Investing in products for goals is not financial planning

This notion has been repeated over and over again that now consumers at large seem to think that financial planning is  accumulating one product after another for various goals. 

Insurance companies do this all the time. Other financial product manufacturers too use the term Financial Planning, rather liberally & loosely. Mutual fund companies have come with pension products and other goal-achievement products like children’s education funding products and call that financial planning.

Most times, there is another problem. Any product can be twisted enough to make it appear suitable for a goal. For instance, a multitude of endowment plans maturing every year in retirement, is touted to be retirement planning solution! Many insurance agents offer this as a retirement solution.

This is the problem with agents & distributors. They will coax & twist the product they want to sell to suit any and every goal one may have. Making these investments can assist in the achievement of certain goals. But, adhoc investments to achieve goals is not planning. Planning process should automatically narrow down the instruments which may have be required for achieving goals.

In Financial Planning one needs to understand clients’ multiple goals & requirements, look at what the clients have done in terms of investment & insurance, find out what is an appropriate asset allocation in line with their risk profile & then finally suggest products that meet with their requirements over time & achieve financial freedom. 

A financial plan is hence a blueprint to achieve the client’s goals in a holistic way. The suggestions in a financial plan/ advisory exercise would be far more well deliberated & thought out, than just a mere matching of products with a goal.

The financial plan would consider the various life events & client requirements and make provisions for funds when needed.  That is the best way to plan for goals.