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29 May, 2024 17:04 IST

Go for fixed rate home loan if your monthly cash flows are tight

Source: IRIS (01 December 2010)

Go for fixed rate home loan if your monthly cash flows are tight
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Brijesh Dalmia, a certified financial planner (CFPCM) and founder director of Dalmia Advisory Services, in an interview with Yogita Khatri of says stricter regulations and higher certification must be mandatory for advisors selling financial products.

> What led you to choose financial planning and wealth management as a career?

It was more of a default than choice. When I joined business, my father / brother were already involved in stock broking activities in Patna. I started the primary market operations (mobilizing funds in IPOs bonds, etc.) through sub broker channels. Over the period, with changing circumstances and regulations, I changed my business model from sub-broker base to direct client model. Finally, when I moved to Kolkata in year 2000, I realized that financial planning and wealth management is a long term sustainable business model. Keeping this in mind, I completed my CFPCM and currently providing financial planning and wealth management services to my clients.

> With hardening interest rates, how will you advise home loan borrowers to take their decisions? Which route they should go for, according to you, floating or fixed home loan rate?

To clients whose cash flows are very comfortable - we are recommending floating interest rates, as they can cope with even if interest rates rise a bit. Salaried clients whose monthly cash flows are tight, we are recommending fixed interest loans so that any increase in EMI (in floating interest rates) should not impact them.

> What are your thoughts on ULIPs after the recent IRDA regulations? How would you recommend going for new ULIP plans? What things one should consider before choosing a plan?

All in all it`s a negative for investors compared to earlier product features and cost. Look, even before there were some great ULIP plans with lower cost. These plans offered very good flexibility to customers, like limited premium payment options, higher multiples of life cover, lower mortality rates, etc. lower / very competitive allocation rates, etc. While upfront costs have been reduced, most companies have increased mortality rates which are not seen upfront. Further, the regulation regarding foreclosure of policies if premiums are not paid in time is a big negative. One should consider buying ULIP plan if he/she wants equity participation, higher life cover and limited premium payment term.

> How can a hard-working family strike a healthy balance between rewarding themselves for working hard and planning for a secure future?

In the early part of life if a family can apply a disciplined approach towards budgeting, the later part of life can be quite rewarding. While one should not curb entertainment and comfort, any family should apply restrain on luxury at the cost of savings. To put it simply, any family should have a savings plan in place - no matter what the income levels are. This will ensure that discretionary expenses are curtailed due to committed savings.

> What piece of financial advice would you provide to the person who is five years from retirement?

Realign your retirement goals and follow strict asset allocation. Do not compromise on retirement corpus for any other financial goals, except medical emergencies. There may be no re-course if retirement corpus is not achieved.

> What do you feel are the two biggest mistakes people make regarding money management, and how can they be corrected?

The underestimate the power of compounding, do not have a savings plan in place and take money management more casually than required due to ignorance and fear. They should start investing early (even with a small amount), follow asset allocation and do not take haste decisions during un-favorable market conditions.

> What`s the one thing that you would change in the financial services industry, if you had the power to make that happen?

Stricter regulations and higher certification must be mandatory for advisors selling financial products.

> Any other thoughts, comments would you like to share with our readers?

It is enough of hearing, reading and learning about the skills of money management.
It`s time to implement your financial plan and put things into action.

Brijesh Dalmia can be reached at

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