Competency and ethics are important in a planner

Retirement planning are still unfamiliar words in India today. Most people begin thinking of retirement just a few years before they actuall...

Retirement planning are still unfamiliar words in India today. Most people begin thinking of retirement just a few years before they actually do retire. What is your experience from the US, are there any economic or social changes that occur for people to begin thinking of their retirement earlier than they do today?
Urbanisation and economic development are the two things that will make a difference. More and more people will come to realise that they need to fend for themselves. It would typically be second generation urban migrants that see their parents, who are under-funded for their retirements, to get up and say: ‘I don’t want that happening to me’ and plan ahead so that they remain financially independent.

What is the ideal asset allocation for the retirement corpus?
I am lecturing here on the age banding model. This model looks at the life of an average person who will retire at age 65 and then live for 30 years. The traditional model looks at putting all the money in the safest possible vehicle, which is usually bonds. But that way the money’s potential will not be fully realised. I would separate the retired life into different phases and allocate money into lower risk assets like bonds to fully fund the first few years of retired life. The rest should be put to work in equity to keep the money working over a long time period. For a moderate risk taker, I would recommend an asset allocation of 60-65 per cent in bonds and the rest in equity for the retirement corpus.

Ideal asset allocations for retirement contain a fair bit of equity, that may work for a market like the US, but in the event of India having high return government assured products with little risk, is there still a case for equity today in a retirement corpus?
The case for equity is very clear. Using 70-year US data we can show that fixed income instruments give an average annual return of 6-6.5 per cent. Large cap stocks give 11-12 per cent and small cap stocks give 15-17 per cent return. Equity is a long run instrument, it outperforms other instruments but it needs time. The earlier you start, the more time you have to make up the money lost, if any, and to get over the equity cycles.

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What kind of regulation is needed for the Indian financial planning industry?
According to me, a SRO approach is better, where the association regulates itself. The government’s role should be kept to lay down the rules, but it should not be poking its nose in the everyday life of the industry. The regulation should be designed to protect the small investor. This is a person who needs protection and if the government does not ensure this, it will lead to market failure.

What should the attributes of a financial planner be?
Customers should look for competency and ethics in the planners. In the US, the CFP has emerged as the hallmark of these two attributes. Just as an accountant who is a CA carries more weight in India, so also, a financial planner who is a CFP is preferred in the US. Something similar must emerge here as well. One designation that is recognised by all and is credible.

What can a person do to begin retirement planning?
Discipline the mind. Only then will the plan work. The plan involves estimating future things like, when will you retire, how long do you think you will live, looking at how long your parents lived, how much would you need, how much do you have today and therefore, how much do you need to save, given your risk tolerance levels. But you need professional help to make a plan, just as you need a professional to solve health issues.

Rahul Gandhi attacks EC: What happened in Aland, who can delete names from electoral roll

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Rahul Gandhi accuses Chief Election Commissioner of protecting those attacking Indian democracy. He cites the alleged deletion of 6018 votes in Karnataka's Aland constituency during the 2023 election. EC responds, saying irregularity was caught and complaint filed. BLOs can delete names from electoral roll, but verification process required. Form 7 used, with opportunity for objections.

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