I recently received this email from my client. I thought it will resonate with you and so I am sharing it here. Read on.
Subject: Financial planning
Dear VK
About 5 years ago, when I invested in a mutual fund for the first time, I was apprehensive. Till then, all that I had ever come close to investing in stocks was the Employee Stock Options (ESOPs) of my company.
So, I was afraid; it was my first time after all. But you gave me the confidence and I went ahead by investing a small amount. Your suggestion of “first testing the waters” was well advised.
Today, in these 5 years, I believe I did the best thing by listening to you. The mutual fund investment portfolio is significantly large today and it is performing quite well too. Overall, I am happy with what we are doing.
During these years, you have also, at various times, asked me to think about taking a comprehensive view of my finances and investment portfolio. To be honest, I never had a written, formal financial plan for myself. All I have been trying to do is to ensure that I save as much as possible and generate the best possible returns with your advice.
But I have been resisting it, as you know. I guess I have not been able to express myself clearly and hence I write this email to explain to you my reasons for not doing financial planning.
First things first. I am not just a planning person. You have seen this right from the beginning with my initial investments. I invested in PPF or Public Provident Fund and Real Estate, like everyone else. I continue to be big on real estate. Then there are mutual funds in the portfolio along with some insurance and bank fixed deposits. It looks like a decent portfolio to me. And as I said, I am happy with it.
Now, the little that I understand about financial planning, it is going to be one elaborate exercise. You will want to understand every thing about my financial life. You will force me to think about my financial goals, priorities and crucially evaluate all my investments.
You will ask me questions like when do I want to retire, what expenses I foresee post retirement, where will my children study and what funding that education will require, etc. etc. And about the startup that I plan to work on 5 years from now.
My question to you is how much of the future can we predict? Things will change – the environment, my lifestyle, my goals will change. I am telling you today that I want to startup on my own in 5 years but in 2 years I could change my mind. On top of it, there could be an emergency, which could affect my investments badly.
How on earth would you incorporate so many variables in the financial planning exercise? At best, it would seem like a “wishful thinking” plan.
All this is too overwhelming for me. Almost scares me.
I do not want to do this huge corporate strategy like time-wasting exercise called, financial planning? I like it the simple way, the way we have been going on till now.
And frankly, isn’t financial planning to be done by rich people? People who have lots of money and who would struggle with how best to invest it and where. I believe they are the right candidates for it. Not me. I am a middle class man of simple needs, a decent income, working my way towards ensuring a safe financial future for my family and having some fun in life.
I suggest that let us just continue with our current approach of working on the investments. In any case, my fund requirements are very long term. We should just focus on the investments and save the financial planning exercise for some other time, may be when I am rich enough. 🙂
In case there are some changes in the mutual funds that you would like to suggest or any profit booking that we should do, please let me know.
I hope I have been able to present my perspective and you will understand that.
BTW, a friend has shared recently a real estate investment opportunity. I would like to discuss it with you.
With regards
AB
So, what do you think? Why bother with financial planning when investments are doing good enough? Why fix something that is not broken?
To an ordinary eye, the email looks perfect. But to an expert eye, there are several hidden issues. AB is carrying many myths about financial planning (Do you see them too?).
In the interests of my client, I would respond to this email. And yes, I will share the response with you. Soon.
Update: Read the response here.
Between you and me: What is your take on this email by AB? Do you have a financial plan for yourself? Do share in the comments.