Navi Mumbai-based Balaji Gopalaswamy, 41, a manager at a private firm, always thought he had his finances sorted. “I have been working for nearly 14 years, so I had some money saved up. I used to invest in mutual funds, periodically. I had also taken term insurance and steered clear of instruments that mix insurance and investments," said Gopalaswamy. He also had some money put away in fixed deposits and invested regularly in his Public Provident Fund account.
Apart from all this, Gopalaswamy and his wife Malini Balaji, 35, who is a homemaker, had bought a house as an investment and put it on rent. The family themselves lived in a rented apartment because it was closer to Gopalaswamy’s workplace and the commute was easier. “The EMIs were pretty high and were taking up a big chunk of my income and I later realised they were interfering with my savings and investments," he said.
He was happy with his investments, until he started assessing the family’s financial preparedness for retirement. Gopalaswamy used online calculators and Excel sheet to calculate on his own, and the numbers shocked him. “The amount I would need to accumulate surprised me," he said.
That is when Gopalaswamy realised that this was more complicated than he had anticipated, and he needed professional help. “I spoke to advisers who work for banks, but I didn’t gain much confidence in their abilities. I felt like they were just trying to sell their own products, rather than recommend something that would genuinely benefit me," he said. Disillusioned with advisers attached to financial institutions, he started doing some research and came across the concept of a fee-only financial planner. “They advise you and then step back and let you make your own choices in terms of investing. I realized that this would suit my needs best," he said. Soon after, he zeroed in on Melvin Joseph, Sebi-registered investment adviser and founder, Finvin Financial Planners.
The house they bought was the first thing they tackled after meeting Joseph. “We had seen our parents and friends investing in homes, so it seemed like the normal thing to do," said Gopalaswamy, who felt it helped inculcate investing discipline. But somewhere at the back of his mind, Gopalaswamy knew that it was not giving him as much returns as he would have gained from other investments, and Joseph agreed. “He invested in a property in the suburbs and it was not appreciating in value. His asset allocation was around 67% in real estate, 20% in debt and 13% in equity, which was not ideal. But he realised that and was planning to increase equity exposure," said Joseph.
The discussion crystallized a big decision, which was to sell the house. While Gopalaswamy made a profit, he knew he had lost out by choosing real estate as an investment. “If you add up the amount I paid as loan interest, combined with the principal, the returns were very low," he said.
The next thing was to focus on insurance and investments. Despite having term insurance, Gopalaswamy was under-insured. Joseph asked him to bump up life insurance and buy more health cover with a super top-up plan. While Gopalaswamy knew about mutual funds and had equity exposure, his investments also needed some fine tuning. “We had invested in mutual funds through a bank’s MF portal, but Melvin explained the difference between direct and regular funds and the extra amount we were paying. We have since moved out of regular plans for the most part, except for a few funds that we have retained for tax reasons," he said. The planner also focused on the couple’s long-term goals, like planning the future of their twin boys aged four and named Anant and Amrit. “They needed to focus on their children’s higher education and marriage, and their own retirement. The investments were not adequate and not in the right instruments. I helped them change their asset allocation," said Joseph.
Gopalaswamy and Malini work as a team now. “He is involving his wife in all his financial discussions and she is taking active interest. In my opinion, this is a must for all families," said Joseph.