3 questions that can transform your financial life

A new approach called life planning can help you prioritise the use of your time and money, says Tinesh Bhasin.
Illustrations: Uttam Ghosh/Rediff.com

Travelling around the world or playing a guitar in a band might not be the things you would expect to discuss with your financial planner.

But pursuing dreams that you thought are impossible to fulfill, or can only be pursued in later years, is at the core of a new financial planning approach called life planning, which a growing number in India have started pursuing.

While traditional financial planners focus primarily on goals such as buying a house, children's education and marriage, and saving for retirement, financial life planning aims to transform your relationship with money.

It intends to help you pursue a life that you always desired, be it a career change, spending more time with your children or doing community work.

"Through financial life planning, we gradually help the client transition to what he really wants to do with his life, instead of sacrificing his dreams at the altar of survival," says Rajesh Dilip Dossa of Life Strategies Financial Life Planners.

The results can, at times, be life-altering.

When a client in his mid-30s approached Niraj Nanal, a registered life planner, to help him with his finances, Nanal realised that the client wanted to be a wildlife photographer.

The client thought this was not possible until retirement owing to his family commitments.

Nanal helped him pursue the dream by starting small and then slowly increasing the time and resources dedicated to wildlife photography.

For this, he even advised the client to postpone the purchase of a house and stay in a rented accommodation.

A different approach

To discover how a client wishes to live his life, financial life planning focuses on three questions.

First, the client is asked: Imagine you have enough money to satisfy all your needs, now and in the future. Would you change your life and, if so, how?

Two, assume your financial situation is the same as it is now. Your doctor tells you that you only have 10 years to live, but that you will feel fine until the end. Would you change your life, and, if so, how?

Three, your doctor tells you that you have just one day to live. You look back at your life: What did you miss out on? Who did you not get to be? What did you fail to do?

Answers to these questions help an advisor understand an individual's intrinsic motivations -- the way s/he wants to live but is not able to.

Typically, an advisor following the life planning method holds 4 or 5 meetings.

In the first, he listens to all that the client has to say about her/his current financial situation and what s/he wants to achieve in the future.

Then, the advisor gives the three questions to the client and asks her/him to think deeply about them and answer them in the next meeting.

In the second meeting, the advisor shows the client that pursuing her/his dreams is possible.

Then he works out a financial plan to help her/him achieve her/his dream life.

"Overall, this approach helps you achieve a better work-life balance," says Rohit Shah, chief executive officer, Getting You Rich.

Is it a fad?

Financial life planning is a more comprehensive approach as it goes beyond mere numbers.

But not all clients might be receptive to it because of the time and costs involved.

Shalini Dhawan, co-founder and director, Plan Ahead Wealth Advisors, and Suresh Sadagopan, founder of Ladder7 Financial Advisories, both incorporate this approach when they make a financial plan for their clients.

"We tried to do it as a standalone method but only a few clients were willing to give the desired time and answer the three questions openly and in detail," says Sadagopan.

While life planning is more fulfilling, the costs to clients are higher.

Those who practise life planning full time have to work with fewer clients as its more time consuming.

Also, the planner has to bear the cost of certification.

He also needs to pay an annual licence fee to the institute from which he has obtained the licence.

The cost of all this could run into lakhs. The annual fee of the advisor, therefore, is higher if a client opts for life planning.

A life planner could charge you around Rs 1.5 lakhs to Rs 2 lakhs (Rs 150,000 to Rs 200,000) a year.

Most planners feel that only clients with a decent-sized portfolio and those above 40 are receptive to this approach.

"In our practice, we have been using it mostly with clients in the 40 to 60 age bracket. They have found the results to be more satisfactory," says Dhawan.

Is the outcome different?

"The outcome of the two approaches is different but usually not does vary widely. Only in few cases can there be a drastic difference," says George Kinder, founder of the Kinder Institute of Financial Planning.

"These are cases where a client might need to shift jobs, change his location, sell his house and so on."

Dreams and aspirations can change with age. How do life planners tackle that?

"Every two years," says Kinder, who is a practising financial planner and tax advisor for the last 30 years, "planners take stock of clients' goals and check for changes. If an individual is in transition, monitoring is done more often. Changes are made accordingly."

Are there takers for this approach in India?

"This approach is for everyone, anywhere, who wants to live a more fulfilling life using the funds they have," he says.

"India is exploding with economic opportunity and wealth in the hands of individuals is growing. India needs more professional advisors to help people manage their wealth."

"Life planning can help them better than traditional financial planning."

"We have so far certified 153 financial planners in India who can offer life planning to clients."