Monday, November 20, 2017

Keeping Good Records is Good Business

Keeping Good Records is Good Business

Maintaining good records is important to help meet your business and legal obligations. The right record keeping system not only helps satisfy these obligations, but it may save you money and time. Here’s what to consider for your record-keeping system.

Regulator has not given specific guidance as to the records that must be kept. Given that, everything that might be needed to demonstrate that the client’s best interests have been served should be kept on file.

‘If in doubt, keep it on file’ is the basic proposition when it comes to client records.

What Records Do You Need to Keep?

The first step is identifying the records you need to maintain. The obvious examples include leases, contracts, payroll and personnel records, and a range of accounting and finance information, such as invoices, receipts, payables, and inventory.

Second Step is to identifying your business needs as far as investment and insurance agents. I suggest keep clients primary details like name , address, date of birth, place of birth, family members details, marriage anniversary, family income, pan number, aadhaar number, bank details. After taking consent from client keep records of investment folios and insurance policy and any other info client want you to know.

Third Step is to identifying clients consent and his need how client want you to help him for example he want you to call when insurance premiums are due, he want you to call when his investment are getting matured or any specific need of client. I suggest as an agent you should provide service like reminder on due, assist client for maturity of investment, product information, wish them on birthday, anniversary, compliments on new situation like house upgrade, new car, clients child’s achievement, new job etc.

Forth step is to ensure that records of the following matters are kept in relation to the provision of the personal advice:
  • to prove that the best interests duty has been satisfied—the information relied on and the action taken by the provider that satisfies the steps in that subsection;
  • the advice given, including the reasons why it would be reasonable to conclude that the advice is appropriate to the client, had the provider satisfied the best interests duty;
  • Where the provider knows, or reasonably ought to know, that there is a conflict between the interests of the client and the interests of an adviser the information relied on and the action taken by the provider to indicate that the provider has given priority to the client’s interests when giving the advice.
  • Must keep the records required for 7 years after the day the personal advice was provided to the client.
  • One of the simplest ways to ensure that all relevant records are kept is to use checklists. A checklist allows the user to systematically ensure that they have kept a record of everything that needs to be contained within a client file. 
  • The checklist, with some sample data included, includes everything that client file should contain, from the time when the client is first contacted and provided with a financial services guide to the time when the client signs their authority to proceed. It also covers all correspondence after that. The checklist looks like this:
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In ‘the old days,’ when all files were made of paper, the simple way to proceed was to staple a checklist like this to the inside of the file used to hold the client’s information. These days, with digital files, the concept is still the same, but the process of keeping the checklist is perhaps the only part of the file-keeping process that has become less efficient with digitisation.

But it is not that much less efficient. In this digital age, the best way to ensure adequate record keeping is to save a blank copy of the client file checklist within each client file when that file is first created. Whenever the file is added to, it is then simply a matter of checking the checklist to see if it too needs updating.

For example, when a client first makes contact and the practice sends that client a copy of the 
fact finders sheet (FFS), the email containing the FFS should be saved within the client file. At the same time, the checklist is updated to show that this has been done, as in the example above.

A source document is essentially an original document. (In strictness, it is the document from which the relevant information is initially sourced). Whenever possible, a source document should be held on the client file. Critical details like pan no, aadhar no, bank details etc. 

Best practice states that the adviser should have a copy of the original document wherever possible. A good example relates to a client’s fact finders ask the client to nominate the name of their fund and the balance held within it. This is a good record, especially when the client has completed the fact finder themselves. But having a copy of the most recent statement – the document from which the client has sourced the information about their balance – is even better. Clients can misread their own statements, or be providing old data from a statement, etc.

getting access to source documents is critical in minimising mistakes. Clients will sometimes become confused or even tell you things that are not true. ‘Garbage in, garbage out:’ If you base your work on flawed data, then you run the risk of later being accused of providing inadequate advice. Gaining access to source documents is the best way to avoid this risk.


Fifth step please consult a professional with tax expertise regarding your individual situation.

How Do You Want to Keep Them?
Record maintenance can take three basic forms:
·         Paper-basedIt’s old school, but maintaining records in file folders stored in a metal cabinet may be sufficient. However, there is a risk of files being damaged or destroyed with no back-up.
·         Computer-basedmaintaining records on computers saves space and makes management easier. Consider backing up files and keeping them off-site.
·         Cloud computingStoring and managing records on the internet offers possible savings on software, reduces the risk of lost data, and provides access from any location.
What Software Should You Use?
The right software can make life more productive; the wrong software may cost you time and money.

When shopping for software, consider:
·         What is the size of your organisation? Do you want an easy-to-use package, or are you able to hire a dedicated employee to take advantage of a more sophisticated alternative?
·         What sort of training and support is provided? Without the right measure of either, your software may not be the productivity tool you envisioned.
·         Is specialized software available? The needs of different professions can vary greatly. Specialised software may have capabilities not available with more generic software.

·         Do you need mobile capabilities? If you operate your business from the road, you may want your software to have robust mobile features.

Friday, May 19, 2017

Bank Fixed Deposits vs Debt Mutual Funds

For most of us, our search for debt investments begins and ends at bank fixed deposits. When we have idle money in our bank, we invest the excess amount in fixed deposits. Bank fixed deposits are easy to understand. You simply need to walk into nearest bank branch to invest. Moreover, with net banking becoming more and more popular, opening a fixed deposit is merely a click away for a number of us.
Returns are fixed and guaranteed. You don’t really need to worry about whether banks can default. You believe that Reserve Bank of India, the banking regulator, will take pro-active steps or in the worst case, the Government will come to your rescue.
Hence, it is no surprise that a number of investors don’t look beyond fixed deposits for their debt investments.
Of late, you would have read a lot about how debt mutual funds can present a credible alternative to bank fixed deposits. Some argue, and correctly so, that the debt mutual funds are more tax-efficient than fixed deposits. Others counter that the returns from debt mutual funds are not fixed, face credit risk and thus your money might be at risk.
In this post, I will compare tax treatment of fixed deposits and debt mutual funds with the help of illustrations. I will compare fixed deposits and debt MF schemes on a few other parameters too.
Please understand I am referring to only bank fixed deposits. I advise readers to stay away corporate fixed deposits and fixed deposits from small co-operative banks.

Tax Treatment of Fixed Deposits and Debt Mutual Funds

This is an area where debt mutual funds score over fixed deposits.
Interest on fixed deposits is taxed at your marginal income tax rate. For example, if you make a fixed deposit of Rs 1 lac at 8% for 5 years, you will earn Rs 8,000 as annual interest.
You will have to pay tax on this interest income at your marginal income tax rate. If you fall in the highest income tax bracket, you will have to pay income tax of Rs 2,400 on this income (30% of Rs 8,000). I have ignored surcharge and cess.
On the other hand, in case of debt mutual funds, the tax liability arises only at the time of sale of mutual fund units. So, if you purchase debt MF units today, you won’t have to pay any tax till such time you sell those units. It does not matter how long you hold those units.
If holding period for debt mutual fund units (at the time of sale)  is less than or equal to 3 years, the resulting capital gains shall be treated as short term capital gains and taxed at the marginal income tax rate (income tax slab).
However, if the holding period is greater than 3 years, the resulting capital gains shall be treated as long term capital gains and taxed at 20% after accounting for indexation.

Tax Deduction at Source (TDS) for Bank Fixed Deposits

A bank is required to deduct TDS (Tax deducted at source) if the interest paid during the financial year exceeds Rs 10,000 across all its branches. TDS is the tax deducted upfront by the bank (from the interest) and deposited with the Government.
So, if your annual interest from fixed deposits (from a particular bank) is Rs 8,000, there is no TDS applicable. However, if the annual interest is Rs 13,000, the bank will deduct TDS at 10% i.e. Rs 1,300. I have not considered cess and surcharge.
If you have furnished PAN with the bank, TDS will be deducted at 10%. Otherwise, the bank will deduct TDS at 20%. Please understand TDS has no relation to your marginal income tax rate (income tax slab).

Friday, May 12, 2017

5 Financial Lessons From Baahubali's Blockbuster Success

From being patient to never letting emotions cloud one's judgement, Bahubali carries many important lessons for investors.

Like Baahubali, one must be ready to play the waiting game when investing.

In less than two weeks, the worldwide box office collections of 'Baahubali 2: The Conclusion' has surpassed the Rs 1,000 crore mark, making it by far the most successful movie in Indian history. The movie directed by SS Rajamouli, has been released in Hindi, Tamil, Telugu and Malayalam in over 6,500 screens across India, and in 9,000 plus screens worldwide.

While Rajmouli’s magnum opus continues its dream run at the box office, the story about a young prince (Baahubali) who lets go of short-term gains as a matter of principle has an important lesson for traders and investors.

Here are some important financial lessons from Baahubali that every investor can use:

Playing The Waiting Game
Baahubali forfeits his right to the throne but never loses sight of the kingdom. It took two generations to finally gain the kingdom. Similarly in the field of investing, the waiting game eventually pays off, Spend Big To Earn Big.

Baahubali pays a huge price throughout his life. He forfeits the throne. He also gives up a life of luxury to live among the commoners. Eventually, he also gives up his own life. While investing the same principles hold true as Most of us tend to trade and invest without understanding the actual costs and the opportunity costs. We hold on to our investments for a long time and get out at the wrong time.

Greed At The Wrong Time Can Be Your Undoing
Baahubali’s brother succumbs to greed and that eventually proves to be his undoing. Baahubali, on the other hand, was greedy at the right time. Similarly, in the investment arena you need to know when to be greedy and when to be fearful. Greed at the bottom of the investing cycle and fear at the top is positive. The reverse can be disastrous for you.You Don’t Need Superstars
Baahubali proved that you do not need big stars to create a blockbuster movie. That is true of your portfolio too. You need star potential; not just superstars in your investment portfolio.

Never Let Emotions Cloud Your Judgement
This was the underlying theme of Baahubali; the character. Whether he was confronted by his affection towards his mother or his commitment towards his wife, Baahubali never allowed emotion to get the better of his judgement. Emotions are your biggest enemy while investing, You normally tend to follow the herd mentality and you tend to get swept away by emotions. Like Baahubali, your investment decisions must be driven by cold logic and incisive analysis.

Friday, February 3, 2017

This time it's different...........There were four things that stood out in the Budget 2017.

The budget was wholly aimed at improving the infrastructure of the country, especially in infrastructure sector. The budget had many provisions addressing the rural segment of the economy.
Meanwhile, there was also driving force on entrepreneurship and rationalisation of tax structure for start-ups and new setups in the manufacturing sector.

Valuations getting better across the board, focus on themes like Focused Government reforms, Digital Money this all beneficiaries could benefit your portfolio significantly.

There were four things that stood out in the Budget 2017. 
One, focus on unsung India – rural poor & agriculture.
Two was continued focus on fiscal disciple,
Three there was focus on infrastructure spending and fourth was to bring transparency in transactions. Spending on housing and roads would help create jobs and in turn boost consumption, Only if consumption improves one will see an improvement in capex and corporate earnings. According to me, I look at it in the backdrop of global uncertainty and the fact that there has been quite a lot of difficulty in raving up domestic growth. The fiscal muscle available to the government was fairly limited. So I saw this Budget straddling the short-term and the long-term.
fourth was to bring transparency in transactions. Spending on housing and roads would help create jobs and in turn boost consumption.

Now, Lets Come back to Our Money… main topic.
So, The world of investing can be cold and hard. But if you do thorough research and keep your head on straight, your chances of long-term success are good. 

Aggressive strategy: We should look at 2-3 years horizon on Infrastructure sector adding money thru systematic investment basis. After recent demonetization effect we can expectant superior returns from banking and financial sector funds.

Moderate Strategy: We should look at 3-5 years Continue or add money to our existing funds like diversified equity Funds.

Conservative Strategy: Stick to Balanced Fund category with minimum time frame of 3 Years.

I strongly feel adding regular and disciplined investment in equity Mutual Funds will make good Long Term Wealth.

Just Reminded me quote by Sir John Templeton.

"The four most dangerous words in investing are: 'this time it's different.'

Follow market trends and history. Don't speculate that this particular time will be any different. For example, a major key to investing in a particular stock or bond fund is its performance over five years. Nothing shorter.


Please feel free to call me for more detailed discussion.


Regards,
 
Ritesh.Sheth CWM®
CHARTERED WEALTH MANAGER

              Helping you invest better...  

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Wednesday, November 30, 2016

2016 will be different

The domestic stock market has reacted negatively to demonetisation and opened lower after digesting the intense social media heat both for and against demonetisation. However, the market gained sanity later and reacted calmly by the close of the week. 

Much has been said about demonetisation but no one denies the pragmatic outcome of the same. Banks have started reducing interest rates and some of the private lenders have already reduced rates by 15 to 20 bps. 
The stock market is altogether an independent animal with has scant regard to demonetisation, if any. However, such moves should bring a positive shift towards a cashless economy. Combined with GST, it would possibly help tame corruption and a new era of meritorious society should emerge. 

In the stock market, open interests in index futures have fallen sharply and are running on the lower side of the annual averages. Volatility, too, is cooling down slowly, which is good for the health of the market. 

Stocks that are banned in the derivative segment stand at a negligible level, indicating a moderation in leveraged positions. Normalcy is creeping back into both the stock market and the economy. 


The stock market is limping back to normalcy. Greed and fear seem to have abated and all the external macro-factors have almost been discounted. 

The massive fall in stock prices on fears of a slowdown seems to be overblown from market’s perspective. It is well known that the market is a six-monthly forward discounting machine. 

Any negative event, whose effects are to be felt within one or two quarters, is almost always discounted. Thus, there is nothing that investors must worry about regarding the effects of demonetising high-value notes, as it has already been discounted by the market. 

The recent fall, therefore, creates a compelling opportunity to buy great businesses. 

Investors should take the opportunity and start purchasing Equity Mutual Fund for long-term portfolio.

views and recommendations expressed in this section are personal. Please consult your financial advisor before taking any position. 

Saturday, November 5, 2016

Principle of Wealth Building 5 of 5

If you thought building wealth was about how much you make then you would be wrong: it's about how much you keep. 
The single biggest expense standing between your earnings and savings is (drum roll, please)... taxes. 
Nothing else comes close. 
When you add together all taxes on items like income and consumption, factor in the pass through of all other taxes like corporate taxes, import duties, etc., you quickly see what an extraordinary burden taxes have become regardless of your income level. 
That's why legally controlling this expense is the 5th essential wealth building principle. You must learn how to keep more of what you make. 
The key point is how your government (in it's infinite "wisdom") has decided to favor certain financial practices through tax incentives. 
How does this all fit together? Well, remember a few emails back when I taught you the 3 Principle of Wealth Building - paper assets, real estate, and business? 
At the time, I explained how paper assets were a wealth parking vehicle, but real estate and owning your own business were wealth building vehicles. This critical distinction surprised a lot of readers. 
While the stats make this claim indisputable, I wanted to give you two reasons why it's true. 
The first reason was contained in the last lesson - leverage. Few leverage opportunities exist in paper assets (and all carry significant risk and cost). However, business ownership and real estate offer maximum leverage opportunities (many without increasing risk or cost - some even lower costs). 
Now you're learning a second reason these two asset classes are favored wealth building vehicles - tax advantages. Real estate and business ownership offer tax advantages not available to Salary earners or paper asset investors. 
(Yes, I know I'm using India-centric terminology; however, similar laws and principles apply in most common law countries for my readers outside India) 
The government has decided to make these two asset classes the most tax-favored wealth building vehicles available. 
For example, it's entirely possible to own real estate that puts cash in your pocket every month while providing valuable tax deductions that give you a bigger tax refund at the end of the year as well. You can't do that with earned income from your job or capital gains from stocks and bonds... without going to jail. 
Similarly, when you own a business many expenses are paid partially by the government as legal tax deductions. This can put more money in your pocket for any given level of income. 
Now, it's beyond this brief email instruction to give detailed analysis of all the deductions available or how they work. There are too many countries, too many rules, and everyone's situation is unique. You'll need to learn the details from one of the many books focused exclusively on this topic or consult with a competent tax professional. 
Instead, what is important for this lesson is to understand how real estate and owning your own business are two wealth building vehicles that afford both valuable tax deductions and leverage opportunities. 
The leverage and tax advantages can dramatically affect your rate of compound growth which will shorten the amount of time it takes to achieve wealth. In short, these two principles allow you to create more wealth with fewer resources - both time and money. You can't apply these two principles to paper assets. 
It's why more people build wealth through real estate and business entrepreneurship than any other asset classes. It's also why paper assets are generally used to park and preserve wealth built elsewhere. 
Sure, you can still achieve financial security the traditional way with aFixed Deposits and savings plan invested in paper assets (which we will cover in detail in the next several lessons). This strategy works (without leverage or tax advantages) if you have the time and discipline to make it work. 
It is well-proven financial path that is governed by strict mathematical limitations. 
However, many people want to turbo charge their results. They want financial security in 10-15 years instead of taking a lifetime. If you're one of those people then there is no getting around the necessity for leverage and tax advantages. 
Your homework from this lesson is to develop a working knowledge of the various tax strategies that apply to your chosen path to wealth. Develop this knowledge or find a professional to help you because it will pay you dividends for a lifetime. 
I know it has for me. That's why it's your 5th wealth building principle. 
I hope you've enjoyed these first 5 principles to wealth Building. Yes, there are many more wealth principles. Course on wealth Building teaches you everything required in carefully structured, step-by-step, learning modules so you walk away with your own personal plan for wealth. You can learn more about it.
In the next blog in I'll share more ideas explaining exactly how the traditional passive investment approach using paper assets can be applied in your wealth plan, and I'll show you the two essential factors required to make it work. This is important material since nearly everyone applies this strategy - for at least a portion of their wealth - me included. 
Thanks for your support, and I'll see you in few days...

Wednesday, September 7, 2016

Principle of Wealth Building 4 of 5

Dear Customer,

Unfortunately, other tasks require prioritization right now, and I'm not willing to rush the writing and sacrifice quality. Principle of Wealth Building. 

In other words, Principle of Wealth Building 4 and 5 lesson delayed. 
If you are disappointed then that is a good thing because it means I've been delivering value to you. 
Principle of Wealth Building 4

Why? You have limited time and capital resources. 
Time and money spent one place cannot be used elsewhere. At some point your financial growth hits a wall because it's limited by your personal resources. 
However, the world has unlimited time and unlimited resources. Your financial growth is literally limitless when you leverage other people's resources. It's how all fortunes - large and small - are built. 
Leverage is your 4th wealth building principle because it multiplies your results for any given expenditure of effort. It must be a part of any properly designed wealth plan. 
However, leverage can make the good times great and the bad times unbearable (if you apply it incorrectly). 
In other words, a common myth about leverage is it increases risk. This is only true for certain types of leverage such as financial leverage. 
Other types of leverage can actually increase results while reducing risk. 
Surprising... but true. 
For example, I'm using technology leverage to deliver this message to you. I write these lessons (knowledge leverage) once and leverage technology to build relationship and add value to thousands of people's lives. 
No risk - unlimited reward. 
Understanding leverage's many aspects at a very deep level is one of the most important principles in your wealth building plan. 
It's another make-or-break issue (like so many others... that is why so few people succeed financially. Each one of these principles is critical to your financial success.) 
Using my own life as an example, I became uncomfortable with the dangers inherent in financial leverage in late 2000. I sold all my holdings prior to the huge decline to eliminate financial leverage. As a replacement, I consciously chose to increase my knowledge and technology leverage instead by focusing on this business. 
None of that was by chance, yet it has been worth millions. It was the conscious matching of an appropriate leverage strategy to the current market environment that resulted in eliminating risky leverage because it was inappropriate. This is an essential wealth building principle that you would be wise to emulate. 
Your homework for this lesson is to look at your wealth plan. Where are you including leverage? Where could you add leverage without increasing risk? What changes would you have to make to open new potential for increased leverage and results? 
The answers to these questions can make-or-break your wealth. 
In a few days I will send you the 5th wealth building principle as part of this base education for developing a proper wealth plan.
I hope you are enjoying these insights. My goal is to help you break from ordinary thinking so you can produce extraordinary results. 
See you in a few days with the 5th principle...