Financial Planning Is A Painful Exercise

While financial planning is good for you, the process which a planner can put you through is not so great, observes P V Subramanyam

Financial planning is not a perfect science. For most people who are not obsessed about large cap, small cap, midcap, goal setting, asset allocation and such nonsense it is as painful an experience as visiting the dentist.

What happens is when a customer/client/potential client comes to meet a financial planner the conversation goes somewhat like this:

Planner: Where do you work and how much do you earn?

Client: About Rs 50 lakh is the gross salary between my wife and me, and our monthly take home is Rs 2 lakh and Rs 1 lakh respectively.

Now the planner who has a lower income thinks that the client should spend Rs 1 lakh per month and save Rs 2 lakh and that Rs 1 lakh should include the EMI.

Client thinks he should spend Rs 2 lakh per month including the EMI, the Rs 1 lakh should be used for vacations, and anyway PF is for retirement!

The other problem with financial planners is they make life sound like there is nothing to do except make plans, do SIPs, write a will and then review it once a month at least. Switch once in a year... phew exhausting is it not?

At the end it is like going to a dentist who says:

a. You have not been brushing regularly

b. When did you last floss your teeth?

c. Even scaling... you have delayed it by a month or two

d. Two more of your teeth need to be removed, and we need to put an implant. Sorry, that will cost Rs 94,000.

How many of us will like that experience (not me, my dentist is a good singer and she even sings for me when she is removing my tooth!).

Financial planning is, of course, worse. It has math. And the planner asks 'Do you know how much investing Rs 40 a day will become if you invest for 30 years? No, no make it 35...' and just when the client is recovering from the shock of doing the math, he says, '4,54,65,425!'

Wow. The client is feeling worse. OMG I wasted 18 years of my life not knowing this.

He is then shown how he needs Rs 3 crore for his daughter's education in India, Rs 8 crore for her to study abroad, Rs 6 crore for her marriage and Rs 28 crore for his retirement. Assuming that he has only one kid... oh, another is on its way? Just double all the numbers except, of course, the retirement.

P V Subramanyam is a chartered accountant with more than four decades of experience in the field of personal finance and blogs at subramoney.com.

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