R Shivkumar eats, drinks, talks and walks numbers. His idea of a good time is when he is juggling complicated excel sheets filled with digits in rows and columns. Getting other people’s finances right is his profession as a chartered accountant (CA). So why did he knock at the doors of a financial planner? If anybody can do it himself, it is Shivkumar himself.
“It’s not that I’m not aware of the options in the market. But a financial planner gives the much-needed long-term focus to a portfolio and is careful about asset allocation, which most CAs tend to ignore,” says Shivkumar, explaining his decision to pay a planner to manage his financial life.
Humility, practical sense and experience—Shivkumar’s decision reflects all of the above in one breath. Fairly confident of his abilities as a CA, Shivkumar started his own practice soon after his CA qualification was in place though he didn’t have a “single rupee in his pocket”, as he puts it. “Right from the time I started my apprenticeship, I knew I was cut out to start my own thing. You can call it a bull-headed decision but that was it,” he says.
The ride, however, was not smooth. “During the initial days of my personal practice, I faced working capital problems often and that made me realize the importance of having financial security,” he says.
A sensible way to achieve this financial security was to buy insurance. Being a thorough professional, instead of making a random decision, he thought it best to seek an expert’s advice. It was at this point that he approached Bangalore-based financial planner B. Srinivasan. “Though my idea was to take advice on my insurance needs, it turned out to be a masterstroke for me,” says Shivkumar.
Problems and solutions
Asset allocation and insurance: It was not as if Shivkumar had no savings. He had made investments, but his portfolio was heavily skewed towards real estate. In fact, he virtually had no exposure to any other asset class. He says: “The planner brought the much-needed balance to my portfolio by introducing other asset classes such as equity.”
He knew he wanted insurance, but had no idea how much would be enough. “Srinivasan explained the need and the quantum of life insurance I needed,” he says. The planner also introduced a retirement fund and children’s education plans in his portfolio.
Making goals: Among other things, the planner made him systematic in his savings and investments. “My investment strategy saw a complete change,” he says. While earlier he had no specific goals, he started investing in a systematic manner through mutual funds towards specific goals.
Too many loans: Shivkumar accumulated a lot of loans initially. With his practice seeing a lull just when he was building a house and a sudden bereavement, his control over his life and finances slipped for a period of time. “I ended up with a home loan, a car loan and a few personal loans. The equated monthly instalments from all these loans hit my budget.”
When looking into Shivkumar’s case, the planner made him prepay as much as possible. “In the last few years, I have brought down my exposure to loans in a big way by repaying loans through my surplus income. My total loan liability had gone up to one and a half times my gross annual income, now it’s only a fraction,” he says.
Curbing temptations: Even during his college days, Shivkumar never overspent on anything. Back then, the only exception was books, now it’s luxury cars. “Books were my passion and my father never stopped me from spending on them. Besides that, I was very careful,” he says.
Shivkumar always wanted to buy a high-end car, such as a Mercedes, but the planner discouraged him from doing anything like that. The planner said that Shivkumar needed to build a stronger financial foundation before doing so. “In retrospect, he was correct and I really appreciate his contribution,” says Shivkumar.
Shivkumar is very satisfied with his financial decisions and gives credit to the planner for that.
Asked why he couldn’t do it himself, he grins: “CAs can beat them hollow if they take financial planning as their profession, but then we are not in that field.” On a serious note, he adds that focused long-term planning is possible only through a planner.