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Building The Financial Planning Profession Through Education

KK Goel - CFP IndiaBy DR. (Col.) KK Goel, CFP

Financial planning is in its nascent stages in India. The concept of financial planning in India was initiated by The Association of Financial Planners (India), later on renamed as FPSB India, in 2003. Of the 1,500 CERTIFIED FINANCIAL PLANNER professionals all over India, we have around 125 of them in Delhi, which is a small figure for India’s capital and a big state, with a population of 12.8 million. Many of them are either in jobs that do not involve financial planning or are practicing more as financial product sellers than as financial planners. There are very few CERTIFIED FINANCIAL PLANNER professionals who are, in a real sense, practicing as financial planners.

Good at Saving, Poor at Investing

Why is this so? Number one is the public’s lack of awareness. People in India understand the concept of saving; however, they are poor investors. Most of the public does not understand various investments and are scared of equities because of their volatility. They feel safe only keeping their money in banks, where they get interest much below the inflation rate, thus reducing the value of their money.

The second factor is the pay-back system investors were used to. So far, these investors were paid by insurance and mutual fund agents out of their commissions for investing in these products without understanding; this led to their buying products that they did not require, and which, many times, turned out to be high-risk and low-return products. After August 2009, when the Indian Government stopped the front-loading of mutual funds, things started changing; however, investors are now getting adjusted to paying fees for financial advice.

In our education system, at no stage from school to college life, are students taught about managing their finances. The focus is only on working hard, studying and increasing one’s earning capacity, but at no stage is the management of this earned money taught. This is something one has to learn on their own. With today’s increasing complexities of financial products, it is increasingly becoming difficult for individuals to understand and decide which products would best meet their requirements and fulfil their financial goals. Hence, the need for expert financial advice is now being felt by many.

The question is from whom to get the advice? What is the difference between a financial advisor and a financial planner?

Advisors vs. Planners

A financial advisor is mainly concerned with advising on your financial investments and financial problems. They may not be looking holistically in all aspects of your financial life, requirements, goals and aspirations.A financial planner is like a life planner. Financial Planning is a holistic process, involving the record of many things including:

  • Present financial status
  • Assets, liabilities, and cash flows
  • Financial requirements at each stage of life
  • Financial goals and aspirations
  • Risk management and planning
  • Investment plans and retirement planning
  • Tax plans and estate planning

Financial planning is, in fact, managing your money to merge it with your life requirements and goals, while keeping in mind the risks involved at various stages of life, affects of taxation and inflation, and requirements in the post retirement period. The overall goal of a financial planner is to allow clients to live a smooth and hassle-free life. Included in this, is the efficient way to transfer the assets to the next generation. A financial planner looks after and advises on all of these aspects while attempting to ensure a smooth, worry-free life and the possibility of achieving all financial requirements and goals.

Thus, a CFP professional is the best person to seek advice from on financial planning.

Stakeholders Play a Role in Education

There is a strong need for financial education, right from school level, onwards. Parents need to educate their children on budgeting and investments. All stakeholders, such as government, regulators, product manufacturers and product sellers have their role to play. Financial planners and CFP professionals need to educate their clients and the public by holding seminars and talks. The interests of clients need to be kept foremost, while giving any financial planning advice. The highest standards of ethics and codes of conduct should be maintained. This would help improve clients’ trust, the financial planning process and the financial planning profession as a whole.

Lately, the government of India, various regulators, FPSB India, Financial Planning Corporation (India) Pvt Ltd (FPCIL), media, financial product manufacturers and various groups of financial planners have started making an effort to broaden the public’s awareness of financial planning. Various education programs and continuing education programs are being held to help financial planners, too. This has started showing its impact and I am sure in a few years time, the financial planning profession will be well accepted in India. I see a bright future and high potential for the financial planning profession and the CFP professionals in India.

5 comments to Building The Financial Planning Profession Through Education

  • Nitin

    Dear Dr. Goel,

    Very well written article indeed! You raise a very good point of the lack of financial planning education among the masses. I completely agree with you!

    Making this education available in an affordable manner to the masses to increase awareness is a crucial step in helping people move from a savings to a investment mindset.


  • ASChilana

    The Financial planning is a new concept for Indians They need alot of guidance on this issue DrKKGoel,s article is thought provoking and useful

  • ankita

    Really interesting article…It is very insightful indeed!

  • yery well said, we are lacking in Financial Planning Education. Please arrange for the continuous education in affordable and convinient level to increase the awareness among the people. We need a lot of education to survive as aCFP and make people understand the difference between saving and investment.

  • I agree with you sir! There is little awareness about financial planning in India and it’s a big challenge for CFPs like you and me when time and again we have to explain that without proper financial planning it would be impossible to attain the desired life goals.

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