March 2011 – Page 3

Profile: Hemant Beniwal, Certified Financial Planner

A while ago I wrote about creating a directory of financial services providers here at OneMint, and let me just copy paste what I wrote earlier.

Profiles for financial advisers

I get a lot of emails from people who want to buy bonds, mutual funds, or life insurance but I donâ€™t sell these myself, so have to disappoint people who ask this.

At the same time, there are several financial advisers who comment on the site, and who can help out such people.

The natural thing for OneMint is to bridge the gap between the two, and Iâ€™ve decided to give that a shot as well. Financial advisers will be allowed to create profiles on the site where they can create their CV, and allow readers to ask them questions.

The profiles are by invitation only, and the only way to get an invite is to help other readers by answering their questions honestly and sincerely in comments and at the forum. If I feel that this is being done then Iâ€™ll invite you, else not.

So with that said, I am introducing the first advisor today.

Hemant Beniwal, Certified Financial Planner^{CMÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â}

Employment Status: Self Employed

Organization: Ark Financial Planners

Blog: The Financial Literates

Services Offered: Fee-based Financial Planning, Single Element Planning

Email: hemant@tflguide.com

About: Hemant Beniwal is Director of Ark Primary Advisor Pvt. Ltd., the company he founded to venture his financial planning practice. He entered the Financial Industry as Management Graduate in Finance & grew up to become a Certified Financial Planner(CFP).

Professional. He is amongst the first breed of Financial Planners, a new profession which is in its inception stage in India. Currently there are very few financial planners in India who are actually providing comprehensive financial planning service.

Financial Planning: Hemant believes Financial Planning gives you more clarity in life; it provides direction and meaning to your financial decision. It helps you to provide right balance between your present and future lifestyle. Financial Planner is like the Photographer; although he is not part of the picture but still contribute his skills to make it look good. But in Indian context, the term â€œFinancial Planningâ€ & â€œFinancial Plannerâ€ has been misused to sell Financial Products. The planning part is completely overlooked and that adds to confusion. Hemant has dedicated his career in bridging this gap & to provide the real FP services to the clients.

Services: Ark specializes in offering fee based comprehensive financial planning service to Indian families across the globe that include middle level executives, professionals, business owners & NRIs. Recently he has added few other services like basic financial plan, retirement planning, investment planning, estate planning, mutual fund/insurance portfolio review, only consulting etc.

Experience: Prior to setting up the practice in 2009, he worked for 8 years with big Financial Brands & his last assignment was Regional Head Rajasthan with one of the Mutual Fund Company.

Beyond Financial Planning: Apart from developing Financial Plans and guiding clients meet their Financial Goals; he keeps interest in research & analysis of various financial products. He also conducts training programs on Financial Planning & Investment Planning and also regularly trains Financial Advisors. He also coaches candidates pursuing CFP Certification.

Financial Literacy & Mission against Mis-Selling: He runs â€œThe Financial Literatesâ€ blog where he regularly writes thought provoking articles & also freely writes against mis-selling. He says â€œMis-selling is making new peaks every year and for people it`s very tough to identify what is right or what is wrong. With the agents, even manufacturers are trying to milk naive investors. It is really painful to see when a client is mis-sold for penny benefits. And best way to avoid mis-selling is to get armored with Financial Literacy.â€ The Financial Literates is a dream & mission to make Indians Financial Literate.

Media: He has written over 100 articles, case studies & Query Section in various publications like Business Bhaskar, Business Standard, Indian Express, Money Mantra Magazine, Nafa-Nuksan etc. He also appeared on Doordarshanâ€™s â€˜Money Plant Showâ€™ giving expert views on Retirement & Financial Planning. You can check few of his media articles & videos here.

Memberships and Association: Currently, he is General Secretary of The Financial Plannersâ€™ Guild, India, a professional body of practicing Financial Planners with the motto of creating awareness on Financial Planning among the public. He is also member of Financial Planning Association (FPA), USA â€“ FPA is worldâ€™s most renowned association of practicing financial planners.

Fees: He currently charges Rs 12000-15000 for comprehensive financial planning; Rs 2500-6000 for single element planning and his hourly fees for consultancy & other services is Rs 1000/hr.

If you would like to use his services you can send him an email at hemant@tflguide.com â€“ he will let you know the process & fees for your particular requirement. Turnaround time is 2 working days.

You can connect with Hemant on Linkedin, can follow him on Twitter or subscribe to his weekly newsletter.

You can also ask Hemant questions related to personal finance or his practice on this page.

Exports worth 450 bn, London Olympics, other India and Mental Accounting

This week a press release from the PIB (Press Information Bureau) of India which states that India is targeting exports worth $450 billion by 2014 really caught my eye. Exports are expected to hit $225 billion in 2010 – 11, so they are talking about doubling this in 3 years.

That’s a great target, and I hope we are successful in it. I haven’t read the strategy paper yet, just the press release, but having a target like this is itself quite good because even if you get close to that you have still done quite well.

Another press release – this time from the blog of Union Minister of State for Sports and Affairs – yeah that’s right – Mr. Ajay Maken does have a blog.

For the 2012 London Olympics – 10 categories have been identified in which India’s prospects of winning a medal are better than the rest, and there is a focus to train and win some medals in these categories. It’ll be really great if we do well (relatively speaking) in the London Olympics. All the best to Mr. Maken and his team, and I’d like to hear from readers if they have ever heard of any focused preparation for the Olympics prior to this.

I think this is another first – Mukesh Ambani – India’s richest man worries about the other India.

John Elliott on the current budget: Finance Minister in a time warp as India’s success story wobbles.

Now, on to some personal finance – Ranjan Varma on mental accounting v/s getting real.

Hemant Beniwal on how to identify when your financial planner doesn’t have your best interest at heart.

I’ll end with this WSJ link about the Indians with most Klout on Twitter. I wasn’t surprised to know that I don’t follow any of these folks, but it makes for interesting reading nonetheless. BTW I’m on Twitter too.

Banks selling silver bars and Caveat Emptor

HDFC bank has become the first bank in India to sell physical silver.

I was unaware of this development till I received a comment, and had a small commentsation (comment + conversation – word that I just Â invented; likely to cause embarrassment many years from now) that I thought is worth reproducing here for others.

SanjeevÂ March 1, 2011 at 6:01 am [edit]

Just got duped..
Bought 500 gms silver @ 3370/50 gms (discounted for being a classic customer)

paid 67400 /kg vs market price of 49915/kg

we should sue these banks.. will go to bank tomorrow & see if anything can be done.. will keep you all posted

HDFC Rates
http://www.hdfcbank.com/common/gold_rates.htm

Market price
http://www.sify.com/finance/gold_rates/

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Manshu March 3, 2011 at 8:30 am [edit]

Banks are selling silver also? Which bank is it and in which city?

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LoneyÂ March 3, 2011 at 8:35 am [edit]

Only HDFC bank is selling silver as 50g bars.

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Manshu March 3, 2011 at 8:49 am [edit]

Oh â€“ I didnâ€™t know about that â€“ and they are charging a fat premium I guess, and then wonâ€™t be able to buy it back either?

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LoneyÂ March 3, 2011 at 8:56 am [edit]

exactly!

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Manshu March 3, 2011 at 1:43 pm [edit]: Well then I better get ready for some more angry comments now!!!

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If you are going to buy silver from banks then please keep the following two factors in mind:

1. Banks charge a premium when compared with your local jeweler. Buying silver from a bank may give you the satisfaction about purity of silver since a bank is more reputable than a jeweler next door, but will also mean that you pay more.

2. Banks will not buy back the silver from you. Many people have found that when they buy gold bars from banks they pay a premium, and when they try to sell it to jewelers – the jewelers ask for a deduction, so the retail investor gets dinged at both ends of the transaction.

These are pointsÂ that you should keep in mind, and factor in your decision making process.

There are several people who think that paper gold or silver is not safe and for them it’s not even an option to buy anything other than physical gold or silver.

Then there are some people who are not comfortable with buying gold or silver from jewelers and since bigger brands like Tanishq also charge a premium they don’t mind going to a bank.

The point I’m trying to make is you need to be cognizant of the premium, and the fact that you will have to figure out how you’re going to sell this silver later on.

It’s not necessarily a good or bad thing because that depends on how you look at it, but you certainly need to be aware of these facts.

Venn bonds collide

The world of fixed income has been made slightly more complex with the issue of infrastructure bonds and SBI retail bonds.

And then there is one infrastructure mutual fund NFO, which is adding to the confusion for a few people as well.

I’ve answered a few questions on the important distinctions between these instruments, and I thought I’d illustrate them with the help of some Venn diagrams.

Infrastructure Bonds, SBI Bonds and Fixed Deposits

First off, what’s the similarity between infrastructure bonds, SBI bonds and fixed deposits?

The only similarity between them is that they are debt instruments.

And what about infra bonds and SBI bonds? Just that both of them will list in addition to being fixed income instruments.

In the diagram below I’ve put a little star against “Listed” though because SBI Bonds will list quite quickly after allotment, while the infrastructure bonds will list only after their lock in period which will be at least 5 years.

Look at the image below and see if the similarities and differences are clear or not.

The question that I notice pops up often is whether the SBI bond issue will give tax saving or not.

The answer to that is a big NO. Only infrastructure bonds get you tax benefit, not retail bonds like the SBI bonds.

Infrastructure bonds and Infrastructure Mutual Funds

Next up, let’s deal with a simple question now.

Will I get tax benefit if I invest in an infrastructure mutual fund?

The people who ask this question are in all likelihood looking for infrastructure bonds which is the instrument that gives you the extra Rs. 20,000 tax benefit, but unfortunately for them infrastructure bonds and infrastructure mutual funds are two completely different things.

Infra bonds are a debt product while infra mutual funds are an equity product, and you can read the difference between bond and equity products here.

There is tax benefit on bonds, but not on mutual funds.

Difference Infrastructure Bonds and Infra Mutual Funds

Tax Saver Fixed Deposits, Normal Fixed Deposits and Infra Bonds

The last Venn is with tax saving fixed deposits, normal fixed deposits, and infrastructure bonds, and I’ll let you take a look at it without explanation.

Notice that there is a star on tax saving because the tax saving fixed deposit comes under Section 80C, while the infra bonds save Rs. 20,000 under Section 80CCF, and while there are tax benefits, those are two different type of tax benefits.

So, there you are – a simple post with some straightforward distinctions.

Do you think I missed any questions in this post? Anything you’d like to add?

Budget Part 2: Where does the government spend your money?

Yesterday we looked at the where the government gets its revenue from, and today we’re going to look at how this money is spent.

There are two heads for spending:

Plan Expenditure: This is the good stuff in the sense that it’s the money spent on building roads, irrigation systems etc.

Non Plan Expenditure: This is the money spent on defense, police, petroleum subsidy, postal deficit, and basically all the stuff that needs to sustain the country.

Like yesterday, let’s start off with how the two stand relative to one another.

As you can see the total non plan expenditure is way more than the plan expenditure, which means that we spend a fairly large amount on sustaining ourselves, and the larger that amount is – the lesser remains for spending on infrastructure building, and boosting growth.

Here is what the absolute numbers look like (pdf).

Heads	In Rs. Cr.
Total Plan Expenditure	441,547.00
Total (Non-Plan) Expenditure	816,182.00

Now, let’s take a look at how we’re spending the money to sustain ourselves.

Look at how big the interest and debt servicing piece is! Defence is big as expected, and look at the petroleum subsidy piece as well. For all those who complain about the government not subsidizing enough – nothing comes for free, and what doesn’t go directly from your pocket goes indirectly because the government has to borrow to pay for it.

Here’s what the absolute numbers look like.

Heads	Expenses
Interest Payments and Debt Servicing	267,986.00
Defence Services Expenditure	164,415.00
Pensions	54,521.00
Interest Subsidies	6,868.00
Grants to State Governments	65,466.00
Police	29,685.00
Capital Outlay (excluding Defence)	13,212.00
Petroleum Subsidy	23,640.00
Agricultural Debt Waiver	6,000.00
Fertilizer Subsidy	49,998.00
Grants and Loans to Public Enterprises	514.00
Postal Deficit	5,018.00
Other Non-plan Expenditure	128,859.00
Total (Non-Plan) Expenditure	816,182.00

What is the fiscal deficit?

Now, let me build on the revenue and expenses data that we have so far seen and look at what the fiscal deficit is.

Simply put – it is the amount of money the government needs to borrow in any year.

The fiscal deficit is projected to be 4.60% of GDP for next year. The GDP is estimated to be Rs. 89,80,860 cr. (pdf) for next year, and based on that the fiscal deficit amounts to Rs. 4,13,119.56 crores.

This is roughly the sum of the Total Debt Receipts (Rs. 392,816.57 crores) and the Net Market Stabilization Scheme (Rs. 20,000 crores).

You can also arrive at this figure by taking all revenue figures from yesterday adding the net recoveries of loans and advances, and the misc. capital receipts and subtracting it from the total expenses.

So when you hear or read someone express their skepticism on the fiscal deficit number you can easily see why that is.

If there isn’t enough disinvestment then the fiscal deficit will suffer, if there aren’t enough tax collections then the fiscal deficit will suffer, even if the post office spends more the fiscal deficit suffers! These are all projected numbers, and any project going wrong unfavorably will mean a worse than predicted fiscal deficit.

Do all the pieces fit together now?

Looking at revenue and expenses figure, and especially the part where you see how much of the expenses are attributed to interest payments, and how that will further lead to borrowing more money shows why a government can’t fully subsidize petrol, or fertilizer or just give away food like that.

Ultimately if the government’s money is spent in paying interest instead of building roads then that’s bad for the entire nation.

For me, the biggest takeaway from this exercise was that like personal finance, there are no shortcuts for a country’s finance also – even if it has a printing press at its disposal.