India less vulnerable to external shocks

The CAD in the first half of current fiscal stood at 1.4 per cent of GDP, lower than 1.8 per cent in the same period last fiscal.
NEW DELHI: Indian economy is less vulnerable to external shocks as it is mainly driven by household consumption and government spending, and not dependent on hot money which can move out quickly, Standard & Poor’s Rating Services said on Tuesday.

The US-based rating agency expects the current account deficit (CAD), which is the difference between inflow and outflow of foreign exchange, to remain at a modest level of 1.4 per cent at the end of current fiscal and would continue at similar level till 2018.

“We see India as having limited vulnerability to external economic or financial shocks. This is because growth in the economy is mainly driven by domestic factors, such as household consumption and government spending.

“At the same time this is a country that has low reliance on external savings to fund its growth. In other words, the banks are mainly deposit funded and don’t rely on wholesale funding to grow their loan books,” S&P Rating Services India Sovereign Analyst Kyran Curry told PTI.

He said India’s capital markets are diversified and deep enough for companies to raise funding.

“Another favourable aspect of India external settings is that it is generally not subject to hot money inflows that can turn into outflows with shifts in investor sentiment. As such we see the external risks for India to be relatively contained,” Curry said.

He said while export growth may be disappointing, the current account deficit likely to be a modest 1.4 per cent in 2015, with similar levels through 2018.

“Our forecasts are partly informed by our view of increased monetary credibility, which dampens the demand for monetary gold imports. In addition, we expect India to fund this deficit mostly with non-debt, creating inflows,” Curry added.

The CAD in the first half of current fiscal stood at 1.4 per cent of GDP, lower than 1.8 per cent in the same period last fiscal. For full 2014-15 fiscal, the CAD stood at 1.3 per cent of GDP.

Breaking Up With Your Adviser for a Robot

Two businessmen shaking hands at lunch meetingWhat do you tell your financial adviser when you are leaving for an algorithm?

Joe O’Connor, a 52-year-old Connecticut salesman, had to have this conversation recently. It was delicate business explaining why he was ditching the planner he had been with for over a decade, to put his money in the hands of what is known as a robo-adviser — a Web-based service that automates the allocation of your investment portfolio.

There were the usual responses: “But why?” “Was it something I did?” “What can I do to make it right?”

And of course, there is the timeless relationship classic line: “It’s not you, it’s me.”

“It wasn’t fun,” O’Connor said.

That kind of awkward conversation is taking place more frequently these days, thanks to the rise of robo-advisers, which have about $20.1 billion in worldwide assets under management for new entrants, according to Switzerland-based research firm MyPrivateBanking.

Of course with total U.S. investable assets at $33.5 trillion, that is barely loose change under the couch cushions, industry analyst Michael Kitces points out. But projections are for heady growth with new robo-advisers expected to grow to $42.6 billion in 2016 and $86.7 billion in 2017.

WHY LEAVE?

Looking strictly at fees, robo-advisers offer certain advantages. Prominent site Betterment (betterment.com), for instance, charges .25 percent on accounts between $10,000-$100,000, and .15 percent above that. Competitor Wealthfront (wealthfront.com) has a similar cost structure, charging .25 percent for accounts worth $10,000 or more.

Personal Capital (personalcapital.com), which Joe O’Connor uses, offers more of a blended service, combining its automated recommendations with humans (albeit primarily via video chat or email), charging .89 percent on portfolios up to $1 million.

That is in comparison to traditional financial planners, who charge around 1 percent or more of assets annually. (Fee-only planners have their own payment structure, billing per planning session instead of charging a percentage of assets.)

The low-fee logic of robo-advisers may work admirably for young savers starting out. In fact many users are converted Do-It-Yourselfers or Millennials with little investable cash, rather than mid-career professionals who have switched from existing planners, Kitces points out.

WHY STAY?

You may gain something by opting for low-fee robots – but you lose the long-term financial planning aspect.

“I had a client recently leave for a robo. I told them robos are not financial planners,” says Kashif Ahmed, an advisor in Woburn, Mass. “A robo will not call you when markets are going through a rough patch, and you can’t call a robo to discuss your protection needs, or to ensure your estate documents are in order.”

As you age, and financial responsibilities start piling up – raising kids, dealing with insurance questions, running a business, coping with elderly parents, and so on – the advantages of dealing with an actual person become more evident.

“At that point, when money has grown substantially, you may opt out of robo-investing and go find a real person,” says Maggie Baker, a Philadelphia financial therapist and author of the book “Crazy About Money.”

Of course, it is not always fees that cause breakups with financial planners. Far from it. In fact, the number-one reason cited by millionaires for switching advisers is due to them not returning client phone calls, according to a report from research firm Spectrem Group.

In cases like that, a robo-adviser is obviously no upgrade. After all, it is hard to get on the phone with an algorithm.

HAVING ‘THE TALK’

Baker’s advice for ditching your existing planner: Just be honest. It is likely that some negative event has caused you to look elsewhere – subpar returns, maybe, or a general lack of communication – and it could be something you can talk through and resolve.

In fact, thanks to technological advances, you may not have to break up at all. Many firms, like Vanguard (vanguard.com) and Charles Schwab Corp , are gravitating towards two-tiered solutions – offering robo-allocations as a starter level, but also providing flesh-and-blood advisory services as a premium option.

With more investors considering robots to steer their finances, though, you cannot escape the regret and bitterness that linger over broken relationships.

“When a client decides to leave, I don’t do anything,” says Richard Colarossi, a planner in Islandia, New York. “If a client leaves to go to robo-adviser, let them go. My experience tells me that a majority of robo clients will shoot themselves in the foot.”

Divorcing? Why You Should Hire a New Financial Adviser

Bride and groom figurines standing on two separated slices of wedding cakeIf you and your spouse are headed to Divorceville, it’s often necessary to have someone – or some people – in your corner, looking out for your best interests. Although hiring an attorney seems the most obvious choice, contracting with a financial adviser is often equally as important.

Hiring a financial adviser is critical if you have been married for a long time or you’re part of a high-net-worth household, according to MarketWatch. While some people do seek out the help of a financial adviser, it’s often after the divorce, when many financial matters – short-term cash needs, insurance, child support, trusts and retirement – have already been finalized.

And relying on an attorney to counsel you on financial matters could end up costing you.

“Too many people rely on an attorney to assist them in dividing assets, without having a clear financial plan that takes in all of the future needs — college plans, home maintenance, retirement income needs, insurance, long-term care, Social Security, and more,” MarketWatch explains.

If you already have a financial planner, one you’ve shared with your spouse, you may also want to divorce that adviser and hire somebody else. Although it’s legal for a financial adviser to advise opposing parties in a divorce, it creates a conflict of interest, or an awkward situation at the very least.

“You want your financial adviser to represent your interests, and your interests alone,” MarketWatch explained.

There are several divorce scenarios where hiring a new financial planner is especially important, including this one: “Some women, particularly in older generations, may not have been part of the budgeting or bill-paying process while married,” MarketWatch explained. “They need the education a financial planner can provide to be prepared to go out on their own.”

Getting a divorce is often a stressful and emotional time, which makes hiring objective professionals all the more important.

“One of the biggest reasons people should work with a financial planner is so that they don’t make emotional mistakes,” Richard Wald, managing director of Merrill Lynch Global Wealth Management, told U.S. News & World Report.

Wald said an example of a costly emotional mistake in a divorce could be when one partner feels attached to a family home and insists on keeping it as part of a divorce settlement. Although that situation isn’t inherently bad, it could be an expensive mistake if the partner agreed to keep the home and as a result, ended up losing out on retirement savings that could prove to be much more valuable in the long run.

It’s important to do your homework before you hire a financial adviser. While word-of-mouth recommendations are typically the best way to find a good adviser, the Financial Planning Association can also help. MarketWatch said:

There are different types of advisers. Some are fee-only; others charge by assets under management. Some manage money; others provide only advice. A few also specialize in financial planning during a divorce, working with your divorce attorney to make sure you are protected.

For more details, and questions you should ask when shopping for an adviser, check out “How to Choose the Right Financial Adviser.”

Are you divorced or going through a divorce? What’s your experience in dividing the property and financial assets? Share your comments below or on our Facebook page.

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10 Money Steps to Take Before Your 70th Birthday

Plates of little iced cup cakes for a 70th birthday party UK
Our money needs — and demands — are constantly shifting as we age. By the time we reach our 60s, if we’ve planned well, we have a sizable nest egg that will support us into our older years as we scale back or stop work altogether. That doesn’t mean it’s time to take a hands-off approach to money, however. In fact, many financial advisers say the pre-retirement years comprise a critical period when it comes to making investing, spending and saving decisions.

“Everyone faces financial challenges at different points in life. The older you get, the less wiggle room you have, with fewer options to right your past wrongs,” says Erika Safran, a certified financial planner and founder of Safran Wealth Advisors based in New York. Older adults should also be on guard against potential cognitive decline, financial abuse and increased costs associated with declining health, all while planning to make accumulated nest eggs last a lifetime.

To compile the following list of money steps to take before your 70th birthday, U.S. News asked members of the Financial Planning Association, a Denver-based organization with over 17,000 certified financial planners, to share their best tips. Here are their suggestions:

Review your current financial outlook. Safran suggests reviewing all of your current (and future) assets, income and expenses to make sure they are sustainable during retirement. If they aren’t, ask yourself what needs to be done, such as reducing debt, working for longer or paying off your mortgage. She urges people to budget conservatively for future costs, which might include additional health care or home upgrades and maintenance.

Map out any extra big expenses. If you’re planning to take a big trip to Machu Picchu, for example, then it makes sense to plan ahead for that expense, says Neal Van Zutphen,​ a certified financial planner in Tempe, Arizona. To figure out just how you might spend your time over the next decade, imagine life in your 70s and take time now to explore activities such as volunteering, mentoring or taking classes​ you might also enjoy later, he adds.

Lock down your estate plans. Consider your legacy, says Juan C. Ros,​ a certified financial planner at the Lamia Financial Group in Thousand Oaks, California. He suggests having not only a will and living trust in place, but also an advance directive for health care and power of attorney for finances. “Seniors approaching 70 should also double check their beneficiary designations in their company retirement plans, their individual retirement accounts, brokerage accounts, bank accounts and life insurance policies,” he suggests. He says he often notices clients have no beneficiaries or outdated ones listed.

Tell your adult children where important documents are located. Just in case you become incapacitated and need tohand over the reins to a family member, you’ll want to share the names of the financial professionals whom you work with, says Nivedita Persaud,​ a certified financial planner and managing director at Transition Planning & Guidance in Atlanta. On a similar note, she suggests using your smartphone to make short videos that share your money advice for your children and grandchildren. “It’s a great way to pass on financial literacy and values,” she says.

Consolidate retirement accounts. If you’ve amassed multiple retirement accounts throughout your career, as many people do, then it might be a good idea to consolidate them, says Taylor Schulte, ​certified financial planner and founder of Define Financial in San Diego. “When required minimum distributions begin at age 70½, clients are relieved when they only have to deal with one financial institution to calculate their [required minimum distributions] each year,” he says. “It also helps [them] simplify their life and feel more organized as they transition into retirement.”

Delay Social Security. If you think you’ll reach the average lifespan​ of 84 years (for men age 65 today) or 86 (for women age 65 today), according to the Social Security Administration, delaying Social Security until age 70 could pay off. You receive a higher monthly payout if you wait, explains Steve Burkett, ​a certified financial planner in Bothell, Washington. He adds that you might want to consider a Roth conversion if you are currently in a low income bracket because of retirement. “Consider locking in that tax rate and converting some IRA money to Roth IRA money, which will help you pay a lower tax rate now — and lower your future required minimum distributions subject to potentially higher future tax rates,” he says.

Keep investing. “Buy stocks to beat inflation,” says Scott Ranby, ​a certified financial planner at Kuhn Advisors in Denver. “Once you reach age 70, you’ve still got plenty of life ahead of you — some 14 to 16 years of life expectancy. Avoid the temptation to get overly conservative with your investments, and keep a good portion in stocks,” he says. That’s because stocks are more likely to stay ahead of inflation than cash or bonds, which can help you maintain your standard of living.

Start giving money away. If you begin formally gifting money to your children or grandchildren now, it could help reduce your family estate taxes in the long run, says Brian Power, a certified financial planner at Gateway Wealth Management in Westfield, New Jersey. “They most likely need the help,” he says, especially if adult children are in the high-cost years of raising a family.

Travel now. Yes, it’s expensive, but spending money on trips now can be a smart idea, too. “Your health may not always be with you in retirement, so don’t procrastinate big life experiences. Incorporate at least one bucket list item into your financial plan before you turn 70,” says Michael H. Baker, a certified financial planner based in Charlotte, North Carolina, who works primarily with baby boomers. ​

Spend time with those you love. On the same carpe diem note, Leslie Beck,​ a certified financial planner and principal at Compass Wealth Management in Wood Ridge, New Jersey, encourages clients to spend time with their grandchildren while they’re still relatively young and healthy. “The memories made will be precious,” she says.