Goal-based Financial Plan or Comprehensive Financial Plan, what should you opt?

Henil Shah
/ Categories: Mutual Fund, MF Unlocked
Goal-based Financial Plan or Comprehensive Financial Plan, what should you opt?

With growing awareness about mutual funds and investments, intermediaries such as brokers, mutual fund distributors, Independent Financial Advisers, Registered Investment Advisers, as well as mutual funds houses and insurance companies have started advising clients to make a financial plan. Where your income, expenses are calculated, assets and liabilities are noted and some of the common financial goals are targeted and then you are asked to do SIP (Systematic Investment Plan) or lumpsum investment to achieve that particular goal. Even many fund houses have introduced goal planner in their mobile apps and even on their website. However, this is just an effort to bring business and to earn out of it. It is no way a proper fiduciary advice from them.

This has made many investors confused as to what is financial planning and which financial planning to opt for, whether goal-based or comprehensive? Financial planning is a process of developing strategies to help you manage your financial affairs to meet your life goals. However, currently, there are two types of plans that are available in the market. One is a goal-based financial plan and other is a comprehensive financial plan. Goal-based financial planning, as the name suggests is a process wherein your goals are assessed to which your existing investments or assets are linked and then for any shortfall whatsoever, SIP or lumpsum investment in mutual funds is suggested. That’s it! this is what goal-based financial planning is.

On the contrary comprehensive financial planning is a process where at first your risk is assessed and proper recommendations are made to cover those risks, be it risk of life, health or temporary loss of income. In comprehensive financial planning, apart from risk even your cash flows and networth is analysed and proper recommendations are made with respect to it to maintain a healthy situation. Comprehensive financial planning also has recommendations for your liabilities where it recommends best possible situation where you can save your cost in terms of interest. Financial goals are an important part of a comprehensive financial plan. Apart from all this, depending upon the financial planner you may also get different scenarios to make a proper financial decision with complete clarity.

So, opting for a comprehensive financial plan would be the way to go. While looking out for a financial planner, do understand the depth of services that he provides. It is recommended to always deal with a SEBI (Securities and Exchange Board of India) Registered Investment Adviser along with a Certified Financial Planner who works on a fee-only model wherein he receives a flat fee for the advice given to you. This will help avoid all the possible conflict of interest and you will receive advice in its true spirit.

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