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Wednesday, March 09, 2016

Optimism slips among Indian households: Principal’s Financial Well Being Index 2015

Optimism slips among Indian households: Principal’s Financial Well Being Index 2015
·        Third edition of the annual study, conducted for Indian households,highlighting the decrease in overall optimism about economic outlook vis-à-vis last year

·        Unemployment &rising inflation continue to be the top concern areas

Hyderabad, March  2016:

Principal Retirement Advisors (India),part of the Principal Financial Group® USA, has released the third edition of the Principal Financial Well Being Index in India. The study, conducted along with its research partner – Nielsen Company across 11 cities including Tier I &Tier II cities, aims to gauge the financial well-being of Indian households / employees.

The Financial Well-Being Index is a very important initiative of the Principal Financial Group®and it is currently in its 14th year running in the US. For the past decade and more, the Well-being Index has served as an important source of insights into the American household’s perception & concerns with respect to their own financial well-being and hence has become popular and been widely followed.

In India too, the research was initiated with a similar objective and the study has managed to capture the perceptions and concerns of the Indian Households about the economy, household spending, savings and investment attitude and other related trends. 

The Well Being Index also touches upon Indians’ perceptions and attitude towards financial planning, retirement planning, employee benefits and availing the services of financial advisors.

Mr. Sudipto Roy, Managing Director, Principal Retirement Advisors said
The study indicated that the overall optimism in Indian households has decreased as compared to year 2014. Indians are concerned about building their financial future and have a lot of expectations from the Government. The Well-Being Index is a baro meter not just on the common man’s perceptions about economy but also sheds light on the financial awareness and preparedness of Indian households.We hope the study will help all the stakeholders to collectively educate and empower investors”

According to the study, some of the major findings are summarized below:

Perceptions & Concerns about the Economy in general

Ø Optimism about the overall state of the economy has come down as compared to 2014 but is not as pessimistic as it was in 2013

Ø Optimism about economy was seen to be highest amongst SEC A1 and lowest amongst SEC B2 (refer note below)

Ø Except Chennai, majority of the respondents from other 10 cities are concerned about the health of the economy

Ø Unemployment (68%), corruption (68%), rising inflation (67%) continue to be top concerns in the economy in the next 1 year

Ø 36% of the respondents say that they are extremely/very worried about home loan interest rates while only 11% are not at all worried

Ø 69% respondents feel that prices for household items would go up in the coming year

Ø Lesser number of respondents expect Rupee to fall vis-à-vis US$ in 2015 i.e. 41% in 2015 Vs 55% in 2014

Ø Jobs, Education and Electricity are the Top 3 Areas where people want Government to focus in the coming year
Allocating Overall Indian Household Income

Household Spending trends & Investments
Household Spending:

Ø House hold expenditure accounts for 43% of the total income earned, Savings and Investments account for 40% while Loans take up the remaining 17% of Income

Ø 43% Households expect their spending to increase in Next 1 Year

Ø Positive outlook about increased salary and bonus are top reasons for increased spending expectations followed by the desire to spend and invest less in the next year

Ø Concern for Savings & Investment, followed by loan/credit along with future concerns are the top reasons for decreased spending

Ø Children’s education continues to be the main big ticket expense foreseen by respondents (65%)

Ø Buying a vehicle and Foreign Holidays are the emerging big ticket spends vis-à-vis 2014

Holiday Plan:

63% respondents are not planning a holiday in next year which is slightly more than 2014

Festivity spending: 

71% respondents say they will either spend the same or less vis-a-vis last year on festivities

Household Savings & Investments Satisfaction levels:

A majority of respondents have a positive outlook towards their personal finances with most stating that they have good insurance coverage, are in control of their financial situation and are making good progress towards long-term financial goals

·        Savings and Investments account for 40% of the income

·        Life insurance (59%) and FDs (55%) are the most preferred investment options currently among Indian households. However, fewer respondents plan to invest in future in Life insurance (35%) & FDs (36%) going forward

·        Safety is the topmost criteria for selection of investment products followed by Returns

·        69% of the respondents feel that they have an adequate amount of Life Insurance Cover

·        75% of the respondents claim to be extremely / somewhat satisfied with their current level of savings

·        35% of the respondents claim their savings have decreased over the last 2 years while 58% say they have remained the same

·        73% of the respondents claim to be extremely / somewhat satisfied with their current level of investments

·        Majority of the respondents (83%)claim to have started investing before the age of 34

Retirement planning: attitude & perceptions

Ø Staying happy & stress free (63%) and having enough savings (56%) are the main thoughts for post-retirement finances

Ø 62% plan to retire between 56-60 years

Ø Overall 46% people claim to have started investing for retirement

Ø The need to secure their future (64%) and a lack of existing support (49%) are the main reasons cited for starting investments for retirement

Ø Children education (65%), household expenditures (64%) & medical expenses (60%) are the Top 3 expenses expected to increase after retirement. Children’s marriage (59%) also features prominently in the list

Ø 45% of respondents don’t know how much money will be available to them post retirement and 44% of respondents have not factored in the impact of Inflation for their retirement fund

Availing services of Financial Advisors
Ø 68% of respondents are confident of their ability to make important financial decisions
Ø 54% of respondents rely on the help of financial professional when making important financial decision
Ø Reputation (58%), Qualification (56%), Trust (50%) & Experience (42%) are the key attributes that people look for in an advisor
Ø Almost 85% people consult financial advisors referred by their friend / family & co-workers
Ø Investment planning (55%), setting financial goals (52%) & tax savings (52%) are the top 3 reasons for consulting a financial advisor
Ø Retirement planning also figures prominently with 49% respondents consulting financial advisor for the same
Ø Overall 68% respondents feel that Financial Advisor plays an important role in their financial decisions
Ø Top Reasons for not consulting a Financial Advisor are own knowledge (60%), not enough savings / investments (48%), advice from family / friends etc. (43%) and not wanting to pay fee (42%)
Ø 59% respondents state that they would be willing to pay a fee for the services of a financial advisor

The Principal Financial Well Being Index - US
The Principal Financial Well-Being Index is a very important initiative of the Principal Financial Group® (PFG) in the US and is currently in its 14thyear running. PFG, as champions of Financial Well Being, started the Well Being Index with an aim to keep a finger on the pulse of the financial well- being of American workers. It is a quarterly survey conducted in the US along with its research partner Harris- Interactive. Through the Well Being Index, the Principal, not only gauges the Financial Well-being of American workers but also focus on the concerns, attitudes and behaviors of people as it related to the topics of financial security.

The Principal Financial Well Being Index – India
Principal Retirement Advisors Pvt. Ltd., part of the Principal Financial Group®, conducts the Well Being Index study in India with an aim to gauge the financial well-being of Indian workers. The study has been conducted along with its research partner – Nielsen Company and this is the third year of the study.

About Principal Retirement Advisors
Principal Retirement Advisors (PRA) is India’s first dedicated retirement solutions specialist, bringing over 65 years of experience of the Principal Financial Group® in retirement planning in the United States and other global markets. PRA offers personalized financial advisory services to individual clients to address their various life stage needs leading to a financially secured and independent retirement. Besides Advisory services, the offerings include investment execution, insurance, estate planning etc.
PRA is a SEBI registered Investment Adviser and is headquartered in Mumbai.

About the Principal Financial Group
The Principal Financial Group® (The Principal®) is a global investment management leader offering retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500®, the Principal Financial Group has $516.2 billion in assets under management and serves some 20.6 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is listed on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

Research Design & Methodology
The research has been conducted in 11 cities with a total sample size of 1491respondents
Cities:Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Chandigarh, Lucknow & Jaipur
Respondent Profile
·        Age: 25-60 years
·        Males and  Females
·        SEC: A & B(refer note below)
·        Annual Household Income: INR 5 lac+
·        Salaried or self-employed professionals: Employed full time/part time with either a small*/medium*/large* sized company

Type of Study:Quantitative research conducted using a structured questionnaire in a CAPI (Computer Aided Personal Interview) format.
Research Methodology:
·        Interviews conducted at respondents’ home. In a given household only one member was interviewed
·        A given market has been divided into several zones and these have been further split by different starting points, in order to ensure sufficient randomness in the sample
·        Quotas maintained for demographic parameters namely Age, SEC, Gender & Employment Status

The Principal Financial Well Being Index Report - 2015 has been compiled by Principal Retirement Advisors Pvt. Td. (PRA) by extracting relevant data from the research work done by its independent research consultant – Nielsen & Company in last quarter of 2015. The numbers reflect the situation at the time the survey was done by the research consultant and the same is likely to change with passage of time. PRA assumes no responsibility for any contents herein. PRA will not entertain any kind of claims made by any person for any losses suffered by use of the information provided herewith.


SEC stands for Socio-Economic Classification of Indian consumers on the basis of certain parameters. Originally developed by IMRB International, it was standardized and adopted by the Market Research Society of India in the mid-1980s as a measure of socio-economic class and is now commonly used as a market segmentation tool in India. It divides population into following 8 grades A1, A2, B1, B2, C, D, E1 and E2 basis occupation and education of chief earner.  SEC A1, A2 and B1 stands for upper most consuming class while SEC B2 stands for Middle Class population
Optimism slips among Indian households: Principal’s Financial Well Being Index 2015 Reviewed by S. Chitra on March 09, 2016 Rating: 5 Optimism slips among Indian households: Principal’s Financial Well Being Index  2015 ·         Third edition of the annual study, conduct...

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