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Financial Planning Is the traditional system of financial planning changing?

Is the traditional system of financial planning changing?

Advisors would do well to make their clients understand that financial planning is always incomplete without the involvement of family.
Poonam Bansal Apr 30, 2016

Traditionally, in an Indian household, male guardians be it husband, father or an elder brother are known to take investment decisions for the entire family. In most cases, women of the house whether home managers or working professionals didn’t have an opinion on investments. In fact, the next generation were also kept out of the loop about investments that were made either on their behalf or in their name.

But is this trend changing? Various studies suggest that as more and more women are becoming financially independent they are beginning to take an active role in making investment decisions. With the growing awareness about financial planning, are the dynamics of the ultimate decision in financial planning also changing?

“There is a gradual shift in the way how financial decisions are being taken in a family. Typically, couples below 35 years of age plan their finances together,” says Anup Bhaiya of Money Honey Financial Services.

However, when probed further, we found that it is largely the young working couples from a professional background who plan their finances together. On the other hand, couples where the husband is running a family business typically tend to have the final say in managing finances.

While it is heartening to know that couples are making investment decisions together, families where the men still call the shots need to be educated about the importance of keeping a family member in the loop about important money matters. 

“First and foremost, the wealth belongs to the family so the knowledge of the same should be shared. In times of emergency, knowledge about investments would really help the family members trace and claim the investments done by the decision maker of the family,” says Gaurav Mashruwala, a Mumbai based financial planner.

There are many instances where the family is unaware of the life insurance policy, medi-claims taken by the husband or father. What is even more disturbing is that during emergency, some families don’t even know who their financial planner is!

So what steps can financial planners take to make sure the family is well aware about the investments done by the male family member?

To begin with, you can make sure that that your clients always bring their spouse in the meeting. This will help the spouse to be updated about their financial situation. Apart from the spouse, you can also ask your clients to bring their children (after they reach a certain age) in some of your meetings.

Thus, advisors would do well to make their clients understand that financial planning is always incomplete without the involvement of family.

Having said that, involving a family member in financial planning also presents a business opportunity for advisors. A study found that whenever a client dies, many advisors find it difficult to retain the adult children or surviving spouse as clients. A whitepaper titled ‘Expanding Your Practice to the Next Generation’ by Advisor Group recommends advisors to conduct beneficiary briefings. “Periodically, it’s a good idea to allocate part of each client review session to a beneficiary briefing during which you will work together to review and perhaps revise clients’ beneficiary designations. These reviews generally begin with a confidential meeting with the client only. Depending on the client’s objectives and preferences, they then can lead to opportunities for briefing beneficiaries on where they stand and what they should do in the event of the owner’s death,” suggests the white paper.

Another advisory firm Oppenheimer Funds recommends advisors to devote meaningful time and attention to understanding what’s important for your client’s spouse. “Get to know them personally. Take their feedback on how they want to be engaged and how often they want to hear from you. Building a genuine relationship with spouses should be a top priority and if you do it right, it’ll dramatically improve your odds of retaining them when the time comes,” recommends Oppenheimer Funds.

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