One financial planner met a client and had the following details:

A 38 year old man with a daughter from an earlier marriage (age 11) a son from the present marriage (7 years) a housewife, parents needing support and a mother in law dependent on him. (5 complete dependents, daughter partially dependent  Рhis ex wife is earning well)

He had bought a house for Rs. 60 lakhs (market value Rs. 3 crores), doing his own business (financial planner ‘feels’ that the client earns about Rs. 20 lakhs. He has a 45 lakh borrowing on this house. He drives a Toyota Corolla – about 3 months old. He is in a capital intensive business and the planner has no idea about his bank borrowings, but they do carry his personal guarantee.

He has all his money in LIC’s endowment plans and believes that the money is safe only in government ‘investments’ like LiC. Does not believe in mutual funds, has dabbled somewhat in equities, but as is to be expected, with terrible results – investments of Rs. 5 lakhs is worth close to zero.

Lifestyle expenses (visible to the planner) seems to be costing Rs. 1 -1.5 L a month, but again a guess.

I have NOT given this case study to ask for a solution, but at the gaps of what the FP told me. The Planner did not know the following details, and to me they were important:

1. How much were his household expenses

2. What was his income – real one, shown to IT, hidden, ….etc.

3. What was the income trend in the business?

4. Personal balance sheet

5. Personal goals, expenses, spending habits, vacations, ….

6. Was his current wife capable of earning or not capable of earning

7. Amount of life insurance, premia paid, maturity,….

8. Financial personality characteristics – spend thrift, ….etc

9. Was he a good businessman or a lucky one? Will his income continue, if yes for how long?

10. Personal guarantees given to the bank? Was the house pledged only to the housing loan company or to the bank for a business loan too?

obviously if I had met the client many more of these questions will emerge…as will further questions based on these answers. This planner just wanted to sell him some mutual funds….and perhaps a pension plan.

It is nice to call yourself a financial planner, but please, please, behave like one.

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  1. 90% business men are LUCKY., even they agree for this.. but LUCK is meant that their hardwork came to fruit instead of going to drains

  2. Hi Subra,

    Can you please elaborate on home loan for young ppl(below 30). We are a couple(both 27 years old) having a monthly combined income of 1.04L(52:52). We are planning to purchase a flat taking a home loan of 34L and will be paying rest 12L as downpayment(our savings till now for our home. Should we take this much home loan as we both want to purchase flat on our own without any help from our parents or are we over-leveraging our income?

    Please help.

  3. if 90% of businessmen are lucky, and 100% of well paid employees are lucky, God make me lucky that is all.


    both 27. Can you live on 52000 per month, while paying Rs. 27000 as EMI? Assuming your wife gets pregnant and has to quit her job what happens? Can your parent step in for say 4 months? or 4 years? I know parents who have said ‘we will be the fall back option’ – so do not borrow from them, BUT you know if there is a problem, THEY WILL STEP IN. Take a worst case scenario – wife pregnant, cannot work for 2 years, and you are downsized…what happens? who pays..???Also what is the current rent that u are paying? that will be saved….so if you are paying 14000 rent – your net outflow is only 27000 – MINUS 14K = 13K….HMMM Not bad at all…

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