeps on varying every month, the amount is invested in a liquid fund. Depending on the goals, we build a STP to a bond fund or an equity fund,” says Deepali.
Nisreen Mamaji of MoneyWorks Financial Advisors says that her clients with irregular income mostly invest lump sum in equity and debt funds depending on their goals and risk profile.
Prepare for those rough days
As these clients do not have a steady income, advisors say that maintaining an emergency corpus is of utmost importance.
Tejal says that she advises her clients to have at least three months of operating expense including payment of their employees in their emergency fund.
What about their retirement?
Planning for retirement is also a key aspect for clients with unsteady income as they do not get any pension. As their income come in a staggered fashion, Tejal advises her clients to build a corpus for their retirement.
Advisors say that ELSS is a convenient way to invest for retirement. Deepali asks her clients to stop their PF investment and switch to ELSS so that they can achieve higher returns and at the same time have a bigger retirement corpus.