Financial planning is not a one-size-fits-all approach. Each individual has unique financial goals, challenges, and levels of wealth accumulation. 1 Finance, a financial advisory firm, has developed a unique perspective on financial planning by categorising individuals into three generations of wealth creators. This framework is not based on age but on financial standing, investment behavior, and wealth-building potential.
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By applying this framework, 1 Finance provides personalised financial planning services that align with an individual’s current financial position and future aspirations. This article explores how 1 Finance integrates the ‘Three Generations of Wealth Creators’ framework into its financial planning process, ensuring tailored, effective, and long-term financial well-being.
Understanding the Three Generations of Wealth Creators Framework
The Three Generations of Wealth Creators framework developed by 1 Finance is based on decades of financial observation in India. Unlike traditional financial classifications that rely solely on income levels or risk appetite, this approach considers psychological, behavioral, and inherited financial traits to determine a person’s financial journey.
Generation 1: The Financial Security Seekers
- Typically comprises individuals who are first-generation wealth creators, often working in unskilled or lower-income roles.
- They are focused on basic sustenance, financial security, and providing for their family’s needs.
- Their primary financial goals include stability, education for children, and securing a safety net.
- Investment choices are low-risk, prioritising savings accounts, fixed deposits, government bonds, and life insurance policies.
Generation 2: The Financial Freedom Builders
- Includes mid-level professionals and salaried individuals who have achieved a stable income but seek financial independence.
- They balance savings with long-term investments, planning for major life expenses like buying a home, funding children’s education, and retirement.
- Investment strategy includes a mix of mutual funds, equities, debt instruments, and home loans.
- They are risk-conscious but open to market-linked returns.
Generation 3: The Wealth Multipliers & Risk-Takers
- Comprises entrepreneurs, business owners, and individuals with strong financial backing and no major liabilities.
- They have a high-risk appetite, focusing on wealth creation, legacy building, and financial expansion.
- They invest in high-return assets such as international markets, venture capital, real estate, alternative assets (NFTs, crypto, art, private equity, etc.).
How 1 Finance Integrates This Framework into Financial Planning
1 Finance applies this Three Generations of Wealth Creators framework to deliver customised financial planning solutions. Instead of offering generic investment advice, it aligns financial strategies with an individual’s current wealth generation category. Here’s how:
1. Personalised Wealth Assessment
Before advising clients, 1 Finance conducts an in-depth financial assessment to identify their wealth generation stage.
- Financial advisors at 1 Finance evaluate income stability, existing investments, financial responsibilities, and behavioral approach to money.
- A custom financial plan is then designed based on their category.
For example:
- A Generation 1 client will receive advice on building an emergency fund, setting up life insurance, and creating a foundation for stable financial growth.
- A Generation 2 client may be advised on optimising tax savings, diversifying into mutual funds, and strategic investment allocation.
- A Generation 3 client might focus on global investments, alternative assets, and risk diversification strategies.
2. Investment Planning Aligned with Financial Standing
One of 1 Finance’s key strengths is its ability to customise investment portfolios based on an individual’s financial category.
✔ For Generation 1 → Low-risk investments such as PPF, FD, gold, and government bonds are recommended.
✔ For Generation 2 → A mix of debt and equity, along with goal-based investments like ELSS, SIPs, and real estate, is encouraged.
✔ For Generation 3 → Exposure to high-risk, high-return investments like global markets, startups, and hedge funds is explored.
By aligning investment strategies with financial standing, 1 Finance ensures clients do not take on unnecessary financial risks or miss out on potential opportunities.
3. Risk Management and Asset Protection
Risk tolerance varies across wealth generations, and 1 Finance incorporates this into financial planning.
- Generation 1 individuals are guided on building financial resilience through insurance planning and emergency funds.
- Generation 2 individuals receive recommendations on balancing risk with returns, including strategies like mutual fund diversification and asset allocation.
- Generation 3 clients are offered advanced wealth protection tools like estate planning, business succession strategies, and risk hedging using derivatives.
4. Behavioral Finance and Financial Psychology
1 Finance recognises that financial decisions are driven by emotions, habits, and psychological biases. This is particularly evident across wealth generations:
- Generation 1 may be overly cautious and reluctant to explore market-linked investments.
- Generation 2 might hesitate to take risks, even when their financial position allows it.
- Generation 3 may exhibit overconfidence, leading to high-risk speculative investments.
1 Finance advisors work closely with clients to overcome financial biases, ensuring rational and informed decision-making.
5. Goal-Based Financial Planning
Instead of focusing only on investment returns, 1 Finance creates goal-specific financial roadmaps based on the client’s financial generation.
- Generation 1 → Goals focus on basic financial security, children’s education, and medical safety nets.
- Generation 2 → Financial plans emphasise home ownership, children’s higher education, and retirement planning.
- Generation 3 → Plans target wealth growth, philanthropy, business expansion, and legacy building.
With this structured approach, 1 Finance ensures financial planning is practical, achievable, and aligned with personal aspirations.
6. Avoiding Wealth Generation Pitfalls
Every wealth generation faces unique financial challenges, and 1 Finance proactively helps clients navigate these.
- Generation 1 risks: Over-reliance on low-yield savings → Solution: Gradual exposure to long-term wealth-building investments.
- Generation 2 risks: Avoiding necessary risks due to fear of losses → Solution: Balanced portfolio diversification.
- Generation 3 risks: Excessive risk-taking in high-return assets → Solution: Risk management strategies.
By identifying and addressing these financial vulnerabilities, 1 Finance safeguards clients from wealth erosion and financial setbacks.
Conclusion
Financial planning should not be a rigid formula—it should evolve based on an individual’s financial standing, goals, and risk appetite. 1 Finance applies the Three Generations of Wealth Creators framework to offer highly personalised financial advisory services that cater to the real-world needs of individuals at different stages of wealth creation.
By understanding where an individual stands in their financial journey, 1 Finance provides customised solutions that ensure financial security, wealth growth, and long-term prosperity. Whether someone is building their financial foundation, striving for financial independence, or expanding their wealth, 1 Finance tailors its approach to help them achieve their goals effectively.
