MODULE 1: PERSONAL FINANCIAL PLANNING

Chapter 1: Introduction to Personal Financial Planning

Chapter 2: Time Value of Money

Chapter 3: Cash Flow Management and Budgeting

Chapter 4: Debt Management and Loans

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CHAPTER 1: INTRODUCTION TO PERSONAL FINANCIAL PLANNING

LEARNING OBJECTIVES:

After studying this chapter, you should know about:

 Concept of Financial Planning

 Need for financial planning
 Scope of financial planning
 Concept of asset, liabilities and net worth
 Financial Planning process
 Financial advisory and execution

1.1 Understand the concept of Financial Planning

Financial planning aims at ensuring that a household or individual has adequate income or
resources to meet current and future expenses and needs. The regular income for a
household or individual may come from sources such as profession, salary, business or even
investments. The normal activities of a household or individual and the routine expenses are
woven around the regular income and the time when this is received. However, there are
other expenses that may also have to be met out of the available income.

The current income that is received must also provide for a time when there will be no or low
income being generated, such as in the retirement period. There may be unexpected
expenses which are not budgeted, such as a large medical expense, or there may be needs in
the future that require a large sum of money, such as education of children or buying a home,
all of which require adequate funds to be made available at the right time. A portion of the
current income is therefore saved and applied to creating assets that will meet these
requirements. Financial planning refers to the process of streamlining the income, expenses,
assets and liabilities of the household or individual to take care of both current and future
need for funds.

Example

Vinod is 40 years old and earns Rs.2 lakhs a month. He is able to save about Rs.40,000 a month
after meeting all the routine expenses of his family, paying the loans for his house, car and
other needs. His investments include those for tax savings, bank deposits, bonds and some
mutual funds. He pays premiums on life insurance for himself and his wife. Vinod is the sole
earning member of his family and he believes he takes care of his finances adequately to take
care of his current and future needs. How would financial planning help him?

The following are a set of indicative issues that financial planning will help Vinod resolve:

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a) As the sole earning member has he made provisions for taking care of his expenses by
creating an emergency fund if his current income is interrupted for any reason?
b) Does he have adequate insurance cover which will take care of his family’s requirements
in the event of his untimely demise?
c) Does the family have adequate health insurance cover so that any medical emergency
does not use up all the accumulated savings?
d) What are his specific future expenses and how will he fund them?
e) If Vinod has to create a corpus to fund large expenses in the future, what is the size of the
investment corpus he should build?
f) Given his current income and expenses is he saving enough to create the corpus required?
g) Will he have to cut back on his current expense or can he increase his current income so
that his expenses in the present and the savings for the future are met?
h) What is the wealth Vinod has so far built from his savings and how can he best use it to
meet his needs?
i) How should his saving be deployed? What kinds of investments are suitable for Vinod to
build the required corpus?
j) How much of risk is Vinod willing and able to take with his investments? How would those
risks be managed?
k) How should Vinod ensure that his savings and investments are aligned to changes in his
income, expenses, future needs?

A formal treatment of the issues that Vinod faces will require a financial planning process to
assess the current situation; identify the current and future needs; determine the savings
required to meet those needs and put the savings to work so that the required funds are
available to meet each need as planned.

Financial planning is thus a process that enables better management of the personal financial
situation of a household or individual. It works primarily through the identification of key
goals and putting in place an action plan to realign the finances to meet those goals. It is a
holistic approach that considers the existing financial position, evaluates the future needs,
puts a process to fund the needs and reviews the progress.

1.2 Understand the need for financial planning

There is a large range of financial products and services that are available for investors today
and these need to be linked to the specific needs and situations of the client. Not every
product may be suitable to every client; nor would a client be able to identify how to choose
and use products and services from the choices that are available in the market. Financial
planning bridges this gap as the Investment Adviser possesses the expertise to understand
the dynamics of the products on the one hand and the needs of the client on the other. This
makes them best suited to use such products and services in the interest of the client.

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1.2.1 Role of the Financial Planner

The Financial Planner has a significant role to play when it comes to advising clients because
the needs of each person are different from that of the other.

a) The financial planner has to recognise the exact needs and goals of an individual and a
household or family and then make efforts to ensure that these needs or goals are achieved.

b) Personal financial management requires time and attention to recognize income and
expense patterns, estimates of future goals, management of assets and liabilities, and review
of the finances.

c) Individuals do not have time to undertake all these detailed financial activities in a busy
world and they need someone like a financial planner to focus on this area and help them in
their efforts.

d) It is not easy to set financial goals and this requires specific expertise and skill which may
not be present with most individuals.

e) Every financial goal requires finding a suitable product and a proper asset allocation to
different asset classes so that this can be achieved, which is where the financial planner steps
in.

f) Selecting the right investment products, choosing the right service providers and managers,
selecting insurance products, evaluating borrowing options and such other financial decisions
may require extensive research. A financial planner has capabilities to compare, evaluate and
analyse various products which enables making efficient choices from competing products.

g) Asset allocation is a technical approach to managing money that requires evaluating asset
classes and products for their risk and return features, aligning them to the investor’s financial
goals, monitoring the current and expected performance of asset classes and modifying the
weights to each asset in the investor’s portfolio periodically to reflect this. Financial planners
with technical expertise enable professional management of assets.

h) Financial planning is a dynamic process that requires attention to the constantly changing
market and product performances and matching these with the dynamic changes in the needs
and status of the client. This kind of attention can be provided by a financial planner.

1.2.2 How is financial planning different from typical financial advisory services?

Financial planning is a specific process that centre’s on the client, their needs, and their goals
Other financial advisory services would normally look at meeting just a specific need like
advising on stocks or debt but the relation with other aspects might be missing.

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The financial planning effort is a comprehensive process as it covers all aspects of a client’s
personal financial requirements including retirement, insurance, investment, estate and
others. A typical financial advisory service is more likely to look at just a small part of the
client’s total financial requirements.

Goal setting becomes the central part of the financial planning process and all efforts are then
directed towards meeting the goals. Overall goals might not be given too much importance
in a normal financial advisory activity, where some specific target is sought to be achieved.

Financial planning looks to ensure that all the financial activities work together and don’t
conflict. As against this, a typical financial advisory service might not even realise that some
steps suggested would be working against some other goal or requirement. For example,
financial planning would ensure that the asset allocation for an older individual meets their
risk taking ability and that their equity exposure across asset classes is kept in check. This
might not happen when normal advice is taken for example advising on equity mutual funds
investment without knowing the equity exposure elsewhere.

Monitoring the situation and then taking action to ensure that things remain on track is a key
part of the financial planning process. It is inbuilt to the entire effort, so this becomes a natural
part of the activity. This might not happen with respect to a normal financial advisory where
the individual might have to take the initiative themselves and see that things are going
according to plan.

Financial planning looks to select what is right for an individual and this would differ from
person to person. This takes into account both the returns as well as the risk which is vital.
This might not happen for a normal financial advice, where the goal might be completely
different like earning higher return and where risk might be ignored.

There has to be continuity in financial planning efforts which sets it apart from other financial
advisory wherein this could be a short one-time exercise or even piecemeal efforts at
different periods of time.

1.3 Scope of financial planning

Financial planning enables a household or individual to manage its personal finances

efficiently in line with their short and long-term objectives. The following are elements of
financial advisory and planning services:

1.3.1 Personal financial analysis:

 Goal setting with prioritizing of goals

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The financial planning process starts with the goal setting process. Goals refer to what has to
be achieved. This gives a clear target that has to be reached. There are several features that
are important when the goals are set. There should be some specific detail with respect to
the goal. For example, saying that I want to be rich is a vague term because it can mean
different things to different people. Saying that I want to earn an income of Rs. 50 lakh a year
is specific. The goals have to be measurable, so that a person knows the exact amount that
will help them reach the goal. At the same time the goals have to be realistic. If an individual
is able to save around Rs 20,000 a month, then a goal which requires an investment of Rs
50,000 a month is not realistic. Finally, goals also have to be time bound so the individual has
a clear idea of when they need to be reached. A goal of wanting to retire in 20 years with Rs
5 crore as corpus is clear because there is a time period attached to it which will help in
planning to reach the goal.

Once all these features are considered in the goal setting process there will be a list of goals
that will be available. However, every individual has restrictions in terms of the income earned
and amount saved. This will require that the goals be ranked in order of priority. Important
goals need to be put first. So, things like children’s education and retirement should come in
front of something like spending on a luxury car or other expense that does not create an
asset. It is easy to look at short term needs but this can come at the cost of long term
disruption of the goals. This is why there has to be priority to goals that improve the financial
health of the individual. For example, there might be a large credit card outstanding and some
extra income is earned by the individual. In such a situation, instead of spending the amount,
it should be used to pay off the credit card debt. This might not add to an asset but it still
improves the financial condition of the individual.

 Focus on important goals

Goals such as retirement and education of children are important financial goals for which
adequate provision of funds have to be made. Long-term goals such as retirement often get
lower priority for allocation of savings because it has time on its side. The urgent, shorter-
term goals often get higher claim on the available savings. While this may be acceptable for
shorter-term goals that are also important, such as accumulating funds for down payment on
a home, it may not be right to prioritize consumption goals, such as holidays and large
purchases, over long-term important goals. The delay in saving for such goals will affect the
final corpus, since it loses the longer saving and earning benefits including that of
compounding.

Clients often believe that the provident fund, superannuation and gratuity corpus they will
receive on retirement will be adequate to ensure a comfortable living during the retirement
years. In many cases, it turns out to be inadequate. Therefore, every client needs a retirement
plan.

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The Investment Adviser needs to go through the numbers and demonstrate the inadequacy.
The objective is to ensure that the client saves enough during the earning years for a
comfortable retired life.

 Staggering the timing of certain goals

The financial situation of an individual may not allow all the financial goals to be provided for.
Some financial goals may have to be deferred to ensure that the critical financial goals are not
compromised. There are situations when it is not possible to achieve a financial goal in a
specific time period. An example could be a person wanting to buy a house within the next
year, which would require a down payment of Rs 20 lakh plus an Equated Monthly Instalment
(EMI) of Rs 30,000 a month. It could be that the current income situation is not able to support
such a situation. Instead of cancelling the goal there is another route available. This is to push
back the goal by some time, which will enable the individual to get the required finances in
order. Instead of 1 year, if the goal is sought to be achieved after 3 years, then there is a good
chance that the desired financial position will be achieved by then.

For instance, around the time that the family proposes to buy a house, the annual holiday
may need to be reviewed. The holiday may be shorter or planned at a less expensive location.
Some financial goals need to be fulfilled within a specified time frame. For instance, education
of the child has to happen as per the normal age and progression. Prudent use of debt in the
form of loans can be used to tide over any shortage of funds. The figure below helps an
individual in visualising the parameters for setting personal goals.

1.3.2 Cash flow management and budgeting

There is a certain income that is earned by an individual along with the expenses made.
Having a plan to ensure that there are savings and these are invested is one part of the
process. It is also vital that there is a cash flow match so that the household or the individual

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does not run into any cash flow problems. This happens when the inflows and outflows of
cash do not match. There can be a situation wherein a person spends less than what they
earn but still run into cash flow problems. For example, if there is a large expense made at
the start of a month it can lead to a cash crunch if there is a delay in the receipt of income
unless there is a reserve present. In fact, it could lead to short term borrowings which are
extremely costly in terms of interest rates. This could lead to a part of the amount that is
being finally saved to be directed towards paying off the debt incurred due to the cash flow
mismatch.

One of the ways to ensure that there is no cash flow problem is to have a budget with cash
flow dates. A budget is nothing but a list of the inflows and outflows that an individual will
witness along with the time period when this will take place. A monthly budget will help a
person to know whether they are managing their income properly. A budget has a list of all
the items of income and expenses along with their amounts. This ensures that with a single
look it is possible to know what the exact financial position is and whether there is adequate
savings taking place. Every person should make their own personal budget. A lot of people
pay attention to the Union Budget but fail to do budgeting for their ownselves.

1.3.3 Insurance Planning

Several unexpected expenses that can cause an imbalance in the income and expenses of a
household can be managed with insurance. Insurance is a risk transfer mechanism where a
small premium payment can result in payments from the insurance company to tide over risks
from unexpected events. The temporary loss of income from disabilities and permanent loss
of income from death can be covered with life insurance products. Health and accident
insurance covers help in dealing with unexpected events that can impair the income of a
household, while increasing its expenses on health care and recuperation. General insurance
can provide covers for loss and damage to property and other valuables from fire, theft and
such events. Insurance planning involves estimating the losses to the household from
unexpected events and choosing the right products and amounts to cover such losses.

1.3.4 Debt management and counselling

Investment Advisers help households plan their liabilities efficiently. It is common for
households to borrow in order to fund their homes, cars and durables. Several households
also use credit cards extensively. To borrow is to use tomorrow’s income today. A portion of
the future income has to be apportioned to repay the borrowings. This impacts the ability to
save in future and in extreme cases can stress the ability to spend on essentials too. The asset
being funded by borrowing may be an appreciating asset such as property, which is also
capable of generating rental income. Or the loan could be funding a depreciating asset such
as a car, which may require additional expenses on fuel and maintenance, but provide better
lifestyle and commuting conveniences.

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Evaluating which assets or expenses can be funded by borrowings is a function Investment
Advisers can perform. They can advise households about how to finance their assets, how
much to borrow, how to provide for repayment, how to ensure that credit scores are not
unfavourably impacted. Sometimes, excessive borrowings may lead a household into a debt
trap. Such borrowers need counselling and handholding to be able to get out of debt.
Sometimes assets may have to be liquidated to pay off debts. Advisers help households to
deal with their borrowings taking into account their need and ability to repay debt.

1.3.5 Investment Planning and Asset Allocation

A crucial component in financial planning and advisory is the funding of financial goals of a
household. Investment planning involves estimating the ability of the household to save and
choosing the right assets in which such saving should be invested. Investment planning
considers the purpose, or financial goals for which money is being put aside. These goals can
be short-term such as buying a car, taking a holiday, buying a gift, or funding a family
ceremony or can be long-term such as education for the children, retirement for the income
earners, or high-expense goals such as marriage of children. An Investment Adviser helps with
a plan to save for these goals, and suggests an appropriate asset allocation to pursue.

The Investment Adviser does not focus on the selection of stocks or bonds, but instead takes
a top-down approach of asset allocation. The focus is on how much money is invested in
which particular asset class in order to deliver the expected return within the risk preference
of the investor. The adviser’s job is to construct a portfolio of asset classes, taking into account
the goals, the savings, the required return, and the risk-taking ability of the investor. This is
one of the core functions of the adviser and many specialise in asset allocation and
investment planning.

1.3.6 Tax Planning

Income is subject to tax and the amount an individual can save, the return they earn on their
investment and therefore the corpus they are able to build for their future goals, are all
impacted by the tax regime they fall under. An investment adviser should be able to assess
the impact of taxes on the finances of the individual and advice appropriate saving and
investment options. The post-tax return of financial products will have to be considered while
choosing products and estimating holding periods. The taxability of various types of
investment income such as dividends, rents and interest differ. The treatment of return if
accumulated, rather than paid out periodically, varies. The taxability of gains differs based on
the holding period. An investment adviser should bring in these aspects while constructing a
plan for the household. To be noted, tax efficiency should not be the basis of investment
decisions, it is more about guidance and awareness. The basis should be the requirements
and risk appetite.

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1.3.7 Retirement Planning

Providing for retirement is one of the primary financial goals that all people have to plan for.
Given its complexity and nature of well-being in the future, many people tend to ignore it
until it may be too late thereby compromising the quality of their retirement. To be able to
plan for retirement it is important to understand the concept of time value of money and
inflation and how it would impact the cost of meeting expenses in the future. Saving and
investing for retirement requires understanding of how compounding benefits investors
saving for long-term goals. It is important to select the right financial products that are best
suited to the long-term nature of the retirement goal as well as to the ability of the individual
to take risks. In the pre-retirement stage, rebalancing the portfolio to less volatile assets is an
important activity. As retirement approaches, the process of planning should shift focus to
the expenses in retirement, the adequacy of the income from investments and pension
benefits to meet these expenses and strategies to meet the shortfall, if any. While investing
the retirement corpus for income, the taxability of different sources should be considered.
The retirement portfolio has to be monitored and rebalanced through the term of retirement
too since the needs do not remain the same. Investment Advisers bring the skills required to
design and execute a retirement plan.

1.3.8 Estate Planning

Wealth is passed on across generations. This process of inter-generational transfer not only
involves legal aspects with respect to entitlements under personal law, but also
documentation and processes that will enable a smooth transition of wealth in a tax-efficient
way. Estate planning refers to all those activities that are focused on transfer of wealth to
heirs, charity, and other identified beneficiaries. There are several tools and structures to
choose from, in estate planning. Some choices such as gifts can be exercised during one’s
lifetime, while choices such as wills come into play after death. Investment Advisers help
households make these choices after considering all the implications, and help them
complete the legal and documentation processes efficiently.

1.4 Concept of asset, liabilities and net worth

The income of a household or individual is at the base of all financial activities that are
undertaken. The income is used to meet current expenses and a portion is set aside to meet
expenses in the future. The portion of current income earmarked for future needs is called
savings. The adequacy of the income of a household or individual is always relative to its
expenses. If the expenses are managed within the income and there is surplus to save, then
the household’s or individual’s finances are seen as stable. Short-term imbalances in income
and expenses can be managed by loans and advances. The loans are a liability and come at a
cost which may further strain the future income. The option of loans to fund expenses must
be used with discretion since it weakens the financial situation of the household.

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The savings of a household or individual are put to work by investing them in assets. Assets
are broadly classified as physical assets and financial assets. Assets may be appreciating in
value or depreciating. All assets have a resale value. Investors hold assets for the returns they
provide. The nature of return that an asset provides classifies them as growth-oriented,
income-oriented or a combination of the two.

Physical assets are tangible assets and include real estate, gold and other precious metals.
Physical assets have an intrinsic value though the actual price at which they trade is impacted
by demand and supply. They are usually seen as natural hedges against inflation since their
price show a positive correlation with inflation. Physical assets are more growth investments
that are bought for the appreciation in value rather than the income they generate. Some
such as real estate provide both income and growth while others such as gold are pure
growth-oriented assets. The primary drawbacks of physical assets are illiquidity, lack of
regulation/limited regulation and the need for specific skills to identify investment
opportunities, assess the merits of the investment, arrange for the purchase of the asset and
its management and sale of the asset when required. The other limitation of physical assets
as an investment is that they are typically large ticket investments and require substantial
savings or a combination of savings and loan to acquire. When it comes to investment in
physical assets, the adviser has to guide the investor, not to confuse consumption assets like
car with physical investments, though the life a particular physical asset may be relatively long
than other such assets.

Financial assets represent a claim that the investor has on benefits represented by the asset.
For example, a bank deposit gives the benefit of periodic interest and repayment of principal
amount to the holder of the asset, an equity share provides periodic dividend paid, if any, and
the appreciation or depreciation in its value is also to the account of the holder. These assets
may be structured as growth-oriented assets, such as equity investments, or as income-
oriented, such as deposits, or a combination of the two, such as all listed securities. Financial
assets are typically standardized products and controlled by the regulations in force at the
point in time. They may differ on liquidity features, with some such as listed securities
enjoying high liquidity, while others such as privately placed instruments featuring low
liquidity. The standardization of financial assets and the mandatory information made
available makes evaluation and comparisons more efficient. These assets lend themselves to
investment in small amounts and units.

Together, the income / growth oriented physical and financial assets represent the
investments made by the investor. While these assets represent financial benefits and returns
to the holder, the financial strength of the household depends upon how the assets are
acquired. Loans and borrowings used to buy assets create a liability and impose a repayment
obligation on the buyer and a charge on the future income of the household. Loans taken to
buy appreciating assets add to the long-term wealth. Loans taken to buy financial assets, also

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called leveraging, is risky because of the higher volatility in the price of such assets. Assets
acquired with savings and without taking on a liability add to the financial strength of the
household.

An assessment of the financial well-being of the household can be made by calculating the
Net-worth. The net-worth is calculated as Assets – Liabilities. Higher this number better is the
financial position of the household. Net-worth should be calculated periodically, and the
progress tracked to bring the financial situation to the desired stage.

1.5 Financial Planning process

Financial planning requires Investment Advisers to follow a process that enables acquiring
client data and working with the client to arrive at appropriate financial decisions and plans,
within the context of the defined relationship between the planner and the client. The
following is the six-step process that is used in the practice of financial planning.

a. Establish and define the client-planner relationship: The planning process begins when
the client engages an Investment Adviser and describes the scope of work to be done and
the terms on which it would be done.
b. Gather client data, including goals: The future needs of a client require clear definition in
terms of how much money will be needed and when. This is the process of defining a
financial goal.
c. Analyse and evaluate financial status: The current financial position of a client needs to
be understood to make an assessment of income, expenses, assets and liabilities. The
ability to save for a goal and choose appropriate investment vehicles depends on the
current financial status.
d. Develop and present financial planning recommendations: The adviser makes an
assessment of what is already there, and what is needed in the future and recommends a
plan of action. This may include augmenting income, controlling expenses, reallocating
assets, managing liabilities and following a saving and investment plan for the future.
e. Implement the financial planning recommendations: This involves executing the plan
and completing the necessary procedure and paperwork for implementing the decisions
taken with the client.
f. Monitor the financial planning recommendations: The financial situation of a client can
change over time and the performance of the chosen investments may require review.
An adviser monitors the plan to ensure it remains aligned to the goals and is working as
planned and makes revisions as may be required.

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1.6 Financial advisory and execution

Investment Advisers may engage with their clients at various levels and the scope of services
they offer may vary depending on their skills, capabilities and business model. In several
countries, including India, there has been regulatory action in defining the role of various
intermediaries that deal with investors. When a relationship manager, financial adviser,
wealth manager or other entity, irrespective of the nomenclature used, sells financial
products to a client as part of his defined role or business, and earns a commission from the
producer of the financial product, there is a potential conflict of interest. The seller of the
product may not act in the interest of the client, but may push products that earn a higher
commission. This may lead to mis-selling, where a product not suitable to the client’s needs,
or not in line with the client’s risk preference may be sold in a manner harmful to the
customer’s interest.

One of the regulatory initiatives to prevent such mis-selling is to differentiate between

providers of advice and distributors of financial products, and to ask advisers to earn their
revenue from the client, and not from the producer. The distributor who executes the
transactions in financial products may earn a commission from the producer. The current
regulatory regime for financial advisers in India requires that anyone offering financial advice
for a consideration should be registered with SEBI, and should not earn any income from the
producer. There are specific exemptions provided for those that offer advice incidental to a
product they may sell.

The following are the various business models in the delivery of financial advice to clients:

a. Fee-only financial planners and advisers: Some Investment Advisers choose to earn a
primary component of their income from enabling clients to plan their finances in a
comprehensive manner. They engage closely with the client, offer advice on most if not
all aspects of their personal finance, and charge a fee for their services. The fee may be of
various types and a combination of the following:

 One-time fee for a financial plan

 Fee for on-going review and periodic revisions
 Asset-based fee charged as a percentage of assets being advised
 Referral fee for engaging experts to take care of specific aspects of the plan
 Referral fee for execution of plan through other agencies
 Selection and portfolio construction fees
 Fees for assessment and analysis of financial position

Fee only Investment Advisers usually do not take on the execution of the plan or advice. They
refer the client to other agencies who may enable execution of the recommended investment

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transactions. This is to ensure that the commissions earned on selling financial products, does
not influence their advice to their clients.

Under the amendments to the Investment Adviser Regulations, SEBI has said that individual
Investment advisers cannot undertake both advisory and distribution. They have the choice
to register as either of the two. A non-individual investment adviser will have client level
segregation at the group level for these services. It also has to maintain an arm’s length
relationship by providing the advisory services through a separate division or department.

Individual Investment advisers are allowed to provide execution services but through direct
schemes or products in the securities market. However, no consideration can be received at
the investment advisers group or family level for these services.

b. Execution only services: Some Investment Advisers do not charge their clients for advice
as their core function is distributing financial products. Their income comes from the
commissions from selling the product. They may also execute transactions advised by
another financial adviser. Such advisers may also distribute a range of products including
investment products, insurance products, banking and loan products, which are subject
to regulations by multiple regulators apart from SEBI.

Some firms may organise the execution only services into an aggregation model. The
aggregating entity has several distributors associated with it, who take a range of financial
products to clients. In this case, the company shortlists the products it would offer, based
on its selection criteria. It may also have a central advisory team that selects products
after research and data analysis. Those that like to offer these products to their clients,
may associate with such company, and share their revenue with the company for using
their research services, or execution platforms. Many aggregators offer a range of support
services to their associates, including training, development, customer relationship
management software, execution platforms and facilities that may be expensive to set up
on a standalone basis. The shared facility helps the distributors to scale up their business,
and pay the aggregator a share of revenue for the benefits offered.

c. Wraps and Platforms: Wraps and platforms are technology-based advisory solutions that
are standardised for execution. A client or an adviser associate with the platform, offers
its financial products as model portfolios that investors can buy. Investment Advisers may
also choose these platforms to execute transactions in standardised model portfolios.
Clients can view how their portfolios are performing. Advisers can monitor and review the
portfolios and holistically manage the money of clients across multiple products. Wraps
and platforms may charge the client a fee and share this fee with the adviser who executes
the transactions using it. They may also enable the adviser to access clients using their
platforms, to sell financial advice to such clients, and charge a fee and share it with the
platform provider.

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