Posts Tagged ‘Personal Finance’

Open Letter to Kamesh Goyal, Bajaj Allianz Life Insurance CEO

September 25th, 2009

Dear Sir,

In an interview published in Economic Times, you say that “I think, this suggestion copying what is done in New Pension Scheme and Mutual Fund sounds a bit far-fetched”

This was part of an answer to the question on agency commission to be removed from 2011 and replaced with a fee-based system from a panel headed by PFRDA chairman D Swarup.

My question to you is “Why are Insurance companies trying to sell Insurance in the garb of Investment products?”

Especially, since Insurance and Investments are two different products, to my mind. Should one mix Insurance and Investment and Insurance v/s Investment

I find it paradoxical that you try to compete with investment products and then complain too.

Regards,

Yours faithfully

Ranjan Varma

Welcome back! Join me on this journey to improving our financial IQ and sharing what we know. Updates at RSS feed or Email. And spread the word please Thank You!

Coming Soon! A Personal Finance Workshop & Software "RupeeManager". Stay tuned

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Personal Finance Websites in India

September 21st, 2009

Personal Finance space in India is getting the attention it deserves. I have chronicled some of the efforts in this space and you can also see all the posts under the personal finance websites category

The Opportunity:
India has over 300 million households and the household savings amounts to Rs 12,00,000 crore. But there is a huge information asymmetry in Financial Services industry where the sellers have much more information than the buyer. This lack of transparency leads to uninformed financial decisions by educated people also.

There’s a huge market out there. To my mind, more than the big market, it’s the huge potential that’s attracting online ventures in this space.

New Kids on the Block
There are three personal finance portals that has caught my attention. They are InvestmentYogi, iTrust and RupeeTalk.

Overview:
Both RupeeTalk and iTrust provide articles, comparison table on financial products and have tied up with leading financial product companies to sell their products. They appear to be the online channels of the financial majors. Both iTrust and RuppeTalk’s tag lines say that they want to make it simple and easy.

InvestmentYogi has content focused on helping individuals on financial planning, retirement planning and tax planning. It doesn’t sell any financial products but focuses on helping you to learn, share and grow.

RupeeTalk
The reach out mail from RupeeTalk says that they are the first-of-its-kind personal finance web portal with a marketplace. To me, they are just another addition to the 3 million strong financial advisors community with a unique online presence.

I tried to search and compare life insurance on their site. Their database returned a choice of 11 products from 10 different companies for the data entered by me. Good choice, but there are actually 22 companies offering life insurance in India. The comparison chart for the four featured products made my head spin as they were too complicated to understand. (Even though I’ve worked in the Insurance industry for quite some time!!)

Can they make life easier for a newbie by recommending just one product? They can explain why they have chosen that product and I would be willing to believe them rather than trying to understand all the jargon!!

iTrust
iTrust has a similar business model like RupeeTalk’s. But they are more uncluttered, thanks to the lack of ads on the site.

Their “life insurance” search does not ask for the category (term, endowment, etc). Simple search options, but there were only 8 responses. (I repeat, there are 22 life insurers in India) . The “Compare” option does not really help a newbie to decide on which product to choose. Again, can iTrust decide and tell me which one is the best and why?

InvestmentYogi
InvestmentYogi has the most disruptive business model, to my mind. That’s why they are not making money right now! :)

They are producing a lot of content related to 5 different topics: Taxes, Investments, Planning, Spending and Insurance
The articles are written in a very unbiased manner and they do not push any products. Their goal is to promote a holistic financial planning approach to investing and managing wealth. They also have an ask the expert section where anyone can ask a personal finance related query to their experts. The QnA is posted for everyone’s benefit. Link

As the regulators have started cracking down on high up front commissions and other hidden costs the market will slowly and surely move towards an advisory and portfolio management model since the distributors have no incentive to promote one product over another. And InvestmentYogi would be right there when the recommendations of the D Swarup Committee on Investor Awareness and Protection, of No-load structure (all retail financial products should go “no-load” by April 2011) is approved. This will remove the bias of selling products with the highest commission.

My Take:
It’s good to see such initiatives in the online space as being done by RupeeTalk, iTrust and InvestmentYogi. The personal finance vertical has a huge potential. The online ventures in this space have a responsibility to reduce the information gap between the buyers and the sellers of financial products. So, to my mind, there’s a case of these companies to collaborate and build the financial awareness in India. (Rather than compete with each other)

Do you agree?

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Coming Soon! Rupee Manager Workshops Near You

September 12th, 2009

This is the 10 slide deck introducing the Rupee Manager Workshop that I am planning. Would be delighted to see your comments.

Transcript for two slides:
# Problem

* Huge Information Asymmetry in Financial Services

* Uninformed Financial Decisions by Educated people

* No Measurement tool to guide the management of Money

* Lack of authoritative resources & books in the Indian context

* Information overload on the Internet

# Solution

* Workshops

o at Corporates, Facilitate one-to-one Financial Planning to employees at Corporates.

* RupeeManager software :A desktop s/w where you can Measure, Manage & Make your Money Work.

* E-learning follow up module

* Online/Offline (E-books) Aggregation of Resources on personal finance

* Financial Services Only term assurance, select Mutual Funds and Stocks

What do you have to say about this workshop? Would you like to attend?

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How to Teach Personal Finance to Kids

September 10th, 2009

This post is another look at why we avoid personal finance. And what we can do to teach our children the value of money.

Why we sweep finance under the carpet

I often wonder why we were not taught the basic things about money when we were younger. And I know that every parent means well for their child (I’m a parent for 15 years now!).

People say that we need to have a personal finance education at school. Okay this may be a good idea, but I have a question.

We are aware of our future goals like what will we do when we grow up. Bade hokar kya banoge?, is such a cliched question, we are bound to answer them.(I’ve been an exception, and still have not decided! :) ) Or aware of social values like respecting elders. No formal education teaches the above two. Then, why this lack of awareness about money?

Moreover making kids aware of money issues is not really a rocket science. It’s a lot easier than what’s covered in Class IX-X these days.

More important than the knowledge is the skills & attitude towards money, I feel. Atleast, when the kids are in school. So the best person to teach the kid about money is not the school, but the parent.

But instead of instilling money values in our kids, we buy them toys even when we can’t really afford them. Dad is my ATM, they say. And Dad is happy too.

But when they grow up and have money on their own, they don’t really value the money. They are not aware of simple principles like the magic of compounding or rupee cost averaging.

Late in the day, some people (like me) wake up and decide to learn. But there are hordes of people around me who are hardwired to avoid making financial decisions. They depend on ill informed financial advisors who make a good living out of this lack of awareness.

Trying to inculcate money values in my child

I read something like this,(source unknown) “The best way to teach a kid about the value of money is to show him poverty”. Or maybe, experiencing poverty.

As an experiment, I put all my income from the day job to a few investments through SIP (Systematic Investment Plan). So for six months my salary went off to the SIP. Ofcourse, I had the backups and the monthly income from my websites to fall back upon.

I shared this information with my family. And I am happy to see the results. Not only the portfolio has increased significantly, my son thinks twice before asking to eat out, scheduling/reducing his pizza/noodles cravings, etc.

Most importantly, he now knows that money has value. I have thought of discussing the magic of compounding or the rupee cost averaging with him. But as of now, I have not found the courage! :)

“What Dad, keep it for your blog”, I’m afraid he will say!

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RupeeManager: Assign work for your Money

September 2nd, 2009

Managing Money is the second of the top two New Year resolutions. (Via Swaroop’s TrackEveryCoin) The top one is, of course, losing weight. The fact that we need those resolutions every New Year, makes it obvious that we don’t keep those resolutions for long!

The reason we are not good with managing our money is not hard to find. Fear of numbers, information overload in the media, financial jargons and the complexity of financial products adds to our inertia.

But the biggest reason, to my mind, why people do not manage their money is that they don’t know anything about their money. How it is coming, where it is going, whether it is lying idle, etc.

That brings me to the RupeeManager software that we are building.

The three guiding principles that have helped conceptualize the software are
1. Measure: (Know Yourself)
2. Manage: (Know how your money is doing)
3. Make Your Rupee Work: (And not just You working for Money!)

1. Measure: It is common knowledge that whenever you need to manage something, you need to measure it first. We have a vague idea about our money.

Like, have you figured out your risk profile/appetite?

The idea is that, if we had a way to measure income, expenses, portfolio, risk profile, etc, we could have a discussion on how to improve them. No records, no improvements.

The RupeeManager is primarily aimed at helping you measure your rupee. Once you are aware, other things follow.

2. Manage: Now that you have numbers ready, the improvements follow naturally. For example, you see that your percentage spend on “eating out” is 2-3 times the monthly grocery bill or it forms 25+% of your expenses.

Also, you will get an idea how to balance your portfolio according to your risk profile. You will match the portfolio with your risk appetite and see if you can take more risk or go more conservative. In other words, you get to decide your asset allocation strategy.

3. Make your Money Work: Other than tracking your earnings and your expenses, it is important to see if your money is working for your future.

We have a feature where you can allocate your income among fixed expenses, discretionary expenses, short term savings and long term investments. It’s like assigning goals for your money.

I have my fingers crossed on the response we’ll get on the software. Would you like to participate in the private beat of the software? Let me know. Thanks

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