Project Report

L.M. Thapar School of Management, Thapar University, PATIALA

ACKNOWLEDGEMENT

It is a matter of great satisfaction and pleasure to present this report on WEALTH MANAGEMENT IN VARIOUS BANKS AND POSITION OF HSBC IN MARKET. I take this opportunity to owe my thanks to all those involved in my training.

This project report could not have been completed without the guidance of my project guide Ms. SEEMA MEHTA (CSM, HSBC). Her timely help & encouragement helped me to complete this project successfully.

I thank Ms. SAUDAMINI KUMAR (Manager- HR Northern India, HSBC) for giving me opportunity to work at HSBC, as a summer intern.

I am thankful to Mr. BHAVESH SARASWAT (Financial Planning manager, HSBC) for his encouragement and able guidance at every stage of my internship work.

I express my gratitude towards staff of HSBC- NOIDA, those who have helped me directly or indirectly in completing the training.

EXECUTIVE SUMMARY

The wealthy Indian has just recently woken up to the concept of international banking. Until recently, terms like wealth management, private banking, and financial advisory were almost unheard concepts in India. A leading wealth management consultancy has found that the industry is now growing at nearly 15% in terms of Assets Under Management (AUM) figures. Indian HNWIs are beginning to explore investment opportunities beyond the traditional capital markets, migrating to newer asset classes such as art, real estate and overseas investment opportunities. The rising incomes and the unlocking of wealth from closely held businesses have created a whole new generation of individuals that constitutes a credible market opportunity for asset managers, private bankers, financial advisors and others. All in all, the reasons for this sudden spurt in wealth management business could be more than one.

Personal banking is one of the fastest growing among all the financial services and is the means of managing clients' money by providing various services such as efficient wealth management, savings, inheritance and tax planning. These banks promise to maximize returns and minimize risk along with the tax burden of the clients through careful allocation of their money.

This unforeseen proliferation of these high end banking activities in Asia has suddenly turned the business more competitive and hawkish. Bankers here have virtually engaged in a war-like situation by offering more exotic investment options to the clients so as to grab a larger pie of this lucrative business.

This report will highlight the wealth management practices followed by the top four private banks in India providing wealth management services; HSBC, Standard Chartered, ABN AMRO and Citi Bank and analyze the position of HSBC in the market.

For this purpose, the information was gathered by visiting websites of different organizations which provide data regarding wealth management in various banks, annual turnover.

The study shows that HSBC has a competitive advantage over other banks in terms of customer base, brand equity and technology used. HSBC has emerged as the safest and the most stable bank during the current recession times because of the strict compliance.

The study was conducted at HSBC, Noida.

The project was of 6 weeks duration.

During the project I had taken the guidance of Relationship Managers, financial planning managers, Sales Managers & staff to collect the data, & also made use of Company’s various reports. The data collected were then compiled, tabulated and analyzed.

WEALTH MANAGEMENT in various banks & position of HSBC in market

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Apart from objectives, some of the points which were considered in this topic to make project report more comprehensive are:-

1. What a customer expects from a wealth management service provider2. Solution framework for wealth management.3. Key Challenge Areas.4. Core Elements of Wealth Management Services.


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http://thesaurus.reference.com/browse/comprehend

ACKNOWEDGEMENT

On the eve of completion and submission of summer project I would

like to express my deep sense of gratitude to my Management

Institute, Thapar University & HSBC, Noida for providing me

Platform.

I am immensely thankful to my guide Mrs. Manu Sharma (Associate

Vice-President HSBC Premier) for providing me great insight into the

project and for sparing her valuable time with me. Without her co-

operation and guidance it was impossible to reach up to this stage.

I am also thankful to Mr. Nitin Mathur (Branch Manager, HSBC

Noida), Nishi Saraswat (RM) and HSBC staff for their kind support

during the project.


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At last, my sincere regards to my parents and friends who have

directly or indirectly helped me in the project. Without their

inspiration and support I would not have been where I am.

TABLE OF CONTENTS

S.NO

PARTICULARS PAGE NO

1 Objective & Scope of Project 08

2 Company profile 09

3 Theoretical background** 18

4 Simplicity & safety are back in fashion 90

5 Bibliography 92

**

1. INTRODUCTION .....................................................................................................18

2. CONCEPT OF WEALTH MANAGEMENT …………………………………..19 Why do people opt for Wealth Management?..................................................19 Does technology take a part?.............................................................................19 Wealth Management Range……………………………….………………….20 Key Elements of Wealth Management Services……………………………...22

3. WEALTH MANAGEMENT – An Emerging Sector ………….………………....23

4. CORE ELEMENTS OF WEALTH MANAGEMENT Services ………...……...264.1 Packaged at various levels………………………………………………………..26

Advisory………………………………………………………………………….. Investment Processing (transaction oriented)…………………………………… Custody, Safekeeping and Asset Servicing………………………………………


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End-to-end Investment Lifecycle Management…………………………………

4.2 Key function areas………..………………………………………………………27 Financial Planning …………………………………………………………27 Client Profiling…………………………………………………………………. Investment Objective…………………………………………………………...

Portfolio Strategy Definition / Asset Allocation…………………………..28 Defining Portfolio Strategies and Portfolio Modeling…………………………. Determination of Portfolio Constituents and Allocation of Assets……………. Strategy Implementation………………………………………………………..

Portfolio Management………………………………………………………..30 Portfolio Administration……………………………………………………… Performance Evaluation and Analytics………………………………………

Strategy Review and Alignment…………………………..…………………30 Recalibration of Portfolio Strategy…………………………………………….. Rebalancing, Reallocation and Divestment of Assets………………………….

5. KEY CHALLENGE AREAS ....................................................................................32

6. SOLUTION FRAMEWORK ....................................................................................35

7. SERVICES PROVIDED BY WEALTH MANAGEMENT INSTITUTIONS____ Custodian Services………………………………………………………..……39 Trust Services…………………………………………………………………….. Retirement Plan Services…………………………………………………………

8. ADVANTAGES AND LIMITATIONS ..................................................................42

9. CONSUMER POINT OF VIEW : Wealth Management………………………...44 PMS vs. Wealth manager and fund manager…………………………………….. How to choose a PMS…………………………………………………………….

Investment philosophy…………………………………………………………. Scheme benchmarks…………………………………………………………… Minimum investment…………………………………………………………... Returns…………………………………………………………………………. Cost structure…………………………………………………………………... Frequency of disclosure………………………………………………………... Broking house………………………………………………………………….. Assets under management (AUM)……………………………………………...

10. CONCEPT OF ASSET CLASSES ………………………………………………4710.1 Asset Mix…………...………………………………………………………


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10.2 List Of Different Asset Class……………………………………………... Fixed Deposits……………………………………………………………….47

Merits and Demerits………………………………………………………… Interest rates on FDs…………………………………………………………. Effective Return………………………………………………………………

Mutual Funds……………………………………………………………….48 Open-end fund……………………………………………………………….. Close-end funds……………………………………………………………… Growth/Equity oriented schemes…………………………………………….. Income/Debt oriented schemes………………………………………………. Balance funds………………………………………………………………… Money market or liquid funds………………………………………………... Gilt funds…………………………………………………………………….. Index funds…………………………………………………………………… Fund of funds………………………………………………………………… Hedge funds…………………………………………………………………..

Equity investment…………………………………………………………..53 Direct holdings and pooled funds…………………………………………….

Commodities Market………………………………………………………54 Art fund…………………………………………………………………….54

Diversified portfolio………………………………………………………… Tie-ups with galleries………………………………………………………

Real Estate Funds…………………………………………………………..56 Insurance………………………………………………………………………

Product………………………………………………………………….…...57 General Insurance……………………………………………………………. Unit Linked Insurance Plan (ULIP)…………………………………………..

Structured Product……………………………………………………..…..59 Composition………………………………………………………………….. Risks…………………………………………………………………………..

GOLD……………………………………………………………………….60 Factors influencing the gold price…………………………………………….

Currency…………………………………………………………………….62 Portfolio composition of currency……………………………………………

11. Companies providing Wealth Management services …………………………….64 Hongkong & Shanghai Banking Corporation…………………………..64 INTRODUCTION…………………………………………………………… PRODUCTS………………………………………………………………….. ASSET CLASSES USED……………………………………………………. ASSET SIZE…………………………………………………………………. INVESTMENT PHILOSOPHY……………………………………………... KEY STRENGTHS AND ISSUES…………………………………………..


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http://en.wikipedia.org/wiki/Equity

ABN AMRO……………………………………………………………..….81 INTRODUCTION…………………………………………………………… PRODUCTS………………………………………………………………….. ASSET CLASSES USED……………………………………………………. ASSET SIZE…………………………………………………………………. INVESTMENT PHILOSOPHY……………………………………………...

STANDARD CHARTER…………………………………………..………84 INTRODUCTION…………………………………………………………… PRODUCTS………………………………………………………………….. ASSET CLASSES USED……………………………………………………. ASSET SIZE…………………………………………………………………. INVESTMENT PHILOSOPHY……………………………………………...


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CITI BANK…………………………………………………………………87 INTRODUCTION………………………………………………………….... PRODUCTS………………………………………………………………….. ASSET CLASSES USED……………………………………………………. ASSET SIZE…………………………………………………………………. INVESTMENT PHILOSOPHY……………………………………………...

12. HSBC & WEALTH MANAGEMENT ……………………………………………… Procedure for entertaining a client in HSBC…………………………………

Customer Profiling at HSBC…………………………………………………………. Up to 30 years of age………………………………………………………… 30-45 years of age……………………………………………………………. 45-60 years of age……………………………………………………………. over 60 years………………………………………………………………….

13. WEALTH MANAGEMENT: INDIAN CONCERN ………………………………

Position of India in Wealth Management……………………………………… Risk aversion of Indian customers……………………………………………...

14. WEALTH MANAGEMENT: GLOBAL PRESPECTIVE ........................................


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OBJECTIVES

1. Through the past results, to identify the potential of Wealth Management sector.2. Understand company’s procedure in wealth management department.3. To do a comparative analysis of the services provided by these banks and various

strategies being followed.4. To know the comparative position of the top four companies offering wealth

management services in India (HSBC, Standard Charter, ABN AMRO, Citi Bank).5. To have a general notion on different asset classes available in financial market.6. To have a conceptualized view on the Wealth Management services.


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HSBC – Company Profile

The HSBC Group serves over 128 million customers worldwide through around 10,000 offices in 83 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of some US$2,354 billion at 31 December 2007, HSBC is one of the world’s largest banking and financial services organizations. HSBC is marketed worldwide as ‘the world’s local bank’.

HSBC Group Members in IndiaThe Hongkong and Shanghai Banking Corporation Limited HSBC Asset Management (India) Private Limited HSBC Electronic Data Processing India Private Limited HSBC Insurance Brokers (India) Private Limited HSBC Operations and Processing Enterprise (India) Private Limited HSBC Private Equity Advisors (India) Limited HSBC Professional Services (India) Private Limited HSBC Securities and Capital Markets (India) Private Limited HSBC Software Development (India) Private Limited

Technology

The HSBC Group develops and applies advanced technology for the efficient and convenient delivery of banking and related financial services via a highly resilient Group Network (Voice/Data) infrastructure. In India, the Group provides 24 hour banking services through an extensive network of over 178 in-branches and off branch ATMs, phone banking through an integrated Contact Centre, SMS alert services on mobile phone and internet banking available at www.hsbc.co.in. Trade and corporate banking services are offered with real-time access to a centralized information database and the Group also has a state-of-the-art treasury dealing system.

Customer Groups Personal Financials: The Hongkong and Shanghai Banking Corporation Limited (HSBC) provides a wide range of personal financial services including personal lending and deposit products, through its branch network in Ahmedabad, Bangalore, Chandigarh, Chennai, Coimbatore, Gurgaon, Hyderabad, Indore, Jaipur, Jodhpur, Kochi, Kolkata, Ludhiana, Lucknow, Mumbai, Mysore, Nagpur, New Delhi, Noida, Pune, Patna, Raipur, Thane, Trivandrum, Vadodara and Visakhapatnam. International platinum, gold and classic credit cards from VISA and MasterCard and debit cards from VISA are used. HSBC Premier Services are offered through all branches in India with specialist business centers in selected branches in major cities.


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Non-Resident Indian banking: Non-Resident Indian banking (NRI) centers located in Europe, Asia-Pacific, the Middle East, and North America, together with Group offices worldwide, provide the international Indian Diasporas access to a range of products and services.

Wealth Management: Financial Planners and Premier Relationship Managers assist clients in identifying their needs and selecting insurance and investment products to meet these needs. Wealth Management is offered in Ahmedabad, Bangalore, Chandigarh, Chennai, Coimbatore, Gurgaon, Hyderabad, Indore, Jaipur, Jodhpur, Kochi, Kolkata, Ludhiana, Lucknow, Mumbai, Mysore, Nagpur, New Delhi, Noida, Pune, Patna, Raipur, Thane, Trivandrum, Vadodara and Visakhapatnam.

Commercial banking:HSBC is a leading provider of financial services to small, medium-sized and middle-market enterprises. The Group has over 40,000 active customers in India, including proprietors, partnerships, clubs and associations, incorporated businesses and publicly quoted companies. Commercial Banking provides a full range of banking services to these customers including multi-currency business accounts, payments and cash management solutions, trade services, factoring and a range of borrowing solutions.In India, Commercial Banking has presence in all cities where we have a Branch and for the convenience of our customers, a multi channel service platform including branches, relationship managers, Internet, ATMs and Phone Banking is provided. It is the first business within the HSBC Group to lend to Microfinance institutions, thus providing indirect funding to hundreds of small businesses owned and run by members of underprivileged sections of society. Commercial Banking also includes an International Banking Centre team which facilitates the process of cross border account opening for both inward and outward referrals and promotes the growth of cross border banking business across the Group.

Trade (international and domestic) and Supply Chain (TSC) services: HSBC offers a wide range of international and domestic trade products and is one of India’s leading Trade Services providers. In India, TSC offer one of the largest trade processing capabilities among peer banks. Each of the trade processing centers is ISO9001-2000 certified. TSC works closely with Group offices overseas and leverage Group’s extensive global network to offer structured, tailor made solutions to a wide range of customers. The Export Trade offering includes comprehensive solutions like Export Financing, Export Collections, and advance remittances, Documentary Credit Advising, Documentary Credit Confirmation and forfeiting. On the Import side, services offered are Documentary Credits, Stand by letter of Credits, Import Collections, Warehouse Receipt financing, eSolutions, Internet Trade Services and a host of advisory solutions. Clients in India include large Indian and multinational companies, Mid Market companies as well as customers in the Small and Medium Enterprises segment.


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Factoring: HSBC offers a full range of domestic and international factoring products. Factoring products offer flexible structures, together with payments and cash management services, to provide seamless supply and delivery to corporates. Factoring’s product suite comprises end-to-end supply-delivery chain solutions customized for various segments like

a. Payables Financing (For Vendors/Suppliers/Purchase Channel of corporate customers);

b. Export Factoring, Portfolio Invoice Discounting, Portfolio Purchase, Distributor Finance (For the Sales Channel of corporate customers and SMEs),

c. Distributors financing (for distributors of corporate customers) Payments and Cash Management: Integrated Domestic and Regional Cash

Management Solutions are provided to Corporate and Institutional customers in India. The suite of offerings under the Cash Management umbrella includes Integrated Receivables Management Solutions, Integrated Payables Management Solutions, Structured Liquidity Management Solutions and Integrated Delivery Channels, with an endeavor to completely integrate with the customer’s backend operating systems and processes. HSBC provides a comprehensive package of Payments products and services under its Integrated Payment Solutions (IPS) proposition. Key components of this proposition include

Cheque Outsourcing Service (COS), which offers customers the ability to outsource their bulk paper payable requirements including Company Cheques, Cashier Orders and Demand Drafts that can be made payable at HSBC and designated alliance bank centers across the country.

Priority Payments, which facilitates end-to-end straight through electronic payments through the various electronic banking channels using Real time Gross Settlement System (RTGS) and National Electronic Funds Transfer (NEFT) systems.

AutoPay service that allows customers to effect large volume low value book transfer payments.

Enriched Advising facility whereby Advices containing all payment & invoice information along with transaction details like Unique Transaction Reference (UTR) are made available to customers and their beneficiaries for all the above types of payments.

Payables Financing, which offers customers the facility to discount their payables and have them effected upfront to their suppliers.

E-Tax solutions, whereby customers can instruct HSBC to effect their Direct Tax, Service Tax and Excise Duty payments electronically for which HSBC has structured alliances with the Authorized Agency Banks.


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Private bankingHSBC Private Banking, India focuses on offering a full range of banking, investment advisory and wealth planning products and services to High Networth clients and their families with a minimum investible surplus of USD 1Million with the Bank. Private Banking clients are serviced by dedicated client teams that combine Relationship Managers, Client Service Officers as well as Investment Advisors across 7 cities in India. Clients are provided with introduction services for succession planning and wealth management through selected third party service providers. Customers are offered a suite of in-house as well as third party products including direct equity advisory, mutual funds, third party portfolio management services, structured products and real estate venture funds. Besides this a comprehensive range of banking products like bank accounts, credit/ debit cards, fixed deposits, foreign exchange, remittances and lending products are also available.

Corporate bankingHSBC’s Corporate Banking team offers a full range of services to multinationals, large domestic corporate and institutional clients. Corporate Banking represents a wide range of banking and financial services, which includes access to commercial banking products, including working capital facilities such as trade, channel financing, and overdrafts, as well as domestic and international payments, term loans (including external commercial borrowings), letters of guarantee. Clients are serviced by sector based client service teams that combine relationship managers; product specialists and industry specialists to develop customized financial solutions. Each team supports the client’s global needs, ensuring a full understanding of the company’s business and financial requirements. Based on client’s requirements, HSBC also assigns Global Relationship Management teams to provide structured solutions. Financial Institutions Group Working closely with Group offices in India and overseas, HSBC offers a full range of banking services to its institutional clients and is a leading service provider in areas of debt/equity capital markets, treasury, payments and cash management, trade, mergers, and acquisitions, custody and fund accounting. Clients include banks, financial institutions, securities houses, stock exchanges and clearing houses, insurance companies, asset management companies and developmental organizations. HSBC Securities Services HSBC Securities Services offers a wide range of securities processing and fund administrative services to local and international institutional clients. As a one-stop securities solutions provider, the bank offer a comprehensive package of top-rated


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award winning Custody and Clearing services, Fund Accounting and Administration, Corporate Trust and Loan Agency and derivatives clearing services. The leading sub-custody and securities clearing services provider, HSBC Securities Services operates across 39 markets in Asia-Pacific, the Middle East, Southern Europe and Latin America. With experienced staff and the latest technology, HSBC provides unrivalled services to diverse set of clients including global custodians, fund managers and brokers/dealers worldwide, and is the premier and largest provider of custody and clearing services to Foreign Institutional Investors in India. Global markets Clients consistently rate HSBC’s Global Markets operations as one of the best in India. In the latest Greenwich FX and Interest Rate Derivatives survey, corporate clients have rated HSBC the best in overall service quality (GQI Index). Its 52 members dealing room in Mumbai is one of the largest in the country that serves corporate and institutional clients in Mumbai and across most major cities in India. It provides a comprehensive range of products that include foreign exchange, money market, fixed income, currency/interest rate derivatives across currencies and debt syndication – both onshore and offshore.

Other Entities Asset management: HSBC Asset Management (India) Private Limited, is the investment manager to HSBC Mutual Fund (trading as “HSBC Global Asset Management” worldwide). With the Group’s global fund management expertise and investment capabilities, it is able to deliver products best suited to meet the investment objectives of both retail and institutional customers. Launched in India in November 2002, HSBC Global Asset Management manages assets of over INR 17,617 crores, spread across 40 schemes and plans under the HSBC Mutual Fund umbrella, as of 30 May 2008. HSBC Global Asset Management also offers Portfolio Management services (PMS) in India to manage wealth for High Net worth Individuals. Currently, the PMS business offers many products, namely, the Signature Portfolio, the Strategic Portfolio, Large Cap Portfolio, Select Series and ELN Series in its range of offerings. HSBC Global Asset Management comprises four specialist businesses: Halbis, Sinopia, Multimanager and Liquidity. These four businesses manage assets of US$397.4 billion at the end March 2008. Through its network of offices in over 20 countries and territories around the world, HSBC Global Asset Management develops strong relationships with corporates, institutions and financial intermediaries of all sizes and types. Audit Services: HSBC Professional Services (India) Private Limited, provides internal audit services to several of the HSBC Group's internal audit units worldwide. The areas in which HPSI provides internal audit services include IT, Treasury, Asset Management, Private Banking, Insurance, Transaction Banking, Support Functions, Branch Banking and Operations (including the Group Service Centres).


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Global resourcing: HSBC Electronic Data Processing (India) Private Limited, forms part of HSBC’s Global Resourcing network, and has 15 Group Service Centres (GSCs) across five countries in Asia. GR India (HDPI) provides a broad range of support services to the Group's banking and financial businesses. A vital part of the HSBC Group's global strategy, GR seamlessly integrates and plays a key role in delivering shareholder value and helping HSBC remain competitive in the global financial services market. In India, HSBC Global Resourcing employees over 16,500 professionals across its GSCs in Hyderabad (2 centres), Bangalore (2 centres), Visakhapatnam and Kolkata (2 centres). The GSC partner with other HSBC business areas to provide world-class customer service to a majority of HSBC's 125 million customers; on an average handling 462,000 calls and processing 1.64 million transactions each day. HSBC Operations and Processing Enterprise (India) Private Limited, through its offices in Mumbai, Chennai and Kolkata provides operations and processing services (voice as well as data) for Personal Financial Services, Wealth Management, Commercial Banking and Corporate and Institutional Banking in India.

Insurance broking:HSBC Insurance Brokers (India) Private Limited is a licensed composite insurance broking company functioning as a direct as well as re-insurance broker. It is a part of a worldwide network provided by HSBC Insurance Brokers, a major international risk management, and insurance broking and employee benefits organization. The Company provides a full range of services to assist clients in identifying, assessing and managing insurable risks, which includes designing and delivering a suitable insurance program to match exact needs of the clients. The Broking business offers a different outlook, because it comes from a different direction: the only insurance broker that is part of a global banking group. It has a unique ability to leverage expertise across the world and across a wide range of disciplines. Investment banking and equities: HSBC Securities and Capital Markets (India) Private Limited offers services in the areas of Equities broking, Investment Banking (IB) and Project Export Finance. Its institutional broking business based in Mumbai has seats on two of India’s premier stock exchanges, the Bombay Stock Exchange and the National Stock Exchange. It deals in Indian securities for both Indian and international institutions and for selected retail clients and is backed by an extensive research team. The IB business, with offices in Mumbai and New Delhi, includes mergers and acquisition advisory service, privatization advisory services and equity and debt origination. Project and Export Finance services are provided to governments, large corporates and top-tier banks.

Private Equity: HSBC Private Equity Advisors (India) Private Limited is a private equity investment advisor and a subsidiary of HSBC Private Equity Management (Mauritius) Limited


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(PEIN). PEIN identifies and evaluates private equity investment opportunities for HSBC’s Principal Investments Group, Special Opportunities Group, Specialist Investments (Real Estate and Infrastructure) Group and HSBC’s Asia Region Private Equity and Venture Capital Funds.

Software development (GLT):HSBC Software Development (India) Private Limited, the Global Technology Centre was established in April 2002 to develop technology solutions for the HSBC Group’s global operations. The centre in Pune is spread across four locations with another center in Hyderabad and employs over 5,560 software professionals. GLT, India is CMMi Level 5 certified and caters to the Group’s IT requirements worldwide through development, maintenance and support of diverse banking applications.


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THEORETICAL BACKGROUND

1. INTRODUCTION

The term Wealth Management, is the latest buzz in the financial sector. Many Banking companies are engaged in the business of Wealth management. The premier insurance industry is now booming because many bankers are also adopting and playing safe in the business of insurance, the term used is Bancassurance.

Wealth management services area in financial sector has been witnessing more attention during last couple of years. Capgemini Merrill Lynch Wealth Report 2008 cites number of HNWIs1 globally to be around 10.1 million with wealth held by them totaling to US$40.7 trillion in year 2008. Value of wealth held by HNWIs represents an increase of around 9.4% since 2006 with average HNWI wealth surpassing US$4 million for the first time2.

Considering long-term high value business proposition, number of banks and niche players has started offering full range of wealth management services.

While growing volume of premium services to affluent clients becomes the key driver for most of the service provider firms, many unique elements inherent to wealth management services requires completely different service offering model than the existing model for transactional services.

Greatly accustomed in offering commoditized financial services so far, demand of unconventional form of service model poses a big challenge in charting growth path for these wealth management firms.

India, China and Brazil had the highest HNWI population growth at the country level2.

HNWI financial wealth is projected to reach US$59.1 trillion by 2012, advancing at an annual growth rate of 7.7%2.____________________________________________________________________________________________________________________________________________________________________________

1High Net Worth Individuals (HNWIs) hold at least US$1 million in financial assets, excluding collectibles, consumables, consumer durables and primary residences.

2Capgemini & Merill Lynch Asia-Pacific Wealth Report 2008.


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2. CONCEPT OF WEALTH MANAGEMENT

Wealth management as a concept originated in the 1990’s in the US. Essentially it is investment advisory covering financial planning that provides individuals with private banking/ asset management/ taxation advisory and portfolio management. Out of the above mentioned services, portfolio management is generic and most other services are highly customized.

Client segmentation basically includes Individual Retail, HNIs (High Net worth Individuals) and UHNIs (Ultra High Net worth Individuals).

The services include portfolio management and rebalancing, investment management and strategies, Financial tax Advisory and estate planning. In terms of products it includes stock trading, equity linked and structured saving products, mutual funds and alternative investments.

2.1 Why do people opt for wealth management solutions?

Until the early 1990’s the investment was restricted largely to real estate, bonds, fixed income and gold. The opening up of the equity markets has caught the imagination of the masses, while further development and transparency have created a surge in the user base. Financial products were thus developed around equity.

Equity related products are highly volatile and react to events within and outside its domain. The need to have a specialist to manage the wealth was felt and this created the concept of Wealth managers.

2.2 Does technology play a part?

Wealth managers are becoming increasingly aware of the potential of the online (platform) with the overall structure of their advisory offerings .i.e. with access to a platform which can complement their strength of advisory. However there are as yet few wealth management firms & platforms which are fully harnessing the inherent potential of the internet as a medium for meeting client’s demands.


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2.3 Wealth management range

The Indian market has been segmented by Wealth Management service providers into five major categories:

1. Ultra-High net worth or Ultra-HNW individuals hold at least US$30 million in financial assets, excluding collectibles, consumables, consumer durables and primary residences.

2. Super-High net worth individuals hold between US$10 million to US$30 million in financial assets, excluding collectibles, consumables, consumer durables and primary residences.

3. High net worth individuals hold between US$1 million to US$30 million in financial assets, excluding collectibles, consumables, consumer durables and primary residences.

4. Super-affluent individuals hold between US$125,000 to US$1 million in financial assets, excluding collectibles, consumables, consumer durables and primary residences.

5. Mass affluent hold between US$25,000 to US125,000 in financial assets, excluding collectibles, consumables, consumer durables and primary residences.

The range of wealth management can be expressed by this exhibit chart.


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STUDENT START OF CAREERCAREER

ESTABLISHEDRETIREMENT

Liquidity Management(Cash Mgt)

* Deposit based comfort A/c

* Credit cards

*Comfort A/c with credit limit

*Gold Card

*Premium A/c

*Platinum Card

*Premium A/c *Platinum Card

* Overnight money A/c* Money Market & Fixed Income Fund* Near Money Market Fund * ZINS Plus

* Overnight money A/c* Money Market & Fixed Income Fund* Near Money Market Fund* ZINS Plus* Special Investments

Wealth Formation (Savings Plans)

* Top portfolio* Flagship portfolio* Titan portfolio

* Top portfolio* Flagship portfolio* Titan portfolio* Capital formation benefit funds

* Top portfolio* Flagship portfolio* Titan portfolio

Wealth Optimization (Lump sum Investment)

* Absolute Return Portfolio* Holding and Private Equities* Modular Wealth Management* Individual Wealth Management* Premium Portfolio* Titan Portfolio

2.4 Key elements of Wealth Management Services

Wealth management services involve fiduciary responsibilities in providing professional investment advice and investment management services to a client. Depending on the mandate of the services given to the Wealth Manager, wealth management services could be packaged at various levels:

Advisory

Investment Processing (transaction oriented)

Custody, Safekeeping and Asset Servicing

End-to-end Investment Lifecycle Management

Wealth management services comprises of following key functional areas:

1. Financial planning2. Portfolio strategy definition/asset allocation/strategy implementation.3. Portfolio management- Administration, Performance evaluation & Analytics.4. Strategy review & modification.

Wealth management strategy: The sum of many parts


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3. WEALTH MANAGEMENT-an emerging sector

Wealth management services area in financial sector, hitherto used to be the preserve of some top multinational banks and financial firms- offering exclusive services to a select few, has been witnessing more attention during last couple of years.

A booming economy, rising stock prices and an increase in income and spending power have brought sharp focus on this sector. With an increasing population of High Net worth Individuals (HNWIs)1, the unsaid tagline of earlier days - “Don’t call us. We’ll call you (if you are that wealthy!)” seems to be completed altered in recent times. Considering long-term high value business proposition, number of banks, financial firms and niche players has started offering full range of wealth management services targeted to HNWIs and emerging affluent.

As per recently published Capgemini & Merrill Lynch Wealth Report 2008, number of HNWIs around the world and value of their assets has been continuously rising. Number of HNWIs globally is estimated to be around 10.1 million in year 2008, an increase of over 6% over previous year. HNWI wealth totals US$40.7 trillion, representing an increase of around 9.4% since 2006. As per report, number of HNWIs in India is increasingly growing – at a rate higher than other region of world. Number of HNWIs in India is estimated to be around 123,000 in year 2006 - an increase of over 23% over previous year. Though, in absolute terms the above number appears pretty miniscule (if we compare that with the number of retail investors in India), however, in terms of value it really makes a really huge sum of serviceable investment.

While growing volume of premium services to affluent clients becomes the key driver for most of the service provider firms, many unique elements inherent to wealth management services requires completely different service offering model than the existing model for transactional services. To meet the client service expectations accurately, servicing model and framework has to be deeply oriented with high level of client satisfaction. It is not a surprise that many of successful firms in wealth management sector draw lessons from successful service leaders from hospitality, entertainment and retailing industries, to learn the trick of enhanced client satisfaction.

Greatly accustomed in offering commoditized financial services so far, demand of unconventional form of service model poses a big challenge in charting growth path for these wealth management firms.


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EXPANDING THE WEALTH MANAGEMENT CANVAS

The spectrum of offerings is spreading and the scope of services is widening significantly. A quick glimpse reveals:

1. Delivery Channels: anywhere and anytime through branch/call center/online/POS/PDA.

2. Personalized Service: Advisory services, relationship managers and financial planning experts to manage accounts and plan financial goals.

3. Investment tools for customers and their financial planners to manage wealth: Analyze portfolio, rebalance portfolio against model portfolio, portfolio simulation and ‘what if’ tools.

4. Product types: Traditional banking, traditional investment products and alternate investments.

5. Straight through processing: End-to-end transaction processing for investments.6. Tax Planning: Country-specific tax and social security.7. One stop financial shop: Interface with market data vendors, bank, depositories,

clearing houses, custodians and brokerage houses.8. Concierge Services: Lifestyle-related value added services.9. Customized view and reports: Portfolio-specific or across portfolio.10. Consolidated View: Complete financial picture in one screen.11. Strict adherence: Financial regulation, compliance and other country-specific

mandates.12. Secure and trusted environment: Data storage.

INCREASING FOCUS ON ADVISORY SERVICES

Private banking and wealth management customers are turning cautious with their investments as they seek better service providers. The quality of service, reporting and investment advice remains some of the important selection criteria for customers. ‘Know all’ advisors, offering advice across different product types, suggesting unique product bundling, predicting trends in the local and as well as global markets and suggesting investment protection mechanism, are key to the success of wealth management services, today. With the frequent highs and lows in the markets, there is an apparent disconnect between advisors and customers. Advisors are turning towards fact-based analysis and detailed case studies to bridge the gap. However, it would be pertinent to note that there is also a growing trend towards ‘Do-It- Yourself’ (DIY) services, where knowledgeable customers are not fully dependent on the advisory services provided by the bank. To provide such high levels of service, banks are seeking assistance from systems that offer a holistic view of customer relationship across assets and liabilities, to tailor appropriate investment solutions.


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TOUGH TIMES AHEAD WITH NO ENTRY LOAD…….It is almost certain now that government is planning to remove the entry load from 1st

august 2009. An entry load is a percentage of NAV that a customer pays when he purchases new fund. This charge is used by the mutual fund for marketing and distribution expenses. However the government is planning to remove this charge to attract new investors. As far now, the bank is not charging anything from the customers for the wealth management services being provided by them. AMCs pay bank a distribution fee directly proportional to the amount of business generated by the bank. This distribution fee is a part of the fund generated through entry load and exit load. So with the removal of the entry load the bank’s earnings through wealth management services will certainly be affected. Many banks have already started developing plans to fight this situation but only time will tell if these strategies will be successful. One possible strategy will be to start charging from the customer for the wealth management advisory services.


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CORE ELEMENTS OF WEALTH MANAGEMENT services

In most basic sense, wealth management services involve fiduciary responsibilities in providing professional investment advice and investment management services to Institutions, funds (Pension/mutual/Hedge), corporations, trusts as well as HNWIs. In the present context of our discussion, we would keep our focus limited to HNWIs.

Some of the analogous terms used for wealth management could be considered as Portfolio management, Investment management and many times Fund management or Asset management.

5.1 Packaged at various levels

Depending on the mandate of the services given to the Wealth Manager, wealth management services could be packaged at various levels:

a) AdvisoryWealth manger’s role is limited to the extent of providing guidance on investment / financial planning and tax advisory, based on client profile. Investment decisions are solely taken by the client, as per his /her own judgment.

b) Investment Processing (transaction oriented)Client engages wealth manager to execute specific transaction or set of transactions. Investment planning, decision and further management remain vested with the client.

c) Custody, Safekeeping and Asset ServicingClient is responsible for investment planning, decision and execution. Wealth manager is entrusted with management, administration and oversight of investment process.

d) End-to-end Investment Lifecycle ManagementWealth manager owns the whole gamut of investment planning, decision, execution and management, on behalf of the client. He is mandated to make financial planning, implement investment decisions and manage the investment throughout its life.


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5.2Key Functional Areas Wealth management services comprises of following key function areas:

I. Financial PlanningII. Portfolio Strategy Definition/ Asset Allocation / Strategy Implementation

III. Portfolio Management – Administration, Performance Evaluation and AnalyticsIV. Strategy Review and Modification

FINANCIAL PLANNINGi. Client Profiling

Client profiling takes into account behavioral, demographic and investment characteristics of a client that would determine each client’s wealth management requirements. Some of key characteristics to be evaluated for defining client’s investment objective are:

Current and future Income level Family and life events Risk appetite / tolerance Taxability status Investment horizon Asset Preference /restriction Cash flow expectations


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Religious belief (non investment in sin sector like - alcohol, tobacco, gambling firms, or compliant with Sharia laws)

Behavioral History (Pattern of past investment decisions) Level of client’s engagement in investment management (active / passive) Present investment holding and asset mix

ii. Investment Objectives

Based on the client profile, investment expectations and financial goals of the client could be clearly outlined. Defining investment objectives helps to identify investment options to be considered for evaluation. Investment objective for most of the investors could be generally considered amongst the following:

Current Income Growth (Capital Appreciation) Tax Efficiency (Tax Harvesting) Capital Preservation (often preferred by elderly people to make sure they don’t

outlive their money.)

PORTFOLIO STRATEGY DEFINITION/ ASSET ALLOCATION

i. Defining portfolio strategies and Portfolio Modeling

After establishing investment objectives, a broad framework for harnessing possible investment opportunities is formulated. This framework would factor for risk-return trade-off of considered options, investment horizon and provide a clear blueprint for investment direction. Investment strategy helps in forming broad level envisioning of asset class (Securities, Forex, Commodity, Real State, Reference and Indices, Art/Antique and Lifestyle Assets (Car, Boat, Aircraft)), market, geography, sector and industry. Each of these asset classes is to be comprehensively evaluated for inclusion in portfolio model, in view of defined investment objectives. While defining the strategy, consideration of client preference or avoidance for specific asset class, risk tolerance, religious beliefs is the key element, which would come into picture. Thus, for a client with a belief of avoidance of investment in sin industries (alcohol, tobacco, gambling etc.) is to be duly taken care of. Likewise, for a client looking for Sharia- compliant investment, strategy formulation should consider investment options meeting with the client expectations.

ii. Determination of Portfolio constituents and Asset Allocation

Guided with the investment strategy, constituents in portfolio model are determined, which would directly and efficiently contribute towards client’s investment objectives. Thus, a broad level investment guidance of – “investment in fixed income in emerging market” would further determine classification within Fixed Income such as Govt. or corporate bonds, fixed or variable rate bonds, Long or short maturity bonds, Deep discounted or Par bonds, Asset backed or other debt variants. Return


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profile, risk sensitivity and co-relation of constituents within portfolio model would help to determine the size (weightage) of each individual constituent in the portfolio.

iii. Strategy Implementation

Having decided the portfolio constituents and its composition, transactions to acquire specific instruments and identified asset class is initiated. As acquisition cost would be having bearing on overall performance of the portfolio, many times process of asset acquisition may be spread over a period of time to take care of market movement and acquire the asset at favorable price range.

PORTFOLIO MANAGEMENT

i. Portfolio Administration

Portfolio Administration involves handling of investment processes and asset servicing. This would also require tax management, portfolio accounting, fee administration, client reporting, document management and general administration relating with portfolio and client.

This function would involve back office administration and custodial services to manage transaction processes (trading and settlement) - interfacing with brokers/dealers/agents, Fund managers, Custodians, Cash Agent and many other market intermediaries.

ii. Performance evaluation and Analytics

Performance evaluation of the portfolio is an ongoing process. Portfolio return is continuously monitored and analyzed with respect to defined portfolio objectives. Analysis dimension could be varied – simple and complex. These may include - absolute return, relative return (in comparison to chosen benchmark), trend, pattern, cost impact, tax impact, concentration, lost opportunity and other form of sensitivity and what-if analysis.

Any deviation of portfolio performance observed during performance evaluation would lead to strategy review and any possible alignment of portfolio strategy.

STRATEGY REVIEW AND ALIGNMENT

i. Recalibration of Portfolio strategy

Based on performance evaluation and future outlook of the investment, portfolio strategy is evaluated on periodic basis. To keep it aligned with the defined investment objectives, portfolio strategy is suitably re-calibrated from time to time. Many times, review of portfolio strategy would be necessitated due to change in client profile or expectations.

ii. Rebalancing, Reallocation and Divestment of Assets


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Any re-calibration of strategy and consequent change in portfolio model would require rebalancing of the assets in portfolio. This would be achieved through rebalancing the asset (divesting over-allocated part and acquiring under allocated), relocation (from one sector the other or from one instrument to other instrument in the same class) or complete divestment.


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7. KEY CHALLENGE AREAS

While immense business potentiality of this emerging sector is a driving point for most of the firms, they face many challenges in formulating winning services offering meeting the client needs. In the following section, we would briefly take a look on the key challenges area in the present context.

i. Highly Personalized and Customized Services

Unlike other stream of financial services, mostly being transactional /commoditized in nature, wealth management services require client specific solution and service offering. No one solution exactly meets the needs of other client. In a situation of highly personalized and customized nature of service offering, developing any form of generic service model does not support growth of the business.

ii. Personal relationship driving the business

To meet client expectation of personal attention, mode of communication in wealth management services tends to be highly personalized. Thus, the conventional grids of communication, such as call centre, data centre does not fit well. Success of wealth management services heavily draws on personal interaction with the dedicated relationship manager, who takes care of whole investment management lifecycle for bunch of clients on one-to-one basis. This essentially requires service firm to invest heavily in human processes to groom and retain a team on competent relationship managers with cross functional skills.

iii. Evolving Client Profile

The biggest challenge in providing wealth management service offering is to factor and reckon the evolving nature of client profile, in terms of investment objective, time horizon, risk appetite and so on. Thus, a service model developed for a particular client cannot remain static over a period of time. Any service model has to be flexible enough to consider the dynamic nature of client profile and expectations arising out of it.

iv. Client Involvement Level

The conventional adage – the more money you have, more effort is needed to manage it – proves to be otherwise in case of HNWIs. Generally, client involvement in managing the finance remains on the lower side. This brings onus of managing the whole gamut of investment and due performance single-handedly on the shoulders of investment manager.

v. Passion Investment (Philanthropy and Social Responsibility)

In the recent years a trend has been observed that bulk of investments by HNWIs has been directed towards passion investments (art, antique, jewellery, coins, unique assets, luxury), philanthropy and social/community causes. As per World Wealth report, 11% of HNW investors worldwide contributed to philanthropic causes with a


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contribution over 7% of their wealth in year 2006. Ultra-HNWIs contribution was even more - 17% of Ultra-HNW investors that gave to philanthropy contributed over 10% of their wealth. In total, this equates to more than US$285 billion globally. Against this backdrop, new breed of HNWIs expect to strategically manage the wealth and personal resources allocated to philanthropy purpose, in order to maximize its impact. This demands a relationship manager not just to be a passive financial advisor rather a passionate partner sharing interest and inclination of the associated client.

vi. Limited Leveraging Capabilities of Technology (as an enabler)

In the recent times, we have witnessed technology a key enabler to help business to expand its market reach with reduced cost of services offering. Online banking and online trading/brokerage services are the best examples in this regard. Technology leveraging has helped services firm to achieve universal proliferation of market with substantially reducing transaction cost. As business rules and service definitions to guide the applications tends to be quite composite in wealth management services, leveraging the capabilities of technology to meet the business requirement may not be highly feasible in the initial years.

vii. Technical Architecture and Technology Investment

As business architecture is still evolving, a proven basis of resilient technical architecture and framework to support the emerging business greatly remains missing. In absence of this framework, any investment commitment towards application development / system implementation would be fraught with severe risk.

viii. Intricate Knowledge of Cross-functional Domain

By very nature of wealth management, it not just involves matters of plain vanilla finance but has intricate relationship with many elements of domestic / international law, taxation and regulatory norms. In order to provide sound investment guidance, a relationship manager is required to have intricate knowledge of domestic/cross-border finance, accounting, legal and taxation subjects.


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8. SOLUTION FRAMEWORK

Generic services offering model is going to draw big blank in case of wealth management services. A HNWI client expects exclusiveness in services in a normal manner. In highly competitive market, key to success for a firm lies in offering exclusiveness in services delivery (high quality services on most personalized basis), going beyond the client expectations. A solution framework with considered inclusion of following key elements would help firms in meeting and exceeding client needs towards sustainable business growth.

i. Quality of Service Level

Quality of service level provided by the service provider firm would the key determinant of growth and success in client acquisition, client satisfaction and client retention aspects. In a sense, service offering could be developed in the form of partnership with the client based on trust and integrity, where the relationship manager remains highly responsive to client sensitivities and expectations. Without over-emphasizing, a satisfied client would provide multitude of opportunities of growth of business – through deepening the relationship, direct / indirect referencing as well as cross selling of products. In the other situation of deficiency in service level, he would not hesitate to move the business to another firm. This keeps strong emphasis on continued engagement with the client on the aspects of client expectation and servicing, rather than showing extra attention only during the period of client acquisition. Focused around client needs, a broad framework of service offering during whole lifecycle of client investment management would be revolving around: Anticipate, Analyze, Advice, Act and Monitor cycle.

ii. Universal Service Offering

To meet the client needs in holistic manner, product and service offering range of the firm should be wide enough to cover the investment spectrum across its lifecycle. In an ideal situation, a client would expect to deal with a single firm to get complete range of investment management services. However, for various business considerations of the service provider firm, in many situations it may not be a viable proposition to offer those services. While universal service offering with assortment


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of services under single umbrella is not attainable inhouse, it could be achieved through active partnership and affiliation. But, due consideration is required that quality of service level provided by partners/affiliates does not get compromised in any manner. Any shortcoming in service quality, even if caused by partner/affiliate’s services, would be ultimately impairing client satisfaction towards the firm.

iii. Investment in People Processes

As relationship manager remains the face of the firm to a client, success of the firm would be greatly dependent on the skills, drive and enthusiasm of relationship managers (to take an extra mile), while bonding and dealing with any of client issues. This aspect is more challenging than as it appears. This necessitates transformation of organizational philosophy towards its people and people processes contributing to business success. Firms would be required to invest heavily in human processes to attract, groom and retain a motivated team of relationship managers, who will make the real difference between winning and losing the game.

iv. Price not a True Differentiator

Pricing as a key differentiator to distinct the service offering from one firm to other may not be highly relevant in case of wealth management services. Focused on performance and quality of service, pricing in isolation will not make much meaning to service seeking clients. Client would always value the pricing from the quality of services received. He will certainly not mind paying extra, if he finds services offered to him meeting and exceeding his expectations.

v. Unconventional Delivery Channel and Communication

Delivery channel for service content and mode of communication has to be greatly customized – aligned with the client-desired vehicles. This would require a process of continuous re-inventing and re-defining the grid of delivery and communication channels to meet client expectations. Impact of technological advancements and its interplay on service delivery and communication method would certainly be an equally challenging aspect to be factored in, while designing such strategies.

vi. Flexibility of Technical Architecture

While business potential appears to be quite high, existing business architecture still does not provide any sound basis to formulate technical roadmap. Added to that, dynamic characteristics of client profile bring an increased challenge in drawing a firm implementation blueprint. In the given situation, any big-bang commitment towards technical implementation plan would not be a wise idea. A prudent approach would be to get started on modular basis with progressive integration of functional components in order of its functional significance. Gaining insight and confidence around the business processes, this could be gradually scaled over the period of time. To meet the information technology requirements, a firm has several alternatives (or combination of alternatives) to consider:

Integrated solution approach:


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Developing in-house applications to meet end-to-end new business requirements. These applications are based on existing technology architecture of the firm and are closely integrated with the existing service models. It would be a least preferred choice in the current situation, on count of cost, time, lack of clarity and complexity of solution.

Service Bureau /ASP Model:

A recent trend has been witnessed in the solution provider’s landscape. Many of information technology service providers have come out with novel solution for investment management / investment processing platform in the form of service bureau / ASP. This platform provides integrated end-to-end processing infrastructure and services including core of business processes of wealth management. On the part of a wealth management firm, paying agreed charges to service bureau provider, option of service bureau completely eliminates the requirement of ongoing resource commitment and cost of maintaining information technology infrastructure. While total cost of owning may be the key motivating point for a wealth management firm to adopt service bureau model, the key consideration of providing high quality of service level with enhanced responsiveness may not be adequately answered. The question remains to be answered is – what would be the key differentiator in service offering of two wealth management firms operating from the same service bureau?

Stand-alone commercial software product/solutions:

Pre-packaged solutions that can be focused to specific part of services or provide comprehensive end-to-end processing. These can be deployed independently or could be integrated with existing systems. Cost, customization and integration difficulties would be the challenging points.

A loosely oriented technical architecture with optionality and mix of Build – Buy – Integrate components would be considered as a good beginning point. To provide enough resilience and high business relevance, any of the considered option and associated structure should keep due provisions for the following key elements:

Considering the complexity of business processes and involved business rules, rule based processing would be the core of processing.

Client profile acquires many new dimensions with plethora of attributes. Client data is required to be appropriately managed (aggregate / segregate) to build a profile driven solution offering.

Decision support and client oriented analytics acquire more importance. Applications should provide adequate flexibility to incorporate manual processing

interfaces.


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9. SERVICES PROVIDED BY WEALTH MANAGEMENT INSTITUTIONS

Following are the services provided by the wealth management institutions:

A. CUSTODIAN SERVICESi. Securities safekeeping

ii. Income collection from securitiesiii. Settlement of securities trade as directediv. Payment of funds when directedv. Timely settlement delivery

B. TRUST SERVICESi. Charitable trust

ii. Revocable trustiii. Irrevocable life insurance trustiv. Special need trustv. Institutional trust

C. RETIREMENT PLAN SERVICESi. IRA’s custodian or trustee

ii. Defined benefit planiii. Defined contribution plan

WEALTH MANAGEMENT VALUE CHAIN


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WEALTH MANAGEMENT PRACTISE ORIENTATION OVERVIEW

A. Transactors Product Expert: Handles high-volume transactions involving sophisticated

products or asset classes, such as foreign exchange derivatives. Investment Broker: Handles transactions involving basic asset classes, such as

equities, fixed income and options. B. Investment Managers

Investment Advisor: Offers strategic investment planning, as well as playing a hands-on role in constructing, reviewing and rebalancing client portfolios.

Relationship Manager: Establishes and nurtures client relationships, delegating portfolio management to internal or external managers.

C. Wealth Planners Wealth Planner: Offers holistic advice in accordance with client’s finances

and short/long-term goals, such as real estate, retirement and generational wealth transfer.

Personal CFO: Aspires to provide quasi family-office services, often acting in a lead discretionary role coordinating with the client’s other trusted advisors.


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The significance of these practice-model categories is that each reflects a different advisory approach, borne of a different perspective. While some firms claim to have a single practice orientation, many actually use multiple models in and across regions—and often leverage different models within their core markets to capitalize on the strengths of individual advisors. As they move into new markets, firms can create or exacerbate friction among the different advisory approaches they use. Importantly, practice orientations need not be mutually exclusive, but the mix of intra-firm practice models does need to be consciously managed.


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10.ADVANTAGES AND LIMITATIONS

Advantages: Following are the advantages of the wealth management concept.

i. Helpful In Tax Planning: The Wealth management professional always shows the good path to the customers and provide the service of tax planning. How to minimize the tax and save more money?

ii. Helpful In Selection of Investment Strategy: Another advantage from the customer point of view is with the help of WM Professional the customer can easily know the investment strategy and analyze risk and return.

iii. Helpful In Estate Management: With the help of Wealth management professional. They can also manage their estate. Estate management is a task to provide objective administration of their funds tailored to aim in responsible distribution and protection of their overall estate.

iv. Helpful in forward looking: They can say planning, that recognizes as their estate grows and changes occurs. They require some team of professionals who help us in future planning.

v. Helpful for Indian Economy: Banks which are engaged in business of WM earning revenues from the foreign countries i.e. outsourcing for economy

Disadvantages: Following are the disadvantages of the wealth management concept.

i. WM Reduces The Scope Of Management: Though They all know that management has existence at all levels of life and society but the term Wealth management only related with the higher level means rich people, and is not having any plans and provisions for poor and lower and middle level of society.

ii. Chances of Fraud: Another demerit or limitation of the WM concept is it is not showing the actual position. The customer doesn’t know about the things going on with using his Wealth and there may be chances of forgery and fraud with customers.

iii. Actual Picture VS Inflation: What is the actual position of market they don’t know because everything is done by some WM professionals. So they cannot assume their position in the market that also results in inflation because economy is unknown about the actual state. There may be chance that the customers are in risk but they are showing the false return and vice-versa.


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11.CONSUMER POINT OF VIEW: Wealth Management

PORTFOLIO MANAGEMENT SYSTEM: Portfolio Management System can be defined as hybrid service provided by portfolio managers, which includes personalized stock and mutual fund investing. Portfolio managers can be of two kinds, discretionary or non-discretionary. Discretionary portfolio managers manage the funds of clients independently on their own accord, while the latter manage the funds according to their clients’ direction. Any person who is registered with Securities and Exchange Board of India (Sebi) as a portfolio manager is allowed to offer PMS.

PMS vs. WEALTH MANAGERS & FUND MANAGERS: PMS is completely different from priority banking and wealth management. Priority banking or wealth management is the umbrella of products while PMS is a product. So if priority banking and wealth management is a grocery shop then PMS is a specific grocery. Priority banking is usually offered to premiere customers who have a relationship manager appointed, who would advice you on your investments across the products offered by the bank like insurance, and investment linked products (mutual funds, bonds and unit linked insurance plan).

Mutual funds and PMS differ on the degree of customization, minimum investment and on the fee structure. Minimum investment required for PMS is more than mutual fund. Unlike PMS, there is no concept of profit sharing in mutual funds. Also, the level of customization of your investments is higher in PMS.

HOW TO CHOOSE A PMS?

Investment philosophy

Akhilesh Singh, business head, Emkay Wealth, says, “The most important factor is to understand the fund manager’s investment philosophy and strategy, which must align with the investor’s objectives.” Singh adds, “Some portfolio managers structure long-term portfolios, while some prefer to actively churn the portfolio for higher short-term returns, which adds to the overall cost and tax liability.” HSBC, for instance, has a product called Strategic, which is for the long term, while Angel’s Bluechip is for medium to long-term investors.

Scheme benchmarks.

Make sure that the portfolio is benchmarked to an appropriate index. This helps measure the performance of the scheme and the portfolio manager. Benchmarks are important also as profit-sharing is linked to the performance of the portfolio above the benchmark. So, an aggressive portfolio benchmarked to a low-return index will mean higher over-the-benchmark returns. This means that you will have to share a larger portion of your profit. The wrong benchmark distorts the performance of the fund.

Minimum investment.

There are many portfolio managers whose thresholds are much higher than the Sebi-mandated minimum of Rs 5 lakh. Choose a scheme that fits the size of your portfolio.


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Returns.

It is difficult to judge a scheme’s performance based on returns, as it may vary from the returns of an investor. Also, depending on the time of entry, an investor’s returns may vary from that of others. Before signing the contract, make sure your portfolio manager has a fair record of surpassing the returns from the benchmark index for numerous years.

Cost structure.

Portfolio managers usually have two kinds of charges—management fee, which is fixed, and profit sharing, which is variable. You can also pay a fully fixed fee. Further, if the portfolio is churned frequently, it adds to the cost due to higher tax and brokerage. On each transaction you pay brokerage and short-term gains tax of 20 per cent. Management fee ranges from scheme to scheme. You could opt for a higher performance-linked charge as it puts pressure on the fund manager to perform better as he has a share in the profits.

Frequency of disclosure.

This varies from firm to firm, and largely depends on the agreement between the investor and the company. Most NAVs are disclosed daily, but you can opt for a company that also discloses portfolios daily.

Broking house.

If the broker is internal, it may be possible that your portfolio is churned frequently. Usually, asset management companies have external brokers, while some, have both external as well as internal broking.

Assets under management (AUM).

Though higher AUMs do not guarantee higher returns, it remains an important factor. A low AUM could be an indicator of poor performance. It is believed that Rs 100 core AUM is a healthy floor.


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12.CONCEPT OF ASSET CLASSES

11.1 ASSET MIX

Asset mix is the allocation of a portfolio between asset classes, it balances return and risk. Returns are a combination of the income from an investment and the price appreciation over the period. Risk is usually proximate by the “standard deviation” of returns, how much the return change about the long-term average.

12.2LIST OF DIFFERENT ASSET CLASSES i. Fixed deposit

ii. Mutual fundsiii. Equityiv. Commoditiesv. Art fund

vi. Real-estate fundvii. Insurance product

viii. Structured productix. Gold x. Currency

xi. Oil

FIXED DEPOSIT

FDs are the most popular today.

With FDs you deposit a lump sum of money for a fixed period ranging from a few weeks to a few years and earn a pre-determined rate of interest. FDs are offered by both banks and companies though putting your money with the latter is generally considered riskier.

Merits and Demerits: The main advantage is that FDs from reputed banks are a very safe investment because such banks are carefully regulated by the Reserve Bank of India, RBI, the banking regulator in India.

Note that company FDs isn’t as safe as bank FDs because if the company goes bankrupt you may lose your money. Make sure you check the credit rating of a company before investing in its FDs. You should be especially wary of companies which offer interest rates significantly higher than the average to attract your money.

The other advantage of FDs is that you have the option of receiving regular income through the interest payments that are made every month or quarter. This option is especially useful for retirees. On the flip side, a fixed deposit won’t give you the same returns that you may get in the stock markets. For instance a stock-portfolio may rise by 20-30 per cent in a good year whereas a fixed deposit typically earns only 7-10 per cent.


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A fixed deposit also doesn’t offer protection against inflation. If inflation rises steeply during the maturity of the FD your inflation adjusted return will fall.

Interest rates on FDs: The rate of interest on FDs varies according to the maturity with longer deposits generally earning a higher interest rate. Interest paid on a fixed deposit is paid either monthly or quarterly according to the investor’s choice. So if you invest Rs 3 lakhs in a one year fixed deposit which pays 8 per cent you can earn Rs 2,000 of interest every month or Rs 6,000 of interest every quarter.

Effective return: Before you invest in FDs you need to understand the concept of effective return which is higher than the rate of interest on the FD. Effective return is relevant if you choose to reinvest your interest every year which means that you will be earning compound interest.

MUTUAL FUNDSA Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in the offer document.Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.

NAV (net asset value): The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV) of a Scheme.

Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on a day-to-day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date.

TYPES OF MUTUAL FUNDS

a) Schemes according to Maturity Period: A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period.

i. Open-ended Fund/ Scheme


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An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices after deduction of exit load, if any which are declared on a daily basis. The key feature of open-end schemes is liquidity.

ii. Close-ended Fund/ Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of the launch of the scheme. Investors can invest in the scheme at the time of the initial public issue In order to provide an exit route to the investors; some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. These mutual funds schemes disclose NAV generally on a weekly basis.

b) Schemes according to Investment Objective: A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:

i. Growth / Equity Oriented Scheme

The aim of growth funds is to provide capital appreciation over the medium to long-term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like Growth option, dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

ii. Income / Debt Oriented Scheme

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short term and vice versa. However, long-term investors may not bother about these fluctuations.


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iii. Balanced Fund

The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.

iv. Money Market or Liquid Fund

These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.

v. Gilt Fund

These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.

vi. Index Funds

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges.

vii. Fund of funds

Are mutual funds which invest in other underlying mutual funds (i.e., they are funds comprised of other funds). The funds at the underlying level are typically funds which an investor can invest in individually. A fund of funds will typically charge a management fee which is smaller than that of a normal fund because it is considered a fee charged for asset allocation services. The fees charged at the underlying fund level do not pass through the statement of operations, but are usually disclosed in the fund’s annual


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report, prospectus, or statement of additional information. The fund should be evaluated on the combination of the fund-level expenses and underlying fund expenses, as these both reduce the return to the investor.

Most FoFs invest in affiliated funds (i.e., mutual funds managed by the same advisor), although some invest in funds managed by other (unaffiliated) advisors. The cost associated with investing in an unaffiliated underlying fund is most often higher than investing in an affiliated underlying because of the investment management research involved in investing in fund advised by a different advisor. Recently, FoFs have been classified into those that are actively managed (in which the investment advisor reallocates frequently among the underlying funds in order to adjust to changing market conditions) and those that are passively managed (the investment advisor allocates assets on the basis of on an allocation model which is rebalanced on a regular basis).

The design of FoFs is structured in such a way as to provide a ready mix of mutual funds for investors who are unable to or unwilling to determine their own asset allocation model. Fund companies such as TIAA-CREF, American Century Investments, Vanguard, and Fidelity have also entered this market to provide investors with these options and take the “guess work” out of selecting funds. The allocation mixes usually vary by the time the investor would like to retire: 2020, 2030, 2050, etc. The more distant the target retirement date, the more aggressive the asset mix.

viii. Hedge funds

Hedge funds in the United States are pooled investment funds with loose SEC regulation and should not be confused with mutual funds. Some hedge fund managers are required to register with SEC as investment advisers under the Investment Advisers Act. The Act does not require an adviser to follow or avoid any particular investment strategies, nor does it require or prohibit specific investments. Hedge funds typically charge a management fee of 1% or more, plus“performance fee” of 20% of the hedge fund’s profits. There may be a “lock-up” period, during which an investor cannot cash in shares. A variation of the hedge strategy is the 130-30 fund for individual investors.

EQUITY INVESTMENTS

Generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created). When the investment is in infant companies, it is


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referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations.

Direct holding and pooled funds

The equities held by private individuals are often held via mutual funds or other forms of pooled investment vehicle, many of which have quoted prices that are listed in financial newspapers or magazines; the mutual funds are typically managed by prominent fund management firms (e.g. Fidelity Investments or The Vanguard Group). Such holdings allow individual investors to obtain the diversification of the fund(s) and to obtain the skill of the professional fund managers in charge of the fund(s). An alternative, usually employed by large private investors and pension funds, is to hold shares directly;in the institutional environment many clients that own portfolios have what are called segregated funds as opposed to, or in addition to, the pooled e.g. mutual fund alternative.

COMMODITIES MARKET

Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts.

ART FUND

Wealth management now includes art, real estate investments. With prices of paintings rising 10 times in the last two years, three new financial entities have launched ‘art advisory’ services as part of Wealth management services. While Citibank has been providing art advisory services like art insurance, art storage and using art as tradable collateral for some time, the recent surge in prices has driven Yes Bank, ABN Amro and Dawnay Day to start this service.

The works of M.F. Hussain, Jatin Das or Anjolie Ela Menon are sought after by art lovers not only for their aesthetic value but also as an asset. Art galleries are involved in art valuations, i.e. mapping the pricing history of an artist or research on art.

Art is now being treated as an investment and high net worth individuals are prompting banks to look at alternative asset classes, such as art or real estate, for investment as a part of Wealth management products.

Diversified portfolio

For individuals looking at alternative investments rather than the usual investments in equity-related products.

Investments in alternative asset classes give clients a diversified portfolio across a variety of asset classes.


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http://en.wikipedia.org/wiki/Commodities_exchange

http://en.wikipedia.org/wiki/Segregated_fund

http://en.wikipedia.org/wiki/Fund_manager

http://en.wikipedia.org/wiki/Diversification_(finance)

http://en.wikipedia.org/wiki/The_Vanguard_Group

http://en.wikipedia.org/wiki/Fidelity_Investments

http://en.wikipedia.org/wiki/Fidelity_Investments

http://en.wikipedia.org/wiki/Pooled_investment_vehicle

http://en.wikipedia.org/wiki/Mutual_fund

Yes Bank is expected to launch a Wealth management service that will offer investment in real estate, art and jeWellery. It expects to kick-start the real estate service during this fiscal.

The bank is planning tie-ups with real estate consultant agencies. The service will largely cater to non-resident Indians seeking opportunities to invest in real estate in the country.


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Tie-up with galleries

In the art segment, tie-up with art galleries, “Contemporary Indian art will be at focus. Hiring specialists in the field for advisory,” High networth individuals in India are increasingly looking at contemporary Indian art as a good investment. With the advent of private art funds and galleries, art is becoming an emerging asset class.

ABN Amro advises clients on investment in art. However, the execution depends on the client in conjunction with experts in the field.

It is difficult to generalize. The majority of clients begin with an investment of around 4-5 per cent of their portfolio,” targets customers with Rs 2-2.5 crore threshold for investment.

According to the banks, some clients also invest in these asset classes to minimize risk because they are looking at protecting their capital. Investment in these asset classes requires a review of client’s age, personal ability to take risk and most importantly, client’s interest. What percentage of assets would be allocated to alternative assets would depend on the client’s interest and ability to take risk.

REAL ESTATE FUNDS

India Real Estate Fund is a significant component of the Indian realty market flooded with Indian and foreign financial institutions. The growing increase in the industrial, commercial and residential projects have boosted the real estate market in India. This has thrown open unlimited scope for the incoming of the India Real Estate Funds. The profits have encouraged financial assistance from not only domestic funds but also lured many foreign investors to participate in the India Real Estate Fund.

The cooperating assistance from the government has further encouraged liquidity flow into the India real estate market sector. The foreign contributions in the India Real Estate Fund have been witnessing a steady rise of 40%-45% per year. The domestic financial institutions have also build up their investments like their foreign counterparts. These combined participations from both along with contributions of the corporate houses have accelerated the growth of India Real Estate Fund.

Leading India Real Estate Fund: Some of the leading India Real Estate Fund are :

HDFC Property Fund- HDFC India Real Estate Fund (HI-REF), the first scheme HDFC Property Fund, invests in all the stages of the real estate projects.

DHFL Venture Capital Fund- DHFL Venture Capital Fund, promoted by Dewan Housing, has a focus on developing properties rather than investing in real estate.

Kshitij Venture Capital Fund - Kshitij Venture Capital Fund, a group venture of Pantaloon Retail India Ltd., will be deploying funds exclusively in developing malls especially in western and southern India.

India Advantage Fund (ICICI)


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Kotak Mahindra Realty Fund

India Real Estate Mutual Fund: The further involvement of the real estate mutual funds has improved the quality of the construction practices. The 10th

Five-Year Plan has proposed that Securities and Exchange Board of India would regulate the India real estate mutual funds.

Real Estate Investment Trusts: The primary difference between Real Estate Investment Trusts and a mutual fund is that investments made in the former are traded in real estate stocks and not invested in company stocks moreover they provides a heavier liquidity than the mutual funds. India Real Estate Foreign Funds- The significant international investments in the India Real Estate Fund are like:1.Warburg Pincus2.Blackstone Group3.Broadstreet4.Morgan Stanley Real Estate Fund5.Columbia Endowment Fund6.Hines7.Tishman Speyer8.Sam Zell’s Equity International

INSURANCE PRODUCTS General insurance

The modern concept of insurance practices in India started during the British rule in 1818 when Oriental Life Insurance Company was established in Calcutta. India became independent from British rule in 1946, and by 1956 the insurance sector was nationalized, with the Life Insurance Corporation of India created by combining almost 245 private life insurance companies; 107 private non-life companies combined in 1973 to form the General Insurance Corporation. But since the very purpose of nationalizing the insurance sector got sidelined due to the monopolistic power it enjoyed, coupled with the bureaucratic mindset of LIC and GIC, insurance again was opened to private players in 1999. During 2000-2006, almost 15 life and 13 non-life private insurance players (mostly joint ventures between Indian and foreign players) started operations in India, indicating the willingness of foreign institutional investors to enter the Indian insurance sector. But through all these major changes the actual impact was felt only in major urban areas, while the vast majority of the rural population was excluded from the insurance sector. Around the world, scholars and financial experts believe that in the next 5 to 10 years, India and China are going to be the targets for insurance companies. So far, most of the insurance companies in India are not actively tapping the huge potential of the rural markets. Unless the rural markets are given priority consideration, all predictions about future insurance industry potential in India


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are going to be distant dreams. The present insurance business is not even able to penetrate 20% to 30% of the total population of 1.095 billion, and the projected population figure by 2025 will be approximately 1.501 billion. The order of the day will be to refocus on micro insurance in India to capture the huge potential of rural customers

Unit Linked Insurance plan (ULIP)

Unit Linked Insurance Plan (ULIP) provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time. ULIP is life insurance solution that provides for the benefits of protection and flexibility in investment. The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV).

ULIP came into play in the 1960s and is popular in many countries in the world. The reason that is attributed to the wide spread popularity of ULIP is because of the transparency and the flexibility which it offers.

As times progressed the plans are also successfully mapped along with life insurance need to retirement planning. In today’s times, ULIP provides solutions for insurance planning, financial needs, financial planning for children’s marriage planning also can be done with this.

STRUCTURED PRODUCT

A structured product is generally a pre-packaged investment strategy which is based on derivatives, such as a single security, a basket of securities, options, indices, commodities, debt issuances and/or foreign currencies, and to a lesser extent, swaps. The variety of products just described is demonstrative of the fact that there is no single, uniform definition of a structured product. A feature of some structured products is a “principal guarantee” function which offers protection of principal if held to maturity. For example, an investor invests 100 dollars, the issuer simply invests in a risk free bond which has sufficient interest to grow to 100 after the 5 year period. This bond might cost 80 dollars today and after 5 years it will grow to 100 dollars. With the leftover funds the issuer purchases the options and swaps needed to perform whatever the investment strategy is. Theoretically an investor can just do this themselves, but the costs and transaction volume requirements of many options and swaps are beyond many individual investors.

As such, structured products were created to meet specific needs that cannot be met from the standardized financial instruments available in the markets. Structured products can be used as an alternative to a direct investment, as part of the asset allocation process to reduce risk exposure of a portfolio, or to utilize the current market trend.

Composition


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http://en.wikipedia.org/wiki/Swap_(finance)

http://en.wikipedia.org/wiki/Currencies

http://en.wikipedia.org/wiki/Commodities

http://en.wikipedia.org/wiki/Index_(economics)

http://en.wikipedia.org/wiki/Option_(finance)

http://en.wikipedia.org/wiki/Security_(finance)

http://en.wikipedia.org/wiki/Derivative_(finance)

http://en.wikipedia.org/wiki/Investment

http://en.wikipedia.org/wiki/Net_asset_value

http://en.wikipedia.org/wiki/Life_insurance

Structured products are usually issued by investment banks or affiliates thereof. They have a fixed maturity, and have two components: a note and a derivative. The derivative component is often an option. The note provides for periodic interest payments to the investor at a predetermined rate, and the derivative component provides for the payment at maturity. Some products use the derivative component as a put option written by the investor that gives the buyer of the put option the right to sell to the investor the security or securities at a predetermined price. Other products use the derivative component to provide for a call option written by the investor that gives the buyer of the call option the right to buy the security or securities from the investor at a predetermined price.

Risks

The risks associated with many structured products, especially those products that present risks of loss of principal due to market movements, are similar to those risks involved with options. The potential for serious risks involved with options trading are well-established, and as a result of those risks customers must be explicitly approved for options trading.

GOLD Factors influencing pricing of gold

Today, like all investments and commodities, the price of gold is ultimately driven by supply and demand, including hoarding and disposal. Unlike most other commodities, the hoarding and disposal plays a much bigger role in affecting the price, because most of the gold ever mined still exists and is potentially able to come on to the market for the right price. Given the huge quantity of hoarded gold, compared to the annual production, the price of gold is mainly affected by changes in sentiment, rather than changes in annual production.

According to the World Gold Council, annual mine production of gold over the last few years has been close to 2,500 ton. About 3,000 ton goes into jewelry or industrial/dental production, and around 500 ton goes to retail investors and exchange traded gold funds. This translates to an annual demand for gold to be 1000 ton in excess over mine production which has come from central bank sales and other disposal.

Central banks and the International Monetary Fund play an important role in the gold price. At the end of 2004 central banks and official organizations held 19 percent of all above-ground gold as official gold reserves. The Washington Agreement on Gold (WAG), which dates from September 1999, limits gold sales by its members (Europe, United States, Japan, Australia, Bank for International Settlements and the International Monetary Fund) to less than 400 ton a year. European central banks, such as the Bank of England and Swiss National Bank, have been key sellers of gold over this period.


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Although central banks do not generally announce gold purchases in advance, some, such as Russia, have expressed interest in growing their gold reserves again as of late 2005. In early 2006, China, which only holds 1.3% of its reserves in gold, announced that it was looking for ways to improve the returns on its official reserves. Many bulls hope that this signals that China might reposition more of its holdings into gold in line with other Central Banks.

In general, gold becomes more desirable in times of:i. Bank failures

When dollars were fully convertible into gold, both were regarded as money. However, most people preferred to carry around paper banknotes rather than the somewhat heavier and less divisible gold coins. If people feared their bank would fail, a bank run might have been the result. This is what happened in the USA during the Great Depression of the 1930s, leading President Roosevelt to impose a national emergency and to outlaw the holding of gold by US citizens known as Executive Order 6102 which has since been ended.

ii. Low or negative real interest rates

If the return on bonds, equities and real estate is not adequately compensating for risk and inflation then the demand for gold and other alternative investments such as commodities increases. An example of this is the period of Stagflation that occurred during the 1970s and which led to an economic bubble forming in precious metals.

iii. War, invasion, looting, crisis

In times of national crisis, people fear that their assets may be seized and that the currency may become worthless. They see gold as a solid asset which will always buy food or transportation. Thus in times of great uncertainty, particularly when war is feared, the demand for gold rises.

CURRENCY

The modern hedge fund manager’s liberal tongue-in-cheek definition is: “If it moves up and down independently, then it’s an asset class.” While currencies surely do a lot of moving up and down, they also stand out for other reasons:

The global foreign-exchange (FX) market can be considered by far the largest marketplace in the world, not only geographically but also with reference to trading volume. The daily turnover is growing constantly and has long ago surpassed the $1 trillion mark: forty times the size of world trade.

An important difference between currencies and other markets is that currency prices allow us to analyze also their reciprocal values. A falling dollar/yen is synonymous with a rising yen because the dollar can be


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expressed in yen and, vice versa, the yen in dollars. By comparison, the dollar is never measured in units, as the Dow Jones for example.

For the same reason the expression ‘short sale’ – so much maligned in equity trading – does not exist in currency trading because the short sale of a currency is equivalent to a purchase of the other currency.

For similar reasons, the currency market cannot suffer a ‘crash’ (such as the stock market crashes of 1929 or 1987) through which the wealth of all market participants dwindles. In the currency market eachloss is matched by an equivalent gain of the counter-party.

Another unique feature of the currency market is that it is active without interruption ‘round-the-clock’.

Portfolio composition of currency

Modern portfolio theory postulates that relative risk can be reduced by diversification into at least six or more components. This is not necessarily true for currency portfolios. Most delivering percentage returns. The index serves as a proxy for available currency manager portfolio returns in general and has the added benefit of being uncorrelated to returns of other asset classes. Low correlation, liquidity and transparency are good enough reasons for currencies to be considered a prime candidate for inclusion in any investment portfolio.


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13.COMPANIES PROVIDING WEALTH MANAGEMENT SERVICES

5.3 HSBC FINANCIAL PLANNING SERVICES Introduction: The customer’s portfolio is managed in a fully discretionary manner by a selection of ‘Best of Breed’ third party panel of Portfolio Management Service providers. The main objective is to help customers preserve their wealth in line with their investment objectives. Inflation, falling interest rates and fluctuating market conditions requires planning of finances carefully. Celebrate important occasions in the future by managing your Wealth Well now. HSBC’s Financial Planning Services offer assistance to secure the future. Their Financial Planning Services are available for existing HSBC customers and are free of cost.

Asset classes used:1. Traditional investments:

i. Direct equity advisory: Customized advice on direct equity portfolios based on customer’s risk profile and specific requirements. The proposition, backed by comprehensive in-house research, entails building portfolios with fresh funds or restructuring legacy portfolios to provide better risk adjusted returns.

ii. Mutual funds: HSBC’s open architecture philosophy and ‘Best of Breed’ selection of debt and equity mutual funds allows customers to buy the top performing mutual funds available in the market.

2. Non-traditional investments:i. Structured products: Combinations of derivatives and financial

instruments create structures that have significant risk/return features that may not be otherwise available in the marketplace. Structured products are designed to provide investors with highly targeted investments tied to their specific risk profiles, return requirements and market expectations.

ii. Real estate venture funds: To provide customers with diversification avenues which reduce the overall portfolio risk, HSBC brings to customers opportunities in real estate space through venture capital funds available in the market.

Asset size:

Investment philosophy: Need based approach with innovationHSBC team works to suggest financial solutions based on customer’s risk appetite, profile and needs. Using customer insight, HSBC have developed a financial planning tool. It analyses and generates a comprehensive financial


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plan based on the customer’s existing financial position, expected future cash flows, inflation and identified financial objectives. Their Relationship Managers extensively use this tool to do financial planning for customers taking into account their long-term objectives and / or medium to short term requirements. For consistent and uniform delivery of financial planning as per the defined customer need centric process, there is a dedicated, independent Sales Quality team to conduct regular quality checks close to the point-of-sale.White list fundsThe concept of white listed funds lies in the bank’s open architecture model, which lays emphasis on meritocracy. They carefully look at various products available in the market and after thorough due diligence select product providers / schemes which adequately correspond to the needs of our customers. White listed funds are selected based on various proprietary models that are used for intense quantitative analysis. These funds help their clients build a long-term portfolio and in achieving long-term financial goals.

Technology is a potent weaponFor consistency in the manner in which their Relationship Managers identify customer needs and suggest suitable solutions, HSBC extensively leverage technology to support their sales process. HSBC’s indigenously developed systems like Wealth Management System, Financial Planning System and Customer Relationship Management System have been built basis customer insights. They constantly look at evolving these systems to address sales process requirements arising out of dynamically changing market conditions and customer needs. HSBC therefore treat technology as a vital ally in executing their philosophy of customer need centricity in a structured and uniform fashion.Sharing the knowledgeHSBC frequently organize wealth management events and investment seminars, where the employees can interact with investment experts and fund managers. This provides them a platform to know and understand the market and economic developments and trends.


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HSBC – Factors for successThe journey from Shanghai to Mumbai HSBC has established strong business in all key areas of commercial banking. In Corporate Banking, HSBC has effective long-term relationships with seven of the ten leading companies and eight of the ten multinational corporations in India, providing the full range of corporate banking services to these customers. HSBC has leveraged upon its global experience to innovate products and services to suite local requirements. Maintaining long term relationships and constant product innovation have been keen factors contributing to the success of HSBC in India. A pioneer in computerization and product innovationHSBC India has retained the HSBC Group’s pioneering spirits by being an active partner in the development of the Indian banking industry. The bank launched the first ATM in India way back in 1987. The bank was also one of the first banks in India to achieve an electronic banking customer interface and this has helped it generate higher than market growth rates for the Trade service business.Cashing on the falling interest rate scenario in the country, HSBC was one of the first banks to start the innovative product offering – floating interest rate home loans. The home loan segment has grown at a CAGR of 32 per cent over the last 5 years. Currently, almost 75 per cent of incremental home loans are disbursed at floating rates.MIS, Management Information System: There is an extensive use of MIS which gives RM an opportunity to tap potential business. RM’s get daily report like inflow-outflow report, high value report and liability tracker. High value report displays all high value transaction that has taken place during the day and liability tracker keeps a track on the net liability status of the bank.RIS, Retail Investment System: Retail investment system integrates systems like WMS, Wealth Explorer, RIS Branch and HUB to offer a consolidated view of all the investments with an ability to let customers drive their own investment priority through simple purchase processes and intuitive interface. RIS is a perfect example to prove that no one can beat HSBC in terms of the technology they use to facilitate the customers. RIS is an attempt to bring the technology to the desk of the customer to help them make wise decisions. It allows them to trade in a wide variety of mutual fund schemes and monitor their performance on-line. Customer can also get regular market insights and updates and also help them to access their risk appetite. Customers can also have detailed information about various mutual fund schemes through mutual fund tracker.Strong retail focus with excellent CRM processesAnticipating a retail banking boom in India the bank acquired the Non-Fund activities from Gujarat Lease Financing Ltd. in 1999. In the year 2000, the bank acquired the Chandigarh branch license from Deutsche Bank. In 2002, HSBC acquired retail banking business from BNP Paribas and the Retail Banking Operations in Kolkata from Bank of Tokyo-Mitsubishi. Currently HSBC has 47 branches and three more to come!


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Emerging as a complete financial services solution providerHSBC, in India has established as a complete financial service solution provider. It has expanded its customer base by extending its product range to include a variety of investment products. It has established a reputation in India of being a provider of international quality investments and services. The company launched its Asset Management Company (AMC) in December 2002 and has been able to achieve one of the highest growths in assets under management in India.The HSBC group has got into insurance distribution through both the corporate agency as well as through the insurance broking channel. For life insurance, it was earlier tied up with Tata AIG but now is tied up with HSBC Canara Oriental Bank of Commerce. HSBC has also adopted a very effective cross selling strategy to sell insurance to its million plus customer base of account and credit card holders. Recently HSBC was also involved in the launch of NFO of Reliance infrastructure Mutual Fund.

International recognition & supportA premier customer receives personal recognition and local support when they travel for work, leisure, or move overseas. Even if a customer is in abroad he can always enjoy privileged access to all the banking services like access to their relationship manager and India premier call center at any of the international premier centers. International premier centers provide useful local information which includes information about local places to eat, hotspots to visit and things to do. Even a customer can also use the premier lounge for giving some presentation. A dedicated 24-hour hotline support is provided during emergency services like emergency encashment services, lost/stolen card reporting and credit card replacement on the next working day.

Around the globe!A Premier Debit Card holder can access up to three accounts, premier saving account and 2 more additional current/saving accounts through worldwide ATM network which consist of 1 million ATM’s and 14 million merchant establishments worldwide. The withdrawal limit is up to Rs. 75,000/- per day. Premier Debit Card is internationally valid and very handy when a customer travels abroad. HSBC also provides an International Needs Review in case a customer needs banking services overseas. The International Banking Center can arrange to open an overseas account even before a customer leaves for the new country. A dedicated international expert is assigned to manage the entire process of establishing the accounts in the new country. The account number can be generated within three working days. The bank can also arrange for the transfer of the credit history of the customer to facilitate the access to similar levels of the credit in the overseas country. HSBC also provides free fund transfer facility across countries via HSBC internet banking, comprehensive international service website (this service is subject to local regulations) under Me2Me service.


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Global View: A truly global internet banking experienceThis is an exclusive service provided by HSBC premier which no other bank is providing. With the help of HSBC Premier Global View, a customer can view and manage their accounts held in different countries conveniently from any location with one single login. A customer can also launch personal internet banking from global view for accounts located in other countries, once these accounts are linked on Global View.

Beyond times or thinking ahead!HSBC is a bit conservative in its approach as there is a lot of paper work involved and compliance is a major issue and taken very seriously. This helps the bank to maintain its highest ethical standards for which it is known worldwide. Because of the prevalent high ethical standards the company was able to survive the latest economy turmoil which resulted in many banks going down just because of the use of unethical practices. The financial planning managers have to do planning, servicing and auditing. Surprise audits are done to keep a check on the employees and preventing them from following unethical practices. While other banks don’t stress on much paper work thus compromising on compliance issues. This has lead to use of malpractices in the bank like opening fake accounts to increase the numbers so as to impress their seniors. Many bank accounts are left without any balance. There is a high probability of such customers default on their credit cards.

Performance through people

HSBC has been rated the best employer among banks for the year 2008 by BT Mercer Best Employer Survey, India published in Business Today which points towards company’s HR policy. HSBC aspires to be recognized as a world class function operating with uncompromising integrity, confidently enabling the business to execute the people strategy. This vision is secured through continuous in-house events which keeps the spirit of the staff high.

There are themes issued every year to give the work a fresh perspective and approach. This year’s theme “DO SEIZE THE DAY” motivates the employees to take every day as a new and end the day with a star performance. There are posters of these themes all around the back office. The performance statistics are displayed on the performance board so that the employees can have an idea where they stand and what is the target to be achieved.

“A sales culture is about transferring our enthusiasm of our products and services to the customer”Financial planners and relationship managers assist clients in identifying their financial needs and selecting insurance and investment products to meet these needs. The approach of the HSBC staff is not focused on sales rather they are focused on first finding the


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financial needs and requirements of the customer and suggesting accordingly. This way they keep the interest of the customer as the first priority rather than selling their products. The staff ensures that there is no product pushing nor there is offering of wrong inappropriate products to the customers. Hence the customers are satisfied with the returns they get from their investments which results in more satisfied and happy customers.

The sales culture of HSBC:i. Recognizing a customer’s need

ii. Agreeing on these needs with the customeriii. Outlining alternative course of actioniv. Implementing the customer’s chosen course of actionv. Securing the deal by ensuring customer loyalty through lasting quality service

Change, the only permanent thing in businessClients evolve with time in terms of investment objective, time horizon, risk appetite and so on. HSBC service model provides enough flexibility to accommodate these changes. This helps in better service of the customer and a longer time scale. This flexible approach helps HSBC to retain customers for a longer duration. This also helps HSBC to cross sell other bank products as the customers are aware and satisfied with the service standards.

Personal relationship driving the businessTo meet client expectation of personal attention, mode of communication in wealth management services tends to be highly personalized. Thus, the conventional grids of communication, such as call centre, data centre does not fit well. Success of wealth management services heavily draws on personal interaction with the dedicated relationship manager, who takes care of whole investment management lifecycle for bunch of clients on one-to-one basis. HSBC believes in investing heavily in human processes to groom and retain a team on competent relationship managers with cross-functional skills. The relationship managers at HSBC are the best in the business with excellent customer satisfaction rate.

STABLE AND COMMENDABLE HSBC boasts of the stability that they carry with every relationship with the customers. There is a very less rate of relationship managers leaving the job. Hence the customer is assured of one relationship managers looking after his money. Whereas in other banks like ABN-AMRO, Citi Bank and Standard chartered the rate of relationship managers leaving the job is high. So when the results of the investment decisions taken are about to show up the relationship manager has already left the job and customer is left with no assistance. The new relationship manager issued brings up a new investment plan. The customer hence is not satisfied.


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The times are uncertain. The relationship isn’t.HSBC actively promotes Together Further Forever concept, an initiative which brings the idea of unity leading to progress. All the departments are encouraged to work together in coherence by complimenting and supplementing each other by giving leads and new prospect customers. This way HSBC has managed to increase the customer base and also increase the customer satisfaction by referring business to other departments. But there are few roadblocks being experienced by the employees in efficiently implementing this concept. There are multiple layers involved in the process while sourcing these accounts like SME, MME, LLC and each team has their own targets for account opening, FDs etc, and they do not appear to follow any process flow for passing leads across teams. Further, if a customer has a mutual fund investment relationship on his corporate account the same is ignored for computation of his AQB relationship value and he is charged every quarter. The corporate Banking team is not forthcoming in reversing these charges as the credit for business has been enjoyed by PFS. Likewise there are many other limitations like no dedicated tracking system but the solution is in the hands of employees only. If they will seriously pursue this concept it will work. This is too brilliant to fail if implemented properly.

The MALL conceptHSBC has always looked at the business from different angle from what other banks see. And this leads to their difference in their approach towards doing business. HSBC is actively following what they call it as MALL concept. Instead of calling their banks as branches they call it MALLs. This concept promotes the idea of one-stop for all financial needs. In malls customer have a wide variety of products to choose from which includes consumer goods, medical goods, electronics etc. When a customer goes to the mall he is given a cart in which he can put all the items that he wishes to purchase. HSBC aims to come up as a bank which can satisfy all the financial needs of the customer like a mall.

LEVERAGING THE INDIA ADVANTAGEBusiness process outsourcing for international operationsIn order to maintain its profitability levels, streamline its costs, improve productivity and cut bureaucracy, HSBC Group has started outsourcing its back office transactions processing and software development activities to India. It has captive BPO centers at Hyderabad, Bangalore, Vishakhapatnam and many more.

Software developmentTo leverage the software expertise available in India, the banks has setup a software development centre in Pune for developing solutions for HSBC Group’s offices worldwide.

HSBC- Key Issues


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Hello!!! Anybody home?Unlike other stream of financial services, mostly being transactional in nature, wealth management services require client specific solution and service offering. No one solution exactly meets the needs of other client. In a situation of highly personalized and customized nature of service offering, developing any form of generic service model does not support growth of the business. HSBC lacks in this aspect as it is overly focused on compliance issues. HSBC Premier Customers, which are the top end customers of the bank, are not provided with some facilities which other banks are providing like cash pick up from home etc and this might lead to HSBC loosing on the customer service front. HSBC tries to play a very safe game without any compromises on the compliance issues.

Unleash the hidden powerHSBC is not very aggressive in terms of market approach. Earlier HSBC focused only on selling equity and also maintained their policy of entertaining high net worth clients. HSBC always focused more on quality rather than on numbers. This approach allowed other banks like Citi Bank and ABN AMRO to take the lead as they were aggressive from the beginning. Now HSBC is changing its approach and is becoming more aggressive. HSBC management is now focused more on cross selling, like term deposits, internet signup, debit cards and credit cards. Also management is trying to increase the number of branches; recently they have acquired three more licenses to open the branches. This will further increase the depth of the bank in the Indian market.

Where’s the passion for passion investments?In recent years a trend has been observed that bulk of investments by HNWI’s has been directed towards passion investments (art, antique, jewellery, coins, unique assets, luxury), philanthropy and social/community causes. As per World Wealth report, 11% of HNW investors worldwide contributed to philanthropic causes with a contribution over 7% of their wealth in year 2006. Ultra-HNWIs contribution was even more - 17% of Ultra-HNW investors that gave to philanthropy contributed over 10% of their wealth. In total, this equates to more than US$285 billion globally. Against this backdrop, new breed of HNWIs expect to strategically manage the wealth and personal resources allocated to philanthropy purpose, in order to maximize its impact. This demands a relationship manager not just to be a passive financial advisor rather a passionate partner sharing interest and inclination of the associated client. HSBC is still not providing this service whereas Citi Bank is aggressively pursuing this field and gaining expertise hence creating dominance in this area.


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PRIVATE BANKING: virgin territory in the world of ultra-wealthy

The country’s biggest billionaires seemed to be engaged in a competition to outdo each other in the Forbes list, which ranks the country’s wealthy. The fortunes of tycoons such as Mukesh Ambani, the head of Reliance Industries, India’s biggest private sector company, and Anil Ambani, his younger brother and rival, mushroomed to double their previous levels.

Others made it to the list through initial public offerings that many analysts criticized as being over-valued- the $2.5bn listing, for instance, of DLF, India’s largest real estate company that helped Mr. K.P Singh, a property tycoon, rocketing up the list.

The bubble has since imploded with the credit crisis. The wealth of Mukesh Ambani has more than halved to about 20.8bn while his younger brother’s fortune has fallen by nearly two-thirds to $12.5 bn.

But that was before the wealth management industry got the point- India is the new kid on the block when it comes to private banking, matching China for the speedy growth of its wealthy and ultra wealthy.

Capegemini and Merill Lynch concluded in a study, Asia Pacific Wealth Report: “Although the number of emerging high net worth individuals and Ultra-HNWIs in China and India is still relatively small, we expect these and other emerging markets to continue to grow at double-digit rates and, within 10 years, to surpass the mature markets.”

The growing importance of the subcontinent for wealth managers is underlined by the findings of the report. The Indian market was fastest growing in the terms of the wealth and population size of rich individuals in Asia.

The study found that the number of wealthy people in India increased 23 percent to 167,000 individuals last year. The highest growth took place at the top of the ultra-wealthy category in the ranks of those with more than $100 m in investible assets.

Both, India and China are reporting a deceleration in manufacturing and both of their stock markets are badly hit, with India’s alone down more than 60 per cent. Small businessmen may be affected by the slowdowns, but many believe the middle and ultra-wealthy of the two countries are relatively insulated from the worst effects of the economic crisis.

In India there are a few challenges-heavy regulations, particularly capital controls. The market is just introducing some of the structured options common in developing markets, such as interest rate and currency futures. Even short selling is a new phenomenon. Yet, this market, too, is promising amid a growing equity culture the most expect to survive the current turmoil.

Indians traditionally invested most of their high levels of savings in gold and property. But they are expected to become more aggressive in deploying it into other investments. A doubling of the amount of the money Indians can invest overseas in any given year – to $200,000 – will also help the industry.


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HSBC: Private Banking

Total customer base of 1200+ clients with assets under advice of INR 45 bn. Minimum threshold per relationship is INR 40M (USD 1M). Offers investment advisory services, wealth planning and banking services to its

clients. Experience in equity research and investment advisory. Rich domain expertise across sectors in capital markets. Sector specialists adopt a bottom up stock selection process to identify

potential winners. In-house expertise to recommend stocks based on in-depth market

understanding and analysis. Presence in seven cities in India (Mumbai, Delhi, Calcutta, Bangalore, Chennai,

Hyderabad, Pune)

PRODUCT OFFERINGSA. BANKING SERVICES

1. Bank accounts and fixed deposits.2. Credit and debit cards.3. Money transfers.4. Treasury and Foreign Exchange.5. Corporate and investment banking facilities including access to HSBC group.6. CREDIT:

Commercial property. Residential property. Secured against debt products. Tailored personal lines of credit.

B. INVESTMENT AND WEALTH PLANNING SERVICES.1. Investment Services

Equity: AdvisoryDiscretionary Mutual Funds

Fixed Income: Debt ProductsMutual Funds

Structured Products Alternative Investments Commodities.

2. Wealth Solutions Estate Planning Insurance Lending against equity/ Structured lending


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Philanthropy

RELATIONSHIP MODEL

INVESTMENT ADVISORY PROCESS

1. Determine investment policy statement: HSBC Private banking investment team analyses the financial situation, investment objectives, risk tolerance and liquidity needs of the customer to determine the investment strategy.

2. Develop Asset Allocation: designing an asset allocation strategy that addresses the overall situation outlined in the investment strategy.

3. Construct Portfolio: Choosing from a select group of investment managers, mutual funds and other products to create a customized portfolio

for the customer.4. Monitor Portfolio: Evaluate the investments in the portfolio and advice changes if

necessary. Periodically refine the investment strategy as the customer’s need and goal evolve.

5. Develop reporting and review: Provide regular performance review to help customers evaluate their performance.


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SWOT ANALYSIS


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STRENGTHS1. High focus on softwares &

computerization.2. Customer oriented sales culture.

3. Complete financial service solution provider.

4. International recognition & global presence.

5. Global internet banking.6. Employee centric.

7. Stablitiy.8. Compliance focused.9. Extensive use of CRM

WEAKNESS1. Weak on customer service front.

2. Not aggressive on market approach.

3. Less number of branches leading to low market penetration.

OPPORTUNITIES1. Passion investment advisory

services.2. Strengthen Together Further

program.3. Emerging as stable bank when

other MNC banks are falling.4. Expanding private banking in

India.

THREATS1. Local national banks

aggressively coming on the front.2. Many smaller banks eating up

the market share.3. Peer banks racing ahead with

better customer services.

RECOMMENDATIONS

1. Runners should be hired for collecting documents from the customers. This will save a lot of time of sales officers and at the same time help in bringing new business to HSBC.

2. Seminars should be arranged for the existing customers to update them regarding RBI guidelines related to investments, markets as there were many changes introduced during current economic crises.

3. Introduce accounts which require lower average quarterly balance to be maintained, otherwise HSBC would have majorly high net worth clients to cater to.

4. Trade service charges are required to be made more competitive to attract new customers.

5. A caller is required in each team majorly for the purpose of reverting back to the potential customers at the desired time as this becomes difficult for the teams.

6. Required data should be provided in advance to the callers for striking a better conversation with the potential customers.

7. E-mails/materials about HSBC services should be send to the customers who show some promise of banking with HSBC in near future. This will keep reminding them about the as a good alternative.

8. The Together Further concept should be implemented seriously by all the departments. The leads which are not related to a particular team should be forwarded to the required department.

9. Call monitoring is required for improving quality of calls made by the callers.10. Employees should be motivated through monetary and non monetary measures

like organizing contests, giving cash prizes, issuing certificates regularly.11. HSBC invest heavily in developing innovative products like RIS etc, the

employees should make customers aware of these products as this will improve the popularity of the bank among the customers.


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BANK PROFITS

THREE BROAD OPPORTUNITIES ON REVENUE SIDE


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LOW INCOME/MASS CUSTOMER BANKING PRESENTS ENORMOUS POTENTIAL

GROWING “SHARE OF WALLET”: A LARGE OPPORTUNITY


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5.4 ABN AMRO WEALTH MANAGEMENT Introduction:ABN AMRO has come up with the NRI Account which provides Wealth Management Services, under the aegis of Van Gogh preferred banking.ABN AMRO Asset Management is the separately organized investment management division of ABN AMRO Bank. ABN AMRO Asset Management is headquartered in London and Amsterdam with other main units in Atlanta, Chicago, Hong Kong and Singapore. It has significant experience in managing money for over 2000 institutional clients including central banks, pension funds, insurance companies and other institutions. In addition to managing funds for institutional clients, ABN AMRO Asset Management offers tailored investment management services to private clients. It employs 2000 people worldwide in over 30 countries, with portfolio managers and analysts located around the world. All investment products benefit from the valuable source of local expertise, while portfolios are often managed locally. This local knowledge is used as input for international co-ordination of the investment policy. ABN AMRO Asset Management’s approach to full-service investment management underlines their commitment to long-term client relationships. They believe that excellence can only be achieved when investment performance and risk management are combined with high-quality client servicing. Their goal is to add value by offering risk-controlled outperformance in the context of specific benchmarks and investment horizons of their investors. Products:I. Investment services: ABN AMRO recognize financial needs vary and there is no

“one-size-fits all” approach. ABN AMRO Investment Services brings to their customers a blend of personalized services and an array of innovative and exclusive products suited for each of their investment needs. Their expert Investment Counselors ensure that the customer’s individual risk profile is drawn so that they can cater to them specific and precise investment needs. Optimal asset allocation among a wide range of investment products helps to create a portfolio best suited to customers requirements and preferences, while maintaining the best balance between risk and return

II. Insurance services: Being away from India doesn’t mean you have to compromise the safety and security of your loved ones. In fact, your savings from your time overseas can easily be channelized to meet your family’s needs for today and in the future. ABN AMRO Insurance Services brings to customers an unrivalled combination of steady returns with minimum risk. The insurance plans will provide customer’s family the added financial security in case of an unforeseen exigency. These investments cum protection plans can help customers create Wealth for funding their long term needs like education and marriages of their children and creating their retirement corpus. They offer a world of choice in insurance that can be customized to meet the individual needs.

Asset classes used: Expertise in all asset classes.


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As a global, full-service investment manager, they offer their broad customer base capabilities in all major asset classes, and a spectrum of products including both fundamentally driven investment approaches and more quantitative investment processes. ABN AMRO Asset Management has significant experience in managing money for consumers as well as for institutional clients including central banks, pension funds, insurance companies and other institutions.

Investment philosophy: ABN AMRO investment philosophy takes root in the belief that fundamental research as an investment process yields returns and hence they lay emphasis on company specific research. The underlying principles that help them formulate the investment process: Investments are made in ‘businesses‘? And not in ‘companies‘? ; The latter is just an avenue. Companies (within that business) that can generate returns on capital in excess of their cost of capital over a business cycle are preferred. Earnings growth of a company is the prime driver and over a period of time the stock price of the company shall be a slave of the same. Hence, investments in stocks are to be made at reasonable valuations. Own companies that can generate long-term, sustainable earnings, managed by qualified professionals capable of executing a well conceived strategic plan.

SWOT Analysis:


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STRENGTHS1. ABN Amro's open door policy gives a feeling of homeliness.

2. A diverse and strong MIS with numerous softwares to assist the

team.3. Well established credibility.4. Strong & planned merketing

strategies.

WEAKNESS1. The regonal office needs to be

informed of routine documentations and in lot of cases

their approval is madatory.2. There is a lot of grey areas in

the organization chart resulting in personality clashes.

3. No direct chain of action is is evident between lower managerial

levels aswell.

OPPORTUNITIES1. Improving brand image and

customer loyalty.2. There are few new products in

the pipeline which company hopes would give them competitive

advantage over rivals.

THREATS1. Local banks have in recent

times attracted their top talent by offering them high salaries which bank could not offer resulting in atleast 2 of their top managers resigning in last two months.

2. Local banks are increasingly undercutting the rate at which they offer loans making the bank offer

unattractive & thus eating into their revenues.

5.5 STANDARD CHARTERED Introduction:

Products: Excel banking: In today’s fast moving, technology-driven world, you need

your bank to keep pace with your banking needs. That’s why you need Excel Banking - a much personalized Wealth management service that has been designed to help customers make the most of your money, without taking up most of your time.With the services of their personal Relationship Manager, customer can access complete Wealth management solutions, from routine banking and transaction management to more complex investment services and insurance advisory services. Customers also get fee waivers on premium savings and current accounts and preferred pricing on a range of complementary banking products and services.Here are the unique features of Excel Banking:

Access to a personal Relationship Manager. Exclusive privileges such as a free gold card, free debit cards and

discounts on lockers, demat accounts and overdraft against term deposits. Free multi-city cheque book for current account and savings account

holders Express cheque collection and national clearing speed service Free demat account Extended branch hour for easier and quick transactions Redirection of interest into any account specified by you Phone Banking and ATM facilities for 24 hour access.

Parivaar account: Parivaar is a unique Wealth Management Solution from Standard Chartered Bank that offers the customer’s family flexibility, convenience and essential tools for Wealth accumulation and preservation.Parivaar is much more than a regular Savings Account. It allows customers maintain their individual identity while allowing them to tap their family’s financial strength. Here are some of the features of the Parivaar savings account : Customer’s family can maintain individual savings accounts with the

benefit of clubbing balances in grouped accounts. Anytime, anywhere access to accounts through ATMs, Phone Banking

and Online Banking. Globally valid ATM-cum-debit card can be used at 3, 26,000 merchant

outlets in India and 14 million outlets worldwide.Asset classes used:

Equities Debt Mutual funds


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Commodities Structured products

Investment philosophy: Standard Charter has developed a different and more focused approach to wealth management. Understanding that wealth means different things to different people, they believe that no one is better placed to help you acquire wealth and grow it, use and enjoy it, protect it and pass it on. Their appreciation that every investor is complex and different and can have complex needs, has led them to development of a highly innovative new approach that they call their investment philosophy. They believe it radically improves the management of private client investments.Their investment philosophy uses sophisticated profiling and portfolio construction techniques to aim for investments that deliver market-leading performance in the way customers want, because while performance is the key, it is performance that suits the customers that really matters. Performance that reflects their attitudes and personality and gives them the confidence and reassurance to make decisions with clarity and speed.

SWOT Analysis:


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STRENGTHS1. Competitive rates.

2. Good & diverse products.3. Flexible spread margin.

4. Strong network of branches in west & south India.

WEAKNESS1. Account access problem faced

by customers.2. RM's don't pay much attention to

small companies.

OPPORTUNITIES1. The growing interest of people in

the derivative and foreign exchange market.

2. Recovery of Indian stock market.

THREATS1. Competition from major local &

international players like ICICI, HSBC etc.

2. The downfall of export market due to global recession.

3. Speulation in derivative markets.

5.6 CITI BANKCiti Gold: Citigold is a banking proposition that seeks to provide wealth management expertise, preferential banking services and a host of lifestyle related benefits to a targeted base of high net-worth clientele. Citigold offering is backed by Citi’s global expertise in wealth management and its experience of managing wealth across 100 plus countries around the world. An experienced, well-trained team of dedicated Relationship Managers, investment & insurance experts, Trade and business specialists, Analysts & Researchers etc. support the client and help them meet their various financial goals.Personalized Financial Planning:

I. The Citigold Team: Dedicated relationship mangers and counselors to guide you at every step of Wealth Management Process.

II. Wealth Management Process: A four step process with Citgold wealth planner and CitiChoice to maximize your wealth potential.

III. Investments: structured financial planning backed y a team if experts and our proprietary Citigold Wealth Planner tool. Regular interaction with fund managers & investment experts. Invest in Equity, PMS, MFs, Bonds and market-linked debentures. Tax and real estate advisory also available.

Business Planning:I. Business Lending: Secured and unsecured business loans up to Rs. 10

Crores. These can be term loans or fund/non-fund based overdraft facilities.

II. International and FX Trade: Use our rich international experience & full range of products to assist your trade. We do document collection, a range of foreign and local currency export credit products, LCs and BGs. Inward & Outward Remittances across the globe of competitive rates. Exporters & Importers can hedge business risk through forward contracts.

III. Cash Management: Manage your local & outstation receivables through your Citibank account. CitiClear at 24 Citibank branches locations, Citispeed for local cheques through 292 correspondent bank branches. CitiCheck at over 1700 upcountry locations and CitiAnywhere for cheques drawn on any location in India

Asset classes used: Insurance products Structured products Art advisory services: In today’s market, art presents an attractive investment

option. To assist customers with advice on various art investments, or to help you in buying or selling art, Citigold has tied up with a reputed art house, Osians - Connoisseurs of Art Private Limited.Osians is based in Mumbai and possesses the expertise, archival infrastructure and professional capacity to systematically cohere various theories of knowledge and provide select Citigold clients objective information on


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purchasing, preserving, valuing and selling art for seasoned connoisseur and emerging collectors.Citigold together with Osians will now help customers strengthen their investments in art by providing you the following services: Documentation and Archiving Authentication, Certification and Valuation Preservation and Restoration Insurance and Custodial Services. Publication and Design Services Art and Cultural Events Management Corporate Gifting Museum and Collection Building Services. Estate Planning

Citi bank time deposit: Deposits held in units of Rs. 1000 for easy liquidity. Flexible tenures from 15 days to 5 years. Overdraft facility of upto 90%against your deposit to fund another

investment opportunity. Automatic roll over facility to renew your deposit when it matures. An exclusive set of structured products like market linked products.

Investment philosophy: Citi Bank invests the customer’s portfolio according to which stage of life they are:

Young adult. Married and yet to have kids. Parents with young kids. Parents with settled kids.And the expenses they are thinking of : Buying a house. Going on a holiday. Getting married. Going abroad.


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SWOT ANALYSIS:


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STRENGTHS1. Global Network

2. Backing of the Citi Group.3. Aggressive strategy.

WEAKNESS1. Tarnished brand image.

2. Online operations are geared towards U.S clients.

3. Branding problems.4. Inorganic growth in India.

5. Churning practices.

OPPORTUNITIES1. Growth markets.2. Chinese market.3. Online presence.

4. Click Citi.

THREATS1. Foreign exchage fluctuations.

2. Market conditions.3. Regulatory forces.

SIMPLICITY AND SAFETY ARE BACK IN FASHIONAs 2008 draws to end, private bankers and wealth managers in Asia seems battered, a little humble and cautious although not always disheartened at the outlook. The next few months would be painful but if the focus is maintained on quality, anyone can have a great time in the upswing.The past few months have been especially dismal. Stock markets have plummeted. Losing 10 per cent on a client’s portfolio is the new break-even for the wealth manager. Investors who lost money on structured products, such as accumulators and Lehman mini bonds, protested on Hong Kong streets, alleging banks had misled them about the risks. In private, many wealth managers will tell you of impending law suits launched by angry clients – but somehow it is always rivals who are being sued, and not their own institution. Everyone seems to be reviewing procedures and they say clients are taking fresh interest in reading the small print. As oil and commodity prices surged during the first part of the year, private banks said clients were worried about inflation.Six months later, deflation is the big fear. Private bankers look a little embarrassed these days when you ask them about their hot new investment products: they do not seem to have any. Often advice focuses on bonds and gold – especially physical gold, and not structured products based on gold. Risk is out and capital protection is in. Bonds look interesting. There is renewed emphasis on diversification. Simplicity is back in fashion. So is safety. Lehman Brothers may not have had a private banking arm, but its collapse in September disturbed private bankers and their clients alike. Even Citigroup, one of the giants of the financial world, needed $300bn of government help and guarantees to survive. If that were not enough, the US authorities indicted the global head of wealth management at the Swiss bank UBS as part of their investigation into the offshore banking activities of rich Americans. Markets will continue to be volatile and that’s something we can’t control, we need to focus on the things we can control. Clients want to know that we will be there for them. Clients don’t remember you as much when times are good as when times are bad. Every private bank has a chance to differentiate itself. When you are in a cross-country race, you make the biggest difference when you are running uphill. The problems of the big universal banks may help the smaller, more focused private banks that have no investment banking arms or exposure to subprime. The private bank within a larger organization still has its appeal. A big retail branch network and a well-known brand name are a great starting point.


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