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### Instruction: ('What is Financial Planning?',) ### Response:Financial planning aims at ensuring that a household or individual has adequate income or
resources to meet current and future expenses and needs. The regular income for a
household or individual may come from sources such as profession, salary, business or... |
### Instruction: ('Example of Financial Planning',) ### Response:Example
Vinod is 40 years old and earns Rs.2 lakhs a month. He is able to save about Rs.40,000 a month
after meeting all the routine expenses of his family, paying the loans for his house, car and
other needs. His investments include those for tax savings... |
### Instruction: ('Understand the need for financial planning',) ### Response:There is a large range of financial products and services that are available for investors today
and these need to be linked to the specific needs and situations of the client. Not every
product may be suitable to every client; nor would a cl... |
### Instruction: ('Role of the Financial Planner',) ### Response:The Financial Planner has a significant role to play when it comes to advising clients because
the needs of each person is different front that of the other.
a) The financial planner has to recognise the exact needs and goals of an individual and a
househ... |
### Instruction: ('How is financial planning different from a typical financial advisory services?',) ### Response:Financial planning requires following of a specific process wherein the client along with their
overall needs and goals are at the core of everything being done. Other financial advisory
services would nor... |
### Instruction: ('Personal financial analysis:',) ### Response: Goal setting with prioritizing of goals
The financial planning process starts with the goal setting process. Goals refer to what has to
be achieved. This gives a clear target that has to be reached. There are several features that
are important when the ... |
### Instruction: ('Cash flow management and budgeting',) ### Response:There is a certain income that is earned by an individual along with the expenses made.
Having a plan to ensure that there are savings and these are invested is one part of the
process. It is also vital that there is a cash flow match so that the hou... |
### Instruction: ('Insurance Planning',) ### Response:Several unexpected expenses that can cause an imbalance in the income and expenses of a
household can be managed with insurance. Insurance is a risk transfer mechanism where a
small premium payment can result in payments from the insurance company to tide over risks... |
### Instruction: ('Debt management and counselling',) ### Response:Investment Advisers help households plan their liabilities efficiently. It is common for
households to borrow in order to fund their homes, cars and durables. Several households
also use credit cards extensively. To borrow is to use tomorrows income to... |
### Instruction: ('Investment Planning and Asset Allocation',) ### Response:A crucial component in financial planning and advisory is the funding of financial goals of a
household. Investment planning involves estimating the ability of the household to save and
choosing the right assets in which such saving should be i... |
### Instruction: (' Importance of cash flow management in personal finance',) ### Response:Personal finance involves looking at the various sources of income and expenses and ensuring that there is some surplus savings which is allocated to various investments to meet the different goals in the future. One of the key a... |
### Instruction: ('What are the key aspects involved in evaluating the financial position of clients?',) ### Response:Cash flow management in personal finance, knowledge about the preparation of a household budget, understanding cash inflows and outflows, budgeting and forecasting, importance of monitoring budgets and ... |
### Instruction: ('Preparing Household Budget',) ### Response:The investment adviser performs an important role in helping the household or an individual understand a household budget. Preparing a household budget entails an understanding of the sources from which the household or individual receives income, and the ap... |
### Instruction: ('Cash management',) ### Response:One of the important aspects of the household budget management process is the handling of the cash. On paper there could be a situation wherein there is some savings or surplus that is being seen, but this has to match with the actual cash flow because the income and ... |
### Instruction: (' Income and expenditure statement',) ### Response:An income and expenditure statement gives a view of the financial flows for an individual or household for a specific time period. There is always a time period for which the income and expenditure statement is prepared and this could be a year or mon... |
### Instruction: ('Budgeting and forecasting',) ### Response:The income of a household or individual has to be adequate to meet the current expenses as well provide the savings to create the assets that will help meet future expenses. If the current expenses are controlled, then it is better possible to secure the fina... |
### Instruction: ('Monitoring budgets and provision for savings',) ### Response:Understanding the concept of budgeting is the first step in the entire process of maintaining control over the finances of the household or the individual. Once the concept is known the next step is to actually prepare a budget. This will g... |
### Instruction: ('Creating a personal Balance Sheet and net-worth',) ### Response:Creating a personal balance sheet for an individual will require that various assets and liabilities are brought together and shown at a single place. A balance sheet shows the financial position of the individual or household in the for... |
### Instruction: ('Creating a budget and savings plan',) ### Response:There are several steps that need to be taken when a budget and savings plan is created. This will ensure that the process is done in a step by step manner and nothing has been missed out. The following steps would be useful in the budget creation pr... |
### Instruction: (' Contingency Planning',) ### Response:Investment advisers need to prepare the client for various contingencies that might come up. The household or individualsfinancial strategy needs to provide for these risks. The following are typical contingencies to provide for: * A family that is dependent on ... |
### Instruction: (' Evaluation of financial position of clients',) ### Response:The personal financial situation of an individual or a household primarily refers to its ability to manage its current and future needs and expenses. The income available to do this may be drawn from salary, a business or profession or from... |
### Instruction: ('Savings Ratio & Expenses Ratio',) ### Response:Savings Ratio is the percentage of annual income that a person is able to save. It is calculated as Savings per year/Annual Income. ABC earns an annual income of Rs. 6 lakhs and saves Rs. 60,000 from the income. The savings ratio is Rs. 60,000 ÷ Rs. 6,00... |
### Instruction: ('Total Assets ',) ### Response:Savings of the individual are deployed in various forms of physical and financial assets such as shares, debentures, mutual funds, real estate, gold, provident fund, superannuation fund, and others over a period of time. The current value of these assets constitutes the ... |
### Instruction: ('Total Liabilities',) ### Response:Liabilities include loans and different forms of credit taken to meet expenses or to acquire assets. These may be taken from institutional sources, such as banks and financial institutions, or from personal sources such as friends and relatives. Liabilities may be lo... |
### Instruction: (' Leverage Ratio',) ### Response:This is a measure of the role of debt in the asset build-up of the investor. It is calculated as Total Liabilities ÷ Total Assets. For example, an investor owns real estate worth Rs.50lakhs, investments and bank balances valued at Rs.10 lakhs, and Rs.5 lakhs is lying i... |
### Instruction: ('Net Worth',) ### Response:A strong asset position is of no use, if most of these are acquired through loans that are outstanding. Similarly, liability is not bad, if it has been used for creating an asset, such as real estate, which has the potential to appreciate in value. It is therefore normal to ... |
### Instruction: ('Solvency Ratio',) ### Response:Despite having assets, a person may be insolvent, if the liabilities are higher than the value of the assets held. A critical benchmark is that the individuals net worth should be positive. The extent of the investors solvency can be determined through the solvency ra... |
### Instruction: ('Liquid Assets',) ### Response:Liquid assets are those assets that can be easily converted into cash at short notice to meet expenses or emergencies. Liquid assets include money in savings bank account, fixed deposits that mature within 6 months, investment in liquid funds or other mutual funds and su... |
### Instruction: ('Liquidity Ratio',) ### Response:The role of liquid assets is to meet the near-term liquidity needs of the individual. It is normal to calculate the liquidity needs as the expenses that an investor will incur over the following 6 months (including loan repayments). In exceptional situations, expenses ... |
### Instruction: (' Financial Assets Ratio',) ### Response:Assets can broadly be categorised as financial assets such as shares, debentures, bank deposits, Public Provident Fund, mutual fund investments and others, and physical assets such as gold, other precious metals, diamonds and real estate. Financial assets have ... |
### Instruction: ('Debt to Income Ratio',) ### Response:Leverage ratio measures the extent of debt use in asset acquisition. It however does not directly measure the ability of the individuals income to service or meet the obligations arising from all debt outstanding. Debt to income ratio is an indicator of the indiv... |
### Instruction: ('What are the key aspects related to debt management and loans?',) ### Response:The need for debt, the role and impact of debt in cash flow management, understanding leverage and debt counseling, calculation of debt servicing requirements, responsible borrowing practices, the concept of secured and un... |
### Instruction: ('The purpose or need of debt',) ### Response:Debt is used to finance goals when available funds (self-funding) are inadequate. Even though income might be higher than expenses it is not possible to finance every purchase or asset with just the existing savings. For example, most people cannot buy a ho... |
### Instruction: ('Role and impact of debt in cash flow management',) ### Response:While some debt is good and may even be recommended, how much debt is good depends upon the financial situation of each household. A good indicator is the debt to income ratio (DTI) that measures the ability to meet the obligations arisi... |
### Instruction: ('Differentiating between consumption expenditure and investment expenditure',) ### Response:Many clients have an endless list of lifestyle expenses. The Investment Adviser should be able to influence the client to be prudent in the expenditure. This can be done by highlighting how expenditure might af... |
### Instruction: ('Identifying the holes in the household budget ',) ### Response:A household may not be managing its income and expenses efficiently to enable savings for goals. Some common errors that make it seem as if savings are not possible include not being clear if an expense is an essential living expense or d... |
### Instruction: ('Allocation to various categories of expenses',) ### Response:The monthly summary of outflows helps in understanding the current prioritization. If unusual expenses are kept out (for instance, a hospitalization that was not covered by insurance), the balance outflows can be categorized as mandatory co... |
### Instruction: ('Windfalls',) ### Response:Clients occasionally earn a windfall such as unexpectedly high annual bonus, inheritance, winning a lottery, etc.. A healthy portion of such unexpected income should be set apart for the future, since the family is used to living without that windfall. This can also be the t... |
### Instruction: ('Leverage and Debt Counselling',) ### Response:Investment Advisers need to consider various aspects when they are advising clients on debt as this can have a big role in the kind of financial behaviour that is witnessed. Many factors will vary for a client and each of these needs to be taken into cons... |
### Instruction: ('Purpose of the debt',) ### Response: Debt or loan should ideally be taken for acquiring appreciating assets such as real estate. Some debt may be recommended to meet an expense that will increase the value of an asset, say an education loan to upskill, so that the income generating ability of the per... |
### Instruction: ('Cost of debt ',) ### Response:Higher the rate of interest at which money is borrowed, more will be the outgo in servicing the debt. Secured loans, such as mortgages, and education loans are relatively cheaper as there is the benefit of the security available to the lender. Unsecured loans such as per... |
### Instruction: ('Maturity of debt ',) ### Response:Shorter the tenor of the loan; more will be the periodic repayment putting pressure on available income. Even if the cost of debt is low, short loan tenor can put financial pressures in repayment. Therefore, loan tenor should be decided keeping in mind the repayment ... |
### Instruction: ('Debt Re-scheduling',) ### Response: If the borrower is unable to manage the debt repayments, then it helps to work out a solution as soon as possible. Potential solutions are as follows: * Rank debt in order of their cost and deal with the costliest debt first. Typically, credit card dues and persona... |
[INST] ('What is Financial Planning?',) [/INST] Financial planning aims at ensuring that a household or individual has adequate income or
resources to meet current and future expenses and needs. The regular income for a
household or individual may come from sources such as profession, salary, business or even
investmen... |
[INST] ('Example of Financial Planning',) [/INST] Example
Vinod is 40 years old and earns Rs.2 lakhs a month. He is able to save about Rs.40,000 a month
after meeting all the routine expenses of his family, paying the loans for his house, car and
other needs. His investments include those for tax savings, bank deposits... |
[INST] ('Understand the need for financial planning',) [/INST] There is a large range of financial products and services that are available for investors today
and these need to be linked to the specific needs and situations of the client. Not every
product may be suitable to every client; nor would a client be able to... |
[INST] ('Role of the Financial Planner',) [/INST] The Financial Planner has a significant role to play when it comes to advising clients because
the needs of each person is different front that of the other.
a) The financial planner has to recognise the exact needs and goals of an individual and a
household or family a... |
[INST] ('How is financial planning different from a typical financial advisory services?',) [/INST] Financial planning requires following of a specific process wherein the client along with their
overall needs and goals are at the core of everything being done. Other financial advisory
services would normally look at m... |
[INST] ('Personal financial analysis:',) [/INST] Goal setting with prioritizing of goals
The financial planning process starts with the goal setting process. Goals refer to what has to
be achieved. This gives a clear target that has to be reached. There are several features that
are important when the goals are set. ... |
[INST] ('Cash flow management and budgeting',) [/INST] There is a certain income that is earned by an individual along with the expenses made.
Having a plan to ensure that there are savings and these are invested is one part of the
process. It is also vital that there is a cash flow match so that the household or the i... |
[INST] ('Insurance Planning',) [/INST] Several unexpected expenses that can cause an imbalance in the income and expenses of a
household can be managed with insurance. Insurance is a risk transfer mechanism where a
small premium payment can result in payments from the insurance company to tide over risks
from unexpecte... |
[INST] ('Debt management and counselling',) [/INST] Investment Advisers help households plan their liabilities efficiently. It is common for
households to borrow in order to fund their homes, cars and durables. Several households
also use credit cards extensively. To borrow is to use tomorrows income today. A portion ... |
[INST] ('Investment Planning and Asset Allocation',) [/INST] A crucial component in financial planning and advisory is the funding of financial goals of a
household. Investment planning involves estimating the ability of the household to save and
choosing the right assets in which such saving should be invested. Invest... |
[INST] (' Importance of cash flow management in personal finance',) [/INST] Personal finance involves looking at the various sources of income and expenses and ensuring that there is some surplus savings which is allocated to various investments to meet the different goals in the future. One of the key aspects of the e... |
[INST] ('What are the key aspects involved in evaluating the financial position of clients?',) [/INST] Cash flow management in personal finance, knowledge about the preparation of a household budget, understanding cash inflows and outflows, budgeting and forecasting, importance of monitoring budgets and provision for s... |
[INST] ('Preparing Household Budget',) [/INST] The investment adviser performs an important role in helping the household or an individual understand a household budget. Preparing a household budget entails an understanding of the sources from which the household or individual receives income, and the application of th... |
[INST] ('Cash management',) [/INST] One of the important aspects of the household budget management process is the handling of the cash. On paper there could be a situation wherein there is some savings or surplus that is being seen, but this has to match with the actual cash flow because the income and expense figures... |
[INST] (' Income and expenditure statement',) [/INST] An income and expenditure statement gives a view of the financial flows for an individual or household for a specific time period. There is always a time period for which the income and expenditure statement is prepared and this could be a year or month. The income ... |
[INST] ('Budgeting and forecasting',) [/INST] The income of a household or individual has to be adequate to meet the current expenses as well provide the savings to create the assets that will help meet future expenses. If the current expenses are controlled, then it is better possible to secure the financial future of... |
[INST] ('Monitoring budgets and provision for savings',) [/INST] Understanding the concept of budgeting is the first step in the entire process of maintaining control over the finances of the household or the individual. Once the concept is known the next step is to actually prepare a budget. This will give a complete ... |
[INST] ('Creating a personal Balance Sheet and net-worth',) [/INST] Creating a personal balance sheet for an individual will require that various assets and liabilities are brought together and shown at a single place. A balance sheet shows the financial position of the individual or household in the form of assets and... |
[INST] ('Creating a budget and savings plan',) [/INST] There are several steps that need to be taken when a budget and savings plan is created. This will ensure that the process is done in a step by step manner and nothing has been missed out. The following steps would be useful in the budget creation process a) Start ... |
[INST] (' Contingency Planning',) [/INST] Investment advisers need to prepare the client for various contingencies that might come up. The household or individualsfinancial strategy needs to provide for these risks. The following are typical contingencies to provide for: * A family that is dependent on incomes of both... |
[INST] (' Evaluation of financial position of clients',) [/INST] The personal financial situation of an individual or a household primarily refers to its ability to manage its current and future needs and expenses. The income available to do this may be drawn from salary, a business or profession or from the assets cre... |
[INST] ('Savings Ratio & Expenses Ratio',) [/INST] Savings Ratio is the percentage of annual income that a person is able to save. It is calculated as Savings per year/Annual Income. ABC earns an annual income of Rs. 6 lakhs and saves Rs. 60,000 from the income. The savings ratio is Rs. 60,000 ÷ Rs. 6,00,000 = 10%. Sav... |
[INST] ('Total Assets ',) [/INST] Savings of the individual are deployed in various forms of physical and financial assets such as shares, debentures, mutual funds, real estate, gold, provident fund, superannuation fund, and others over a period of time. The current value of these assets constitutes the investors tota... |
[INST] ('Total Liabilities',) [/INST] Liabilities include loans and different forms of credit taken to meet expenses or to acquire assets. These may be taken from institutional sources, such as banks and financial institutions, or from personal sources such as friends and relatives. Liabilities may be long term and sec... |
[INST] (' Leverage Ratio',) [/INST] This is a measure of the role of debt in the asset build-up of the investor. It is calculated as Total Liabilities ÷ Total Assets. For example, an investor owns real estate worth Rs.50lakhs, investments and bank balances valued at Rs.10 lakhs, and Rs.5 lakhs is lying in provident fun... |
[INST] ('Net Worth',) [/INST] A strong asset position is of no use, if most of these are acquired through loans that are outstanding. Similarly, liability is not bad, if it has been used for creating an asset, such as real estate, which has the potential to appreciate in value. It is therefore normal to monitor any inv... |
[INST] ('Solvency Ratio',) [/INST] Despite having assets, a person may be insolvent, if the liabilities are higher than the value of the assets held. A critical benchmark is that the individuals net worth should be positive. The extent of the investors solvency can be determined through the solvency ratio, which is c... |
[INST] ('Liquid Assets',) [/INST] Liquid assets are those assets that can be easily converted into cash at short notice to meet expenses or emergencies. Liquid assets include money in savings bank account, fixed deposits that mature within 6 months, investment in liquid funds or other mutual funds and such other short-... |
[INST] ('Liquidity Ratio',) [/INST] The role of liquid assets is to meet the near-term liquidity needs of the individual. It is normal to calculate the liquidity needs as the expenses that an investor will incur over the following 6 months (including loan repayments). In exceptional situations, expenses over a longer p... |
[INST] (' Financial Assets Ratio',) [/INST] Assets can broadly be categorised as financial assets such as shares, debentures, bank deposits, Public Provident Fund, mutual fund investments and others, and physical assets such as gold, other precious metals, diamonds and real estate. Financial assets have the advantage o... |
[INST] ('Debt to Income Ratio',) [/INST] Leverage ratio measures the extent of debt use in asset acquisition. It however does not directly measure the ability of the individuals income to service or meet the obligations arising from all debt outstanding. Debt to income ratio is an indicator of the individuals ability... |
[INST] ('What are the key aspects related to debt management and loans?',) [/INST] The need for debt, the role and impact of debt in cash flow management, understanding leverage and debt counseling, calculation of debt servicing requirements, responsible borrowing practices, the concept of secured and unsecured loans, ... |
[INST] ('The purpose or need of debt',) [/INST] Debt is used to finance goals when available funds (self-funding) are inadequate. Even though income might be higher than expenses it is not possible to finance every purchase or asset with just the existing savings. For example, most people cannot buy a house without a l... |
[INST] ('Role and impact of debt in cash flow management',) [/INST] While some debt is good and may even be recommended, how much debt is good depends upon the financial situation of each household. A good indicator is the debt to income ratio (DTI) that measures the ability to meet the obligations arising from debt wi... |
[INST] ('Differentiating between consumption expenditure and investment expenditure',) [/INST] Many clients have an endless list of lifestyle expenses. The Investment Adviser should be able to influence the client to be prudent in the expenditure. This can be done by highlighting how expenditure might affect the chance... |
[INST] ('Identifying the holes in the household budget ',) [/INST] A household may not be managing its income and expenses efficiently to enable savings for goals. Some common errors that make it seem as if savings are not possible include not being clear if an expense is an essential living expense or discretionary in... |
[INST] ('Allocation to various categories of expenses',) [/INST] The monthly summary of outflows helps in understanding the current prioritization. If unusual expenses are kept out (for instance, a hospitalization that was not covered by insurance), the balance outflows can be categorized as mandatory contributions to ... |
[INST] ('Windfalls',) [/INST] Clients occasionally earn a windfall such as unexpectedly high annual bonus, inheritance, winning a lottery, etc.. A healthy portion of such unexpected income should be set apart for the future, since the family is used to living without that windfall. This can also be the time to take a l... |
[INST] ('Leverage and Debt Counselling',) [/INST] Investment Advisers need to consider various aspects when they are advising clients on debt as this can have a big role in the kind of financial behaviour that is witnessed. Many factors will vary for a client and each of these needs to be taken into consideration when ... |
[INST] ('Purpose of the debt',) [/INST] Debt or loan should ideally be taken for acquiring appreciating assets such as real estate. Some debt may be recommended to meet an expense that will increase the value of an asset, say an education loan to upskill, so that the income generating ability of the person goes up. Fi... |
[INST] ('Cost of debt ',) [/INST] Higher the rate of interest at which money is borrowed, more will be the outgo in servicing the debt. Secured loans, such as mortgages, and education loans are relatively cheaper as there is the benefit of the security available to the lender. Unsecured loans such as personal loans and... |
[INST] ('Maturity of debt ',) [/INST] Shorter the tenor of the loan; more will be the periodic repayment putting pressure on available income. Even if the cost of debt is low, short loan tenor can put financial pressures in repayment. Therefore, loan tenor should be decided keeping in mind the repayment capacity of the... |
[INST] ('Debt Re-scheduling',) [/INST] If the borrower is unable to manage the debt repayments, then it helps to work out a solution as soon as possible. Potential solutions are as follows: * Rank debt in order of their cost and deal with the costliest debt first. Typically, credit card dues and personal loans will be... |
[INST] ('The Indian Economy',) [/INST] 5.1 The Indian Economy The Indian economy has gone through phases of growth and change that has transformed it from being a primarily agriculture-oriented economy to one where services and manufacturing contribute to 3/4th of its gross domestic product. The economy requires the fi... |
[INST] ('The Indian Financial Markets',) [/INST] 5.2.1 Key Features
The financial markets enable efficient transfer and allocation of resources for productive
activities in the economy. Users of funds include governments, businesses and households
who seek funds to run their activities. Governments, businesses and hous... |
[INST] ('Regulators of Financial Markets',) [/INST] 5.3 Regulation of the financial markets is motivated by the need to safeguard the interests of investors. What is paramount is to ensure that investors make informed decisions about their financial transactions on the basis of a fair understanding of various markets ... |
[INST] (' Ministry of Finance ',) [/INST] 5.3.1The Ministry of Finance through its Department of Financial Services regulates and overseas the activities of the banking system, insurance and pension sectors. The Department of 92 Economic Affairs regulates the capital markets and its participants. The ministry initiates... |
[INST] (' Ministry of Corporate Affairs ',) [/INST] 5.3.2 Ministry of Corporate Affairs The Ministry is primarily concerned with administration of the Companies Act 2013, the Companies Act 1956, the Limited Liability Partnership Act, 2008 & other allied Acts and rules & regulations framed there-under mainly for regulat... |
[INST] ('Registrar of Companies ',) [/INST] 5.3.3 Registrar of Companies The Registrar of Companies (RoC) is the authority appointed under the Companies Act to register companies and to ensure that they comply with the provisions of the law. |
[INST] ('Reserve Bank of India (RBI)',) [/INST] 5.3.4 Reserve Bank of India (RBI) The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as: "to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the ... |
[INST] ('Insurance Regulatory and Development Authority of India (IRDAI)',) [/INST] 5.3.6 Insurance Regulatory and Development Authority of India (IRDAI) IRDAI regulates the insurance sector in India in accordance with the terms of the IRDA Act of 1999. IRDAI is the licensing authority for insurance companies and defin... |
[INST] ('Pension Fund Regulatory and Development Authority (PFRDA)',) [/INST] 5.3.7 Pension Fund Regulatory and Development Authority (PFRDA) The PFRDA is the authority entrusted to act as a regulator of the pension sector in India under the PFRDA Act, 2013. PFRDA regulates the National Pension System (NPS) and any oth... |
[INST] ('Role of Self-Regulatory Organizations (SRO)',) [/INST] 5.3.8 Role of Self-Regulatory Organizations (SRO) Additionally, intermediaries representing some segment of the securities markets may form a Self-Regulatory Organization (SRO). In the developed world, it is common for market players to create Self-Regulat... |
[INST] ('Structure of Financial Markets in India ',) [/INST] 5.4 Structure of Financial Markets in India 5.4.1 Banking System The banking system is at the core of the financial structure of an economy and supports its growth. It enables capital growth and formation through financial intermediation by accumulating savin... |
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