Personal Financial Planning: Can AI Enhance Financial Management? Here Are Expert Insights On The Role Of Financial Planners | Personal Finance News

Why Personal Finance Matters: Can AI Enhance Financial Management? Here Are Expert Insights On The Role Of Financial Planners (image source: Times Now Digital)

Personal finance, a term synonymous with individual financial planning tailored to specific needs and goals, holds immense significance in today’s world. Many individuals find themselves navigating a complex landscape, balancing present expenses with future financial security through avenues like insurance, savings, and investments. However, a lack of proper knowledge often leads some to neglect financial planning altogether.

In the digital age, access to information via the internet has been easier, yet concerns persist regarding the credibility of sources. According to a 2019 survey by the National Institute of Financial Education, only 27 per cent of Indians possess financial literacy, highlighting the pressing need for education in this domain.

Amidst this evolving landscape, personal finance has emerged as a buzzing topic in the financial sphere. Times Now recently sat down with Krishan Mishra, CEO of FPSB, a standard-setting body that certifies financial planners to global standards through rigorous programs and testing procedures.

During the conversation, CEO Krishan delved into various topics surrounding personal finance, including its importance, the spending habits of Gen Z and millennials, the role of AI in financial planning, career prospects for financial planners, and much more. Here are some of the extracts in Q and A format.

Why Personal Finance Matters?

Personal finance enables individuals to achieve their financial goals and secure their future. By understanding concepts like budgeting, saving, investing, and debt management, individuals can make informed decisions about their finances, ensuring financial stability and freedom. Additionally, personal finance education equips people with the skills to navigate unexpected expenses, plan for major life events like buying a home or retiring comfortably, and build wealth over time. Ultimately, mastering personal finance is essential for achieving financial independence and peace of mind.

The Role Of Artificial Intelligence (AI) In Personal Finance

AI has been around since its discovery in 1954, albeit its practical application in personal finance is more recent. It’s akin to a young individual embarking on new endeavours. Technology, including AI, serves as an enabler, offering opportunities to enhance financial planning. Mundane tasks like data management and information gathering can be efficiently handled by AI systems. However, the emotional connection between clients and financial planners remains crucial in personal financial planning. While AI tools can provide solutions and work tirelessly, the decision-making aspect remains distinctly human.

Can AI Replace Traditional Financial Planners?

The emergence of robo-advisors and AI-driven financial tools indeed caused apprehension among some financial planners. However, these tools heavily rely on available data and may not grasp nuances beyond their programmed scope. It’s imperative to view AI as a supplementary tool rather than a replacement. Embracing AI as a primary source of information and leveraging its capabilities alongside human expertise is essential for both clients and financial professionals.

Millennials And GenZ Engagement With Personal Finance

The internet has democratised access to financial information, presenting both opportunities and challenges. While it offers vast resources, ensuring the reliability of sources remains a concern. Self regulatory bodies like FPSB play a crucial role in maintaining standards within the personal finance industry. FPSB acts as a global standard-setting body, fostering professionalism and competency among financial planners. It collaborates with regulators and governments to align industry practices with international standards, fostering growth and trust in the profession.

Why CFP Professionals?

CFP professionals adopt a holistic approach to financial planning, focusing on clients’ goals and needs rather than promoting specific products. They function as consultants, providing personalized recommendations tailored to individual circumstances. While they may hold licenses for specific financial services, their primary role is to guide clients in making informed decisions aligned with their long-term objectives.

Career Prospects For Certified Financial Planners

Certified financial planners (CFPs) find opportunities across various sectors, including banking, insurance, and asset management. The BFSI sector remains the primary employer, followed by roles in treasury departments, family offices, and consultancy firms. With the increasing demand for financial expertise, particularly in private banking, the salary prospects for CFP professionals are promising. Collaborations between FPSB and educational institutions further enhance career prospects, offering specialized programs that align with industry needs.

How Much Do CFP Professionals Charge For Their Services?

Fees for financial consulting vary based on factors such as portfolio complexity and the scope of services provided. Unlike standardized charges, fees are tailored to each client’s unique financial situation and requirements. Financial planning involves a comprehensive assessment of goals and strategies, emphasizing the client’s best interests rather than transactional gains. This client-centric approach ensures transparency and fosters trust between CFP professionals and their clients.

Underlooked Rural Areas

Rural and semi-urban areas are frequently overlooked in discussions about savings, despite their potential to outstrip urban counterparts in this regard. The reason lies in the limited options for discretionary spending and the inherently lower cost of living prevalent in these locales. With fewer opportunities for extravagant purchases or lifestyle expenses, residents often find themselves naturally inclined towards saving more of their income. Moreover, the absence of the consumerist culture prevalent in urban centres contributes to a more frugal approach to finances. Consequently, individuals and families in rural and semi-urban areas tend to prioritize saving for the future, whether it be for emergencies, education, or retirement.