The majority of Indians are financially unprepared for medical emergencies and job losses, revealed a survey conducted by financial education firm Finsafe India, according to Mrin Agarwal, Founder of the firm.
On whether Indians are really prepared for financial emergencies, 56% felt planning for financial goals was tough, while 45% said they were not prepared to manage expenses in case of a job loss and 29% were worried about not being able to support their elderly parents.
A majority of those surveyed are also not prepared for medical emergencies, with 52% saying they were relying on employer-provided health insurance covers, but were not sure if it was enough, while 21% did not have cover for health emergencies at all.
On investing, while 41% have put money in equities, 35% still preferred traditional investments like fixed deposits and insurance policies, and 34% of the respondents did not know where to invest.
About 71% of the respondents were interested in learning more about detailed financial planning, followed by mutual funds and taxation. Saving more and budgeting were also of interest to those surveyed.
The survey received 5,769 responses from salaried employees.
The survey highlights the glaring need for financial planning for Indians. Generally, investments are done in an ad hoc manner based on recent performance and held for the short term while there is appreciation. Once markets fall or in case of volatility, investors tend to exit, thereby losing out on potential returns in the long run. This, coupled with low savings, is the reason people are not able to meet financial goals.
Another factor that stops financial goals from being met is opting for wrong investments. According to the 2022 annual report of the Reserve Bank of India (RBI), household savings are held primarily in fixed deposits. About 6% of gross national disposable income (GNPI) is held in deposits versus a meagre 0.5% of GNPI in equities. Fixed deposits are neither tax efficient nor do they beat inflation.
The problem lies with how financial advice is seen in India. Even now, the financial adviser is only seen as someone selling products.
In the 1990s, the financial adviser was meant to show good (well-performing) mutual fund schemes to the customer. Beyond the returns, there was no discussion on financial goals and this continues even now to a large extent. Clients were not interested to discuss anything but products, and advisers were giving what the clients want. Not all advisers are also equipped to talk about financial planning and/or feel the importance to do so.
As investor needs change, financial advisers must realise they add value through holistic financial planning and not just recommending schemes. They need to equip themselves with the knowledge and certification for the same.