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Personal Financial Planning

Notes Shadowing and, at times, pre-empting this environment has been an expansion in the type and
style of investment products available in the market. Indians, by and large, have increasingly
embraced the new investment environment and, the rising popularity of managed funds show
an increasing sophistication in the consumer’s approach towards their investments. The openings
up of the insurance sector and the imminent arrival of broad ranging pension reforms have
primed both the economy and society for the development of the personal financial planning.
India is not alone in witnessing the emergence of the financial planning profession, as several
other countries have adopted the’ Certified Financial Planner’, CFP, marks from the US-based
CFM Board of Standards. In recent years we have seen Australia, United Kingdom, Germany,
France, Japan, Canada, South Africa, New Zealand, Switzerland, Singapore, Malaysia, South
Korea, and Hong Kong securing the right to use the CFP mark as a means of designating the
standing of a financial planner. The CFP designation is based on the education and experience of
the practitioner.

Your enrolment in the CFP Professional Education Program is one major step toward achieving
CFP status. In India today, advice on financial needs of individuals is being given by bank
managers, accountants, share brokers, real estate and life insurance agents. With the growth in
the professional recognition of financial planning continuing unabated the world over, people
are increasingly turning to the financial planner for comprehensive financial advice. For example,
a recent study done in April 2000 in Australia showed that 31.3% of the 1200 adults surveyed
would approach a financial planner/adviser, up from 27.1% in the survey of June 1997.
Internationally, it is not just the wealthy and those about to retire who are turning to financial
planners for advice. For example, families with young children, a loan and other financial
commitments are increasingly seeking professional advice on managing their current finances
and building a sound financial future. Financial planners are in a unique position to assist all
Indians who are willing to put a value to sound financial advice because of the range of services
they can offer. An increasing community awareness of such services is no doubt linked to the
growth in the profession.
A career in financial planning offers the potential to gain both personal satisfaction from assisting
clients meet their financial objectives and personal financial security for the successful practitioner.
While it is a rewarding career, it is a career which requires an ongoing commitment from the
practitioner to continuing education and professional development.
In this section, the first topic of this unit, we will introduce you to the professional world of the
financial planner. We address the nature and scope of services offered in comprehensive financial
planning, the professional environment of the financial planner, including the Financial Planning
Standards Board, India (FPSB, India) Code of Ethics and Rules of Professional Conduct and the
relationship between the client, financial planner and employer.
At the end of this topic, we will outline the way in which financial planning is a continually
evolving and changing profession and, importantly, we will identify the professional attributes
that define a successful financial planner.

1.1 Meaning and Definition of Personal Financial Planning

Financial planning is the process of meeting your life goals through the proper management of
your finances. Life goals can include buying a home, saving for your child’s education or planning
for retirement.

The financial planning process consists of six steps that help you take a “big picture” look at
where you are financially. Using these six steps, you can work out where you are now, what you
may need in the future and what you must do to reach your goals.

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