PROJECT
-
Upload
peshnesneha -
Category
Documents
-
view
5 -
download
0
Transcript of PROJECT
A project
on
“A study of Wealth management practices with reference to Indian Overseas Bank”
Submitted to:
Rashtrasant Tukadoji Maharaj, Nagpur University, in partial fulfillment of the degree of Master of Business
Administration. (MBA)
Academic Session:[2009-2011]
Submitted by:
Manasi N. Ramteke
Guide:
Prof. Hemant Deshmukh
Supervisor:
Dr. Vivek Pimplapure
Dr. Ambedkar Institute of Management Studies and Research, Deekshabhoomi, Nagpur.
2009-11
1
C E R T I F I C A T E C E R T I F I C A T E
This is to certify that this project titled “A study of Wealth management
practices with reference to Indian Overseas Bank” is a bonafide work carried
out & developed by Manasi Ramteke, in partial fulfillment for the award of
degree of Master of Business Administration during the academic session
2009-11, submitted to Rashtrasant Tukadoji Maharaj, Nagpur University,
Nagpur, under my guidance and supervision.
This is also to certify that project is the result of candidate’s own work and is of
sufficiently high standard to warrant its submission to the University for the
award of the said Degree. To the best of my knowledge the matter presented in
this project report has not been submitted earlier for any other degree/ diploma to
any university. The assistance and help rendered to him during the course of his
project work in the form of basic source material and information have been duly
acknowledged.
Project Guide
(Prof. Hemant Deshmukh)
Supervisor Director
(Dr. Vivek Pimlapure) (Dr.Sujit G.Metre)
Place: Nagpur
Date :
2
D E C L A R A T I O ND E C L A R A T I O N
I hereby declare that this project titled “A study of Wealth management
practices with reference to Indian Overseas Bank”is a bonafide and authentic
record of work done by me under supervision of Dr. Vivek Pimlapure
The work presented here is not duplicated from any other source & also not
submitted earlier for any other degree/diploma to any university. I understand that
any such duplication is liable to be punished in accordance with the university
rules.
Manasi Ramteke
Place: Nagpur
Student
Date: ___/___/_____
3
A C K N O W L E D G E M E N TA C K N O W L E D G E M E N T
With immense pride & sense of gratitude, I take this opportunity to
express my sincere regards to Dr. Sujit G.Metre, Director, Dr. Ambedkar
Institute of Management Studies & Research, Deeksha Bhoomi, Nagpur for
his outstanding support, guidance and encouragement throughout which helped
me complete this project. I also would like to express my sincere gratitude
towards the guidance & cooperation extended by Dr. Vivek Pimplapure my
project supervisor. I would also thank our project guide Prof. Hemant
Deshmukh for the help and cooperation extended.
I take this moment to thank our Director Dr. Sujit Metre for providing the entire
infrastructure which could make this project possible.
I thank all supporting staff members at my college for their assistance.
I also thank my parents & all my friends for their support during the project
completion.
Place: Nagpur Manasi Ramteke
Student
Date: ___/___/_____
4
Sr. No Contents Page no
1 EXECUTIVE SUMMARY
2 OBJECTIVE OF STUDY
3 RATIONAL FOR STUDY
4 INTRODUCTION
5 WEALTH MANAGEMENT INDUSTRY
6 EVOLUTION OF WEALTH MANAGEMENT
5
EXECUTIVE SUMMARY
6
EXECUTIVE SUMMARY
Indian Overseas Bank provides discretionary wealth management service, in
which wealth managers give recommendations to customers and invest according
to customer discretion
Indian Overseas Bank (IOB or the Bank) provides various banking services,
including saving bank, current accounts, credit facilities and other services. The
Bank's services also include personal banking services, non-residential Indian
(NRI) accounts, corporate banking services, foreign exchange reserves (FOREX)
collections services, Agri business consultancy and e-banking services. During
the fiscal year ended March 31, 2010 (fiscal 2010), IOB had 13 establishments
abroad, consisting of six branches (two branches in Hong Kong and one each in
Singapore, South Korea, Sri Lanka and Bangkok), four representative offices, two
remittance centers and one extension counter.
IOB reported a 10.13 per cent rise in net profit at Rs 638 crore for the quarter
ended December 2010.
Fitch Ratings has today affirmed Indian Overseas Bank's (IOB) Individual Rating
at 'C/D' and Support Rating at '3'.
IOB's Individual Rating draws comfort from the quick turnaround in the
bank's financial performance in FY11, following a cyclical deterioration in
7
asset quality in FY10. Fitch expects the rating to remain stable through the
current period of strong loan growth that is backed by equity infusion by
the government and the bank's strong retail funding profile.
IOB's gross NPL ratio declined to 3.26% at end-December 2010
(9MFY11) from a high of 4.49% at end-March 2010, as incremental NPLs
slowed down in Q3FY11 due to improving economic performance. The
bank has revamped its risk management systems and processes, and is
increasingly focusing on better appraisal and monitoring of loan accounts.
The bank is also focusing on better rated corporates and mortgage loans to
ensure stable asset quality.
IOB's profitability stabilized in 9MFY11 after being negatively impacted
in FY10 by lower interest margins and higher credit costs. Incremental
credit costs are reducing gradually and net interest margin stabilized at
around 3% in 9MFY11. The bank's cost-to-income ratio declined to 51%
in 9MFY11 (FY10: over 55%) due to improving productivity and growing
operating income. Fitch is of the view that the ratio could improve further
relative to peer government banks' as IOB has already provided for
INR32bn of its total estimated pension liabilities of INR44bn.
One of the best NIMs in the PSU banking space due to its focus on
the high yielding assets
Well managed Asset quality
Consistent performer by efficient utilization of Assets
8
Reasonable CASA ratio
The study helps in understanding the wealth management practices, global wealth
management industry, wealth management in India, wealth management
undertaken by banks and comparative study of various banks
The present study is purely an exploratory study, dependent on both the
Primary and the Secondary sources of data. The primary sources of data
constitutes the interaction (both formal and informal) with the managers of
Bank and other officials who are directly associated with the wealth
management industry in India. The Annual Reports of Bank and the
relevant literature and facts and figures available on the problem of the
study in various books, journals and magazines constitute the Secondary
sources of data.
9
OBJECTIVE FOR STUDY
10
OBJECTIVES
1. To study existing wealth management industry in India
2. To study existing wealth management procedures and practices
undertaken by Indian Overseas Bank
3. To have comparative study of wealth management practices followed by
public, private and foreign banks in India
4. To derive the potentiality and the future prospect of the wealth
management industry in India
5. To have a conceptualized view on wealth management services
11
SCOPE OF STUDY
12
SCOPE OF STUDY
India represents one of the greatest opportunities to wealth managers over the
coming decades. Even in today’s financial environment, the wealthy population in
India is large and growing.
India has the tenth highest number of dollar millionaires in the world and their
rate of growth is higher than in any other country
A relaxed regulatory framework and financial sector reforms are gradually
allowing wealth generation in India to become more open and competitive
Wealth Management services in India are under-developed and there are
immediate opportunities for organizations who understand the market to capture
business there
Wealth Management will need to spread beyond the largest cities and to adapt
with and educate its clients on the changing business environment
Indians are increasingly looking beyond their own borders for investments;
foreign banks must therefore leverage their global expertise
Non-Resident Indians represent a large asset to foreign banks
13
RATIONAL FOR STUDY
14
RATIONAL FOR STUDY
Wealth management now a days having very importance. Evidences prove
that the wealth management industry in Asia pacific region is emerging
into massive opportunity.
In India, wealth management is evolving along with a positive regulatory
environment, changing demographics and income.
With increasing number of HNWI’s, financial services institutions now
offer a wider range of product portfolios targeted at wealthy customers in
the form of investments in art, structured finance and insurance.
Considering long-term high value business proposition, number of banks
and niche players has started offering full range of wealth management
services targeted to HNWIs and emerging affluents.
Banks play important role in providing premium services to affluent
clients.
15
INTRODUCTION OF TOPIC
16
CONCEPT OF WEALTH MANAGEMENT
The term Wealth management formed with two words Wealth & Management.
The meaning of Wealth is – Funds, Assets, investments and cash it means the
term Wealth management deft with funds Asset, instrument, cash and any other
item of similar nature. “Wealth Management is an all inclusive set of strategies
that aims to grow, manage, protect and distribute assets in a much planned
systematic and integrated manner”.
Wealth management is an investment advisory discipline that incorporates
financial planning, investment portfolio management and a number of aggregated
financial services. High Net Worth Individuals (HNWIs), small business owners
and families who desire the assistance of a credentialed financial advisory
specialist call upon wealth managers to coordinate retail banking, estate planning,
legal resources, tax professionals and investment management. It is an advanced
type of financial planning that involves private banking, asset management, estate
planning, legal resources and investment resources. These all factors have a
common goal which is sustaining and growing long-term wealth. Wealth
managers are professional money manager who works to enhance the income,
growth and tax favored treatment of long-term investors. Wealth management is
often referred to as a high-level form of private banking for the especially
affluent. A wealth management company provides many services like portfolio
management and portfolio rebalancing, investment management, trust and estate
17
management, private management and financing solutions, tax advice etc. They
can provide you personal banking and insurance advices. Their purpose is to
ensure that you do not make any wrong choice as far as investment decisions are
concerned.
The study points out that wealth management service provider categorize the
market on the basis of investable of the customers. The Indian market has been
segmented by Wealth management service providers into five categories, namely:
Ultra-high net worth, or Ultra-HNW (in excess of US$30 million), will have a
total population of 10,500 households by 2012.
Super high net worth (between US$10 and $30 million) will have a total
population of 42,000 households by 2012.
High net worth (between US$1 million and $10 million) will have a total
population of 320,000 by 2012.
Super affluent (between US$125,000 and $1 million) will have a total population
of 350,000 households by 2012.
Mass affluent (between US$25,000 and $125,000) will have a total population of
1.8 million households by 2012.
18
WEALTH MANAGEMENT INDUSTRY
19
STATE OF WORLD WEALTH
HNWI (high net worth individuals) SECTOR GAINS IN 2007
10.1 million individuals worldwide held at least US$1 million in financial
assets, an increase of 6.0% over 2006.
Global HNWI wealth totaled US $ 40.7 trillion, a 9.4% gain from 2006,
with average HNWI wealth surpassing US $ 4 million for the first time
The Ultra-HNWI “wealth band” experienced the strongest growth, gaining
8.8% in population size and 14.5% in accumulated wealth
Emerging markets, especially those in the Middle East and Latin America,
scored the greatest regional HNWI population gains
HNWI financial wealth is projected to reach US $ 59.1 trillion by 2012,
advancing at an annual growth rate of 7.7%
For the global economy, 2007 was a transitional year that began and ended
with sharply opposing macroeconomic environments: Momentum that was
carried over from 2006 sustained unabated growth in the early months. By
the latter end, heightened uncertainty and instability marked the deep
change that was underway.
Overall, market performances were solid in 2007. However, closer
analysis of the key drivers and inhibitors of wealth reveals how the many
fundamental changes that took place over the course of the year led to
deteriorating economic conditions in key markets, including the United
States and several mature European nations. Evenly split, the two halves
of the year tell very different stories: steady global growth in the first six
months, followed by sharply diverging paths between mature and
emerging economies in the second half.
20
In early 2007, strong economic gains spurred impressive performances in
equity markets and various investment products, reflecting high levels of
investor confidence. Robust growth in emerging markets, driven by high
commodity prices and rising domestic demands, supported solid growth in
mature economies. Stock markets worldwide performed well into the
summer, led by Latin America and Emerging Asia, which saw roughly
25% and 17% growth, respectively, through July.1 A variety of
investment products performed well during the first half of the year; for
instance, total announced private equity deals worldwide were on pace to
shatter their 2006 record.
The second half of 2007, however, revealed a distinct and growing
divergence between mature and emerging economies—with the advantage
going to emerging nations. Whether hobbled by the downturn taking hold
in the United States or challenged by the slowed growth of a major trading
partner, with few exceptions, the
performances of mature economies weakened significantly in the closing
months of the year. In the European Union, for example, growth was
dampened by a confluence of key market forces: slowing domestic
consumer spending, a result of high levels of personal debt amid
tightening credit conditions; a drop-off in exports brought on
by easing demand in the United States, which received nearly 24% of E.U.
goods and services shipped abroad; and an appreciating euro. Growth
slowed among other global powers as well: In Japan—the world’s second-
largest economy—a decline in housing investment and low levels of
consumer confidence took their toll.4 In essence,
a long period of “easy money” in mature economies was routed by
financial and credit market turmoil.
21
By contrast, emerging markets proved resilient and posted robust gains in
the second half of 2007, even as uncertainty grew in mature markets.
Building on their core competency, export-driven growth, many emerging
economies converted sharp increases in energy and commodity prices into
sources of high profitability and significant growth. Both GDP and market
capitalization gains, particularly in
Brazil, Russia, India and China—the BRIC nations—were strong, capping
another impressive year for HNWI growth and investment opportunity.
Given these nations’ more stable consumption habits, rising domestic
demand and healthy business environments, the slowing United States
economy, which accounts for 21% of global
GDP, did not appear to significantly compromise their economic growth
in 2007
The State of Asia-Pacific’s Wealth
The number of HNWIs grew by8.7% in 2007,to 2.8 million, exceeding
global HNWI population gains of 6.0%.
Asia pacific HNWI wealth expanded by 12.5% in 2007,to US $ 9.5 trillion
,exceeding both the 10.5% rate posted a year earlier and total world wealth
growth in 2007 of 9.4%.
Asia pacific is home to 27.8% of the world’s HNWI population and
23.3%of global HNWI wealth.
India ,China , South Korea experienced the highest HNWI population
growth with in the region ,gaining 22.7%,20.3% and 18.8% respectively.
Together Japan and China accounted for 68.8% of the pacific HNWI
population and 62.4% of its wealth.
22
Over the past five years, HNWI wealth has soared in the Asia- Pacific
region. In 2007, five of the world’s 10 fastest-growing HNWI populations
were concentrated in Asia-Pacific markets, with India and China posting
the largest gains. However, the slow growth of some of the larger Asia-
Pacific HNWI populations, such as the 2.2% rate posted in Japan, kept
overall regional growth levels at or near global averages. As a result, Asia-
Pacific HNWI gains exceeded global averages but fell short of advances
made in the very highest growth regions, namely the Middle East and
Latin America.
Real GDP and market capitalization continued to be key drivers of Asia-
Pacific wealth generation, despite mixed results relative to 2006
performances. Two-thirds of the markets reported on2 boasted real GDP
growth above the 5.1% global average,3 while market capitalization in all
of the Asia-Pacific economies analyzed, with the exception of Japan’s,
experienced strong, positive growth throughout 2007.
The global “story of two halves,” as told in the 2008 World Wealth
Report, accurately reflects 2007 trends evident in Asia-Pacific as well:
Steady growth across the region defined the first half of 2007 whereas
heightened volatility and a sharp divergence between mature and
emerging economies characterized the second. Unlike some other
parts of the world, the economic slowdown in the United States did not
dampen overall 2007 Asia-Pacific gains. However, deteriorating global
conditions over the course of the year heightened uncertainty regarding the
global economic outlook and cast a shadow on many of the region’s
primary export markets. Further, while some Asia-Pacific economies were
faced with slowing growth, high—and steadily rising—inflation became
the most pressing challenge for the entire region. This issue grew more
23
pronounced in 2008, amid severely weakened Asia-Pacific equity markets,
and drew attention to related policy-action decisions. Nonetheless, in
2007, rapidly rising domestic demand and improving socioeconomic and
political fundamentals within the region, particularly among the emerging
markets, buoyed growth in most Asia-Pacific economies.
The net result of strong growth in emerging markets and weak
performances in mature markets was above-global-average gains for
HNWIs in the Asia-Pacific region. In 2007, the number of HNWIs in the
region grew by 8.7%, to 2.8 million. With those gains, Asia- Pacific ended
the year hosting 27.8% of the world’s 10.1 million wealthiest individuals,
with the nine key markets studied accounting
for 93.1% of the region’s HNWIs. During the same period, HNWI wealth
in Asia-Pacific expanded by 12.5%, to US$9.5 trillion, significantly
exceeding gains of 10.5% in 2006. By year-end 2007, Asia-Pacific HNWI
financial holdings accounted for 23.3% of the US $ 40.7 trillion held by
HNWIs globally.
In 2007, the Ultra-HNWI4 population in Asia-Pacific grew by 16.4%, to
20,400 individuals—nearly double the 8.8% growth of the global Ultra-
HNWI population and significantly higher than the 12.2% growth
witnessed in the region a year earlier. Notably, Asia- Pacific’s Ultra-
HNWI segment accounted for only 0.7% of its entire
HNWI population, less than in any other region. This trend has been
consistent over the past few years and reflects how the Asia- Pacific
HNWI population is weighted more heavily in the lower wealth bands
than HNWI populations in other regions
24
25
EVOLUTION OF WEALTH
MANAGEMENT
26
EVOLUTION OF WEALTH MANAGEMENT
The term 'Wealth Management' traces its origin in the 90s in the United States
through Insurance Companies, banks, and Broker Dealers. The evolution of
wealth management traces to high-net worth monetary consulting for people who
happen to be topmost clients of any of the firms, to high level private banking
which makes provisions for different kinds of investment, bank products, and
insurance.
Wealth Management is used to serve the affluent community, along with
Chartered Monetary analysts, certified managers of wealth, Public Accountants,
government-licensed lawyers, insurance professionals, etc.
Wealth management in India was historically conducted in a relatively
disorganized way – with accountants, lawyers and other trusted adviser providing
the advice, rather than bankers.
Only in recent years have formal wealth management and private banking
offerings started to take a larger share of the market. There are two key reasons
for this: first, the amount of wealth created in India, initially post-1991 as a result
of various deregulation, and especially in 1999 to 2000 on the back of the IT
boom; and secondly, the changing nature of wealthy individuals – rather than
there only being wealth in the form of old money, a lot of new wealth was
created.
27
The more formal wealth management landscape began with banks selling mutual
funds and insurance products to their customers, starting around 2000. Since then
it has developed into an industry where a large variety of products is distributed
by third-party banks. This has been the mainstay of the industry, generating the
majority of the revenue.
28
INDIAN WEALTH MANAGEMENT LANDSCAPE
29
The Indian Wealth Management Landscape
India is one of the most exciting markets in the world with respect to wealth
management. ‘The success of entities in Wealth Management will depend
primarily on the client segment they choose to cater to and how focused they are
in this area’.
According to published reports the assets of dollar millionaires was around 477
billion spread across 1,26,700 households and is expected to grow to a trillion by
2012. Typically a private wealth client is defined as one with a minimum of 1
million USD of investible surplus excluding primary residence and consumables.
The market for wealth management in India is significant and the growth rate is
the second highest in the world. The success of entities in Wealth Management
will depend primarily on the client segment they choose to cater to and how
focused they are in this area. For entities catering to the 'mass wealth' client
segment the presence of a large branch network as also 'feet on street' is certainly
a distinct advantage since 'reach' is critical. However, for entities where, the
business model clearly targets only ultra HNIs and the offer is holistic end to end
investment management, and the structuring of vehicles for routing these
investments, a distribution led model with large man power is not at all relevant
According to a recent report, the wealth management market in India will be
having a target size of 42 million households by 2012, as against only about 13
million in 2007.
30
New Delhi: Indians will be having one trillion dollars worth investable wealth by
year 2012, indicating the country's robust economic growth that drives a four-fold
surge from just about 250 billion dollars in 2007.
In a report by international consultancy firm Celent, the number of potential
clients for wealth managers and size of manageable wealth are both expected to
grow four-times through 2012. India is all set to become a huge hunting ground
for wealth managers across the globe.
The report titled 'Overview of the Wealth Management Market in India' noted that
the wealth management market will be having a target size of 42 million
households by 2012, as against only about 13 million in 2007.
The wealth management sector in India is poised to witness tremendous growth.
The country's economic growth is making larger sections of its population
prospective customers of wealth management providers.
The growth will be seen across all income-levels. However, the lower-income
segment is the one that would record maximum growth in terms of volume, while
high-net worth households would be contributing the most in terms of wealth size.
Celent has defined the lowest end of the target market for wealth managers as a
household with a minimum income of $5,000 (Rs2 lakh), while the ones with at
least $30 million (Rs120 crore) of investable income has been added in the
category of ultra-high net worth.
The wealth management revenues are expected to contribute nearly 32-37% of the
total revenue of full-service financial institutions by 2012.
31
The mass-market (having Rs. 2-10 lakh of disposable income) would be the key
driver, accounting for nearly 40% of the overall growth in number of households.
Except the niche players, majority of wealth managers would target the mass
market owing to its youth-dominance and this market would be seeing more
service providers entering the fray with an 'own them young' policy.
The ultra-high net worth households [having wealth in excess of $30 million]
would have a total population of around 10,500 households by 2012, while the
super high net worth households ($10-30 million) would grow to 42,000.
The count of high net worth households ($1-10 million) will grow to 3, 20,000,
while there would be 3, 50,000 households in the super-affluent category (Rs. 50-
400 lakh).
Also, 10 lakh new households would be joining mass-affluent category (Rs10-50
lakh), taking their total population to 18 lakh by 2012. However, a vast majority
of 39 million households, out of the total 42 million target market population in
2012, would belong to the mass market (Rs 2-10 lakh).
Private Banks, full service brokerages & independent financial advisors would
serve the high net worth segment, while ultra high net worth households would be
served by private banks & family offices.
32
CONCEPT OF ASSET
CLASSES
33
CONCEPT OF ASSET CLASSES
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 provided by
the “standard deviation” of returns, how much the return changes about the long-
term average.
List of Different Asset Class
1. Fixed deposit
2. Mutual Fund
3. Equity
4 Commodities
5. Art Fund
6. Real-Estate Fund
7. Insurance product
8. Structured product
9. Gold
10.Currency
11.Oil
34
FIXED DEPOSITS
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.
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 20-30 per cent in a good year whereas a fixed deposit typically
earns only 7-10 per cent.
35
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.
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.
Interest rates on FDs
The rate of interest on FDs varies according to the maturity with longer deposits
generally earning a higher interest rate.
Effective Return
Before one invests in FDs one 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 FUND
A mutual fund is a professionally managed firm of collective investments that
collects money from many investors and puts it in stocks, bonds, short-term
money market instruments, and/or other securities. The fund manager, also known
as portfolio manager, invests and trades the fund’s underlying securities, realizing
capital gains or losses and passing any proceeds to the individual investors.
Currently, the worldwide value of all mutual funds totals more than $26 trillion.
36
Since 1940, there have been three basic types of investment companies in the
United States: open-end funds, also known in the US as mutual funds; unit
investment trusts (UITs); and closed-end funds. Similar funds also operate in
Canada. However, in the rest of the world, mutual fund is used as a generic term
for various types of collective investment vehicles, such as unit trusts, open-ended
investment companies (OEICs), unitized insurance funds, and undertakings for
collective investments in transferable securities (UCITS).
Types of mutual funds
1. Open-end fund
The term mutual fund is the common name for what is classified as an open-end
investment company. Being open-ended means that, at the end of every day, the
fund issues new shares to investors and buys back shares from investors wishing
to leave the fund. Mutual funds must be structured as corporations or trusts, such
as business trusts, and any corporation or trust as an investment company if it
issues securities and primarily invest in non-government securities. An investment
company will be classified as an open-end investment company if they do not
issue undivided interests in specified securities (the defining characteristic of unit
investment trusts or UITs) and if they issue redeemable securities. Registered
investment companies that are not UITs or open-end investment companies are
closed-end funds. Neither UITs nor closed-end funds are mutual funds (as that
term is used in the US).
37
Exchange-traded funds
The exchange-traded fund or ETF, is often structured as an open-end investment
company. ETFs combine characteristics of both mutual funds and closed-end
funds. ETFs are traded throughout the day on a stock exchange, just like closed-
end funds, but at prices generally approximating the ETF’s net asset value. Most
ETFs are index funds and track stock market indexes. Shares are issued or
redeemed by institutional investors in large blocks (typically of 50,000). Most
investors purchase and sell shares through brokers in market transactions.
Because the institutional investors normally purchase and redeem in in kind
transactions, ETFs are more efficient than traditional mutual funds (which are
continuously issuing and redeeming securities and, to effect such transactions,
continually buying and selling securities and maintaining liquidity positions)
Equity funds
Equity funds, which consist mainly of stock investments, are the most common
type of mutual fund. Equity funds hold 50 percent of all amounts invested in
mutual funds in the United States. Often equity funds focus investments on
particular strategies and certain types of issuers.
Bond funds
A bond fund is a collective investment scheme that invests in bonds and other
debt securities.Bond funds typically pay periodic dividends that include interest
payments on the fund's underlying securities plus periodic realized capital
38
appreciation. Types of bond funds include term funds, which have a fixed set of
time (short-, medium-, or long-term) before they mature. Municipal bond funds
generally have returns, but have tax advantages and risk. High-yield bond funds
invest in corporate bonds, including high-yield or junk bonds. With the potential
for high yield, these bonds also come with greater risk.
Money market funds
Money market funds entail the least risk, as well as rates of return. Unlike
certificates of deposit (CDs), money market shares are liquid and redeemable at
any time. The interest rate quoted by money market funds is known as the 7 Day
SEC Yield.
Funds of funds
These 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 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.
39
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).
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
a “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.
40
EQUITY
It 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
referred to as venture capital investing and is generally understood to be higher
risk than investment in listed going-concern situations.
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. It covers physical product
(food, metals, electricity) markets but not the ways that services, including those
of governments, nor investment, nor debt, can be seen as a commodity. Articles
on reinsurance markets, stock markets, bond markets and currency markets cover
those concerns separately and in more depth. It gives relationship between simple
commodity money and the more complex instruments offered in the commodity
markets.
ART FUND
Wealth management now includes art, real estate investments.
41
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.Citibank has been providing art advisory services like art insurance, art
storage and using art as a tradable collateral for some time.
The works of M.F. Hussain, Jatin Das or Anjolie Ela Menon are sought after by
art lovers not only for their aesthethic 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.
REAL ESTATE FUND
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
42
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. This combined participations from both along with
contributions of the corporate houses has accelerated the growth of India Real
Estate Fund.
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. Life
Insurance Corporation of India was 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. 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) 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).
The popularity of ULIP is because of the transparency and the flexibility which it
offers. In today’s times, ULIP provides solutions for insurance planning, financial
43
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. 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.
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
44
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.
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. 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.
CURRENCY
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 analyse also their reciprocal values. A falling dollar/yen is
synonymous with a rising yen because the dollar can be 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.
45
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’.
46
WEALTH
MANAGEMENT BY
BANKS
47
WEALTH MANAGEMENT BY BANKS
Wealth management are provided by banks, financial institutions, large corporate
entities, independent financial advisers or multi-licensed portfolio managers
whose services are designed to focus on high-net worth customers. Large banks
and large brokerage houses create segmentation marketing-strategies to sell both
proprietary and nonproprietary products and services to investors designated as
potential high net-worth customers. Independent wealth managers use their
experience in estate planning, risk management, and their affiliations with tax and
legal specialists, to manage the diverse holdings of high net worth clients. Banks
and brokerage firms use advisory talent pools to aggregate these same services.
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:
a) Advisory
b) Investment Processing (transaction oriented)
c) Custody, Safekeeping and Asset Servicing
d) End-to-end Investment Lifecycle Management
48
Wealth management services comprises of following key function areas of:
Financial Planning
Portfolio Strategy Definition/ Asset Allocation / Strategy Implementation
Portfolio Management –Administration, Performance Evaluation and Analytics
Strategy Review and Modification.
Wealth management services offered by banks are:
Investment planning: assists in investing money into various investment
markets, keeping in mind investment goals of individuals.
Insurance planning: assists in selecting from various types of insurances, self
insurance options and captive insurance companies.
Retirement planning: is critical to understand how much funds you require in
old age.
Asset protection: begins with financial advisor trying to understand preferred
lifestyle and then helping you deal with threats, such as taxes, volatility, inflation,
creditors and lawsuits, to maintaining this lifestyle.
49
Tax planning: helps in minimizing tax returns. This might include planning for
charity, supporting y favorite causes while also receiving tax benefits.
Estate planning: helps in protecting estate from creditors, lawsuits and taxes.
This service is critical for every person whose net worth is high.
Business planning: This service aims at optimizing the tax free advantages of
running your own business.
Business succession planning: assists in planning for the inevitable to maximize
returns.
Wealth transfer: helps in passing on your wealth to your dependents.
50
WEALTH MANGEMENT STRATEGY-THE SUM OF MANY
PARTS
51
ELEMENTS OF WEALTH
MANAGEMENT SERVICES
52
CORE ELEMENTS OF WEALTH MANAGEMENT SERVICES
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. Some of analogous terms used for wealth management could be
considered as Portfolio Management, Investment Management and many times
Fund Management or Asset Management.
Key function areas are:
a) Financial Planning
b) Portfolio Strategy Definition / Asset Allocation
c) Strategy Implementation
d) Portfolio Management
e) Strategy Review and Alignment
a) Financial Planning
53
Client Profiling
Client profiling takes in account multitude of 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
Religious belief (non investment in sin sector like - alcohol, tobacco, gambling
firms etc)
Behavioral History (Pattern of past investment decisions)
Level of client’s engagement in investment management (active / passive)
Present investment holding and asset mix
Investment Objective
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:
54
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.)
b)Portfolio Strategy Definition / Asset Allocation
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
55
investment in sin industries (alcohol, tobacco, gambling etc.) is to be duly taken
care of.
Determination of Portfolio Constituents and Allocation of Assets
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 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.
c) 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.
d) Portfolio Management
Portfolio Administration
56
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.
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.
e)Strategy Review and Alignment
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
57
time. Many times, review of portfolio strategy would be necessitated due to
change in client profile or expectations.
Rebalancing, Reallocation and Divestment of Assets
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.
58
SERVICES PROVIDED BY WEALTH MANAGEMENT
INSTITUTIONS
(1) Custodian Services
(A) Securities Safekeeping
(B) Income collection from Securities
(C) Settlement of Securities trades as directed
(D) Payment of fund when directed
(E) Timely settlement delivery
(2) Trust Services
(A) Charitable Trust
(B) Revocable Trust
(C) Irrevocable life Insurance Trust
(D) Special Need Trust
(E) Institutional Trust
(3) Retirement Plan Services
(A) IRA’s Custodian Or Trustee
(B) Defined Benefit Plans
(C) Defined Contribution Plans
59
WEALTH MANAGEMENT VALUE CHAIN
60
INDIAN OVERSEAS BANK
Indian Overseas Bank (IOB; established 1937) is a major bank based in Chennai
(Madras), with 2018 domestic branches and six branches overseas. Indian
Overseas Bank has an ISO certified in-house Information Technology department,
which has developed the software that 2018 branches use to provide online
banking to customers; the bank has achieved 100% networking status as well as
100% CBS status of branches with a total number of 2018 CBS branches and
Extension Counters. IOB also has a network of about 771 ATMs all over India
and IOB's International VISA Debit Card is accepted at all ATMs belonging to
the Cash Tree and NFS networks. IOB offers internet Banking (E-See Banking)
and is one of the banks that the Govt. of India has approved for online payment of
taxes. The bank's business more than doubled in the last four years. According to
"A profile of banks (2009-10)" published by RBI, the bank's deposits increased
from Rs.50529 crore as on 31.03.06 to Rs.110795 crore as on 31.03.10 and
advance from Rs.34756 crore to Rs.79004 crore.
Indian Overseas Bank (IOB or the Bank) provides various banking
services, including saving bank, current accounts, credit facilities and
61
other services. The Bank's services also include personal banking services,
non-residential Indian (NRI) accounts, corporate banking services, foreign
exchange reserves (FOREX) collections services, agri business
consultancy and e-banking services. During the fiscal year ended March
31, 2010 (fiscal 2010), IOB had 13 establishments abroad, consisting of
six branches (two branches in Hong Kong and one each in Singapore,
South Korea, Sri Lanka and Bangkok), four representative offices, two
remittance centers and one extension counter. During fiscal 2009, the
Bank launched an rural development project aiming at total village
development called IOB-Sampoorna in Kuthambakkam and Padur villages
in Tiruvallur District, Kameshwaram village in Nagapattinam District,
Dhaliyur village in Coimbotore District and Innambur village in
Thanjavur, Tamil Nadu.
CONSTITUTION:
62
The Constitution of the Board of the Bank is governed by “The Nationalized
Banks (Management and Miscellaneous Provisions) Scheme, 1970, formulated by
the Central Government, after consultation with the Reserve Bank of India, in
exercise of the powers conferred by section 9 of “The Banking Companies
(Acquisition and Transfer of Undertakings) Ac t 1970”.
COMPOSITION:
The Composition of the Board of Directors of a Bank is governed by “The
Nationalised Banks (Management and Miscellaneous Provisions) Scheme 1970”
read with “The Banking Companies (Acquisition and Transfer of Undertakings)
and Financial Institutions Laws (Amendment) Act 2006” and amendment to
the vide Extraordinary Gazette Notification dated 19.02.2007 of the Central
Government.
CONTRIBUTION:
In terms of The Banking Companies (Acquisition and Transfer of Undertakings
Act 1970, the General Superintendence, Direction and Management of the affairs
and business of the Bank vests in the Board of Directors which is entitled to
exercise all such powers and do all such acts and things as the Bank is authorized
to exercise and do.Presently, there are 12 Directors on the Board of the Bank.
63
Wealth Management Services at Indian Overseas Bank
1. PRODUCTS
2. ASSET CLASSES USED
3. ASSET SIZE
4. INVESTMENT PHILOSPHY
PRODUCTS
Personal Banking
Saving bank
Current account
Term deposit
Retail loans
Home loans and mortgages
Depository services
IOB Fine GoldInternational
VISA Cards
Any Branch BankingMulti city cheque facility
64
Insurance and mutual fund
Corporate Banking
Micro Small and Medium Enterprises (MSME)
IT & ITes BPOCash management services -IOB STARS
Rural
IOB's commitment for social causes
Agricultural short time loans
Financial inclusion
Agri business consultancy
NRI Accounts
Non-Resident Ordinary (NRO)
Resident Foreign Currency Account (RFC)
Foreign Currency Non-Resident Accounts (Banks)
NRI home loan scheme
NRI remittances
Remittances procedures
65
Tracking cell
Forward cover
IOB NRI shield
IOB Expo Gold Card
Forex
SWIFT centers
Authorized dealer branches
Forex collection services
Overseas cash
Government Business
E-Payment of direct taxes
E-Payment of indirect taxes
Pension payment scheme
Sales tax collections
Provident Fund Scheme
88 percent savings taxable bond scheme
Senior citizen scheme 2004
66
ASSET CLASSES USED NRI Accounts
Depository services
IOB fine gold
Mutual Funds
Insurance
SBI WEALTH MANAGEMENT
State bank of India is the largest banking and financial services company
in India, by almost every parameter - revenues, profits, assets, market
capitalization etc. SBI provides a range of banking products through its
vast network in India and overseas, including products aimed at NRIs. The
State Bank Group, with over 16000 branches, has the largest branch
network in India.
67
State Bank of India, the country’s largest lender, offers wealth
management services to its affluent clients
The bank has more than 10 crore customers and Rs. 8,04,116 crore
deposits from more than 12,000 branches across India.
"We plan to introduce wealth management services in a phased manner in
2010-11 to help the high net-worth clients to preserve and grow their
wealth,chairman Om Prakash Bhatt said at the bank’s annual meeting of
shareholders.
1. PRODUCTS
2. ASSET CLASSES USED
3. ASSET SIZE
4. INVESTMENT PHILOSPHY
PRODUCTS
Personal banking
Agricultural/Rural
NRI services
International banking
Corporate Banking
SME
68
Domestic Treasury
Government Business
ASSET CLASSES USED
Deposits
Insurance
Mutual Funds
Demat
NRI services
Merchant Banking
69
ICICI WEALTH MANAGEMENT
INTRODUCTION
In India ICICI bank is a very well known banks in the field of Wealth
management. ICICI Bank will float subsidiary for the purpose of WM activities
in Canada & other market even as ICICI has rolled out ICICI Group Global
Private Clients for those with net worth of $ 1 million or more. ICICI GCPC
launched their business in Dubai very recently in the month of April-08 and
caught 2500 clients. They are going to add another 1000 high network clients this
year.
70
ICICI Bank is using the services of global players like Merrill Lynch, City group,
and UBS for catching the clients for Wealth Management business. ICICI Bank
and its subsidiaries are engaged in the development of various attractive products
(services) for the clients with net worth of $ 1 million.
The eyes of ICICI Group Global Pvt. Clients on the rising number of dollar
millionaires at present they are 100,000 in number in few year the number will
definitely increase. India’s No.2 lender banker ICICI expects to sustain the 70%
growth in its private Wealth management business. ICICI has 150,000 customers
with investible surplus of at least Rs. 10 lakhs equity, real estate and private
equity is driving the private banking business in India. India has market of Wealth
management about $ 600 billion.
PRODUCTS
Private Banking
ASSET CLASSES USED
1. Online Trading : They also bring to you the best value for money through
competitively priced brokerage charges for online share trading services from
www.icicidirect.co. With a 3-in-1 account consisting of a trading account, ICICI
Bank savings account and demat account, you can stay connected to the market at
all times. To add to this, They give you waiver on the account opening charges
too.
71
With a 3-in-1 account consisting of trading, ICICI Bank account and demat
account, you can enjoy:
Competitive priced brokerage rates
Reduced account opening charges
Online share trading services
2. Mutual Funds :
They offer you advice on the entire universe of mutual funds. So be it equity
funds, where you look for growth and capital appreciation or debt funds for
capital preservation, They can help you select the right mix to suit you. Choose
from an array of more than 15 fund houses with innumerable schemes.
3. Customised Products
Structured Products : Their Structured Product offerings are tailor-made to suit
your investment objective and risk appetite. Their services include Portfolio
Management Services and specially designed products that are Equity or Index-
linked in nature.
Alternate Asset Products : They offer products which complement your existing
investments eg. Art Funds, Private Equity Funding, Realty Funds. So, if you’re
looking beyond the stock market, you’ll find us there too
4. Life and General Insurance
5. IPO
6. ICICI Bank Pure Gold
7. ICICI Bank Bonds
72
ASSET SIZE Rs.1230 Cr.
INVESTMENT PHILOSPHY
Our approach emphasizes a globally diversified investment strategy designed to
provide above average performance, at below average risk.
AXIS BANK & WEALTH MANAGEMENT
One of India’s leading private sector banker Axis bank also combined with
Banque Privee Edmond de Rothschild Europe based Wealth management
expertise institution & is going to make new standard for the NRI’s Wealth
management.
The LCF Rothschild group has based its reputation in the area of Wealth
management on its big banking experience. Actually the institution is engaged in
the task of providing financial advise to the Europe’s leading families,
Government and various corporations for the last ‘7’ generations.
The Axis Bank 5th largest bank by market capitalization in India provides payroll
services to over 12000 corporates across 2.8 million salary accounts. The market
73
capitalization of Axis Bank was 235 million in the last year 2007 is engaged in
the business of Wealth management, with its international presence in Dubai,
Singapore Hong Kong, Shanghai and so on.
PRODUCTS
Private banking
ASSET CLASSES USED
Deposits
Insurance
Mutual Funds
Demat
Online trading
Bonds
NRI services
Depository services
Advisory Services
74
ASSET SIZE Rs.181.20 Cr.
INVESTMENT PHILOSPHY
Axis Bank Wealth Management provides discretionary wealth management
service, in which wealth managers give recommendations to customers and invest
according to customer discretion.
HSBC WEALTH MANGEMENT
INTRODUCTION
HSBC Holdings plc serves over 128 million customers worldwide through around
10,000 international offices in 83 countries and territories in Europe, the Asia-
Pacific region, the Americas, the Middle East and Africa. With global assets of
75
US$2,354 billion at 31 December 2007, HSBC is one of the world’s largest
banking, investment and financial services organizations.
The Hongkong and Shanghai Banking Corporation Limited in India offers a full
range of banking, investment and financial services to over 2.8 million customers
through its presence across 26 cities
Launched in India in November 2002, HSBC Investments manages assets of over
INR 10,684 crores, spread across 21 schemes and plans under the HSBC Mutual
Fund umbrella, as of end August 2006. HSBC Investments has also soft-launched
HSBC Alpha Account, the Portfolio Management services (PMS) Business to
manage wealth for High Net worth Individuals.
PRODUCTS
Private Banking
HSBC Premier
HSBC Advance
ASSET SIZE US $ 297 billion
ASSET CLASSES USED
Traditional investments :
Direct Equity Advisory : Customized advice on direct equity portfolios based on
your risk profile and specific requirements. The proposition, backed by
76
comprehensive in-house research, entails building portfolios with fresh funds or
restructuring legacy portfolios to provide better risk adjusted returns.
Mutual Funds : Our open architecture philosophy and ‘Best of Breed’ selection
of debt and equity mutual funds allows you to buy the top performing mutual
funds available in the market.
Insurance
NRI services
Non - traditional Investments:
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.
Real Estate Venture Funds : To provide you with diversification avenues which
reduce the overall portfolio risk, we seek to bring to you opportunities in real
estate space through venture capital funds available in the market.
INVESTMENT PHILOSPHY
Need-based sales approach with innovation
Our team works to suggest financial solutions based on your risk appetite, profile
and needs. Using customer insight, we have developed a financial planning tool.
It analyses and generates a comprehensive financial plan based on your existing
77
financial position, expected future cash flows, inflation and identified financial
objectives. Our Relationship Managers extensively use this tool to do financial
planning for you taking into account your 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-listed funds
The concept of white listed funds lies in the bank’s open architecture model,
which lays emphasis on meritocracy. We 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 our clients build a long-term portfolio and
in achieving long-term financial goals.
Technology is a potent weapon
For consistency in the manner in which our Relationship Managers identify
customer needs and suggest suitable solutions, we extensively leverage
technology to support our sales process. Our indigenously developed systems like
Wealth Management System, Financial Planning System and Customer
Relationship Management System have been built basis customer insights. We
constantly look at evolving these systems to address sales process requirements
arising out of dynamically changing market conditions and customer needs. We
78
therefore treat technology as a vital ally in executing our philosophy of customer
need centricity in a structured and uniform fashion.
Sharing the knowledge
We frequently organise wealth management events and investment seminars,
where you can interact with investment experts and fund managers. This provides
us a platform to know and understand the market and economic developments and
trends.
CITI BANK WEALTH MANGEMENT
INTRODUCTION
Citi has the largest footprint among wealth managers in the Asia Pacific with
more than 20 offices across the region. Over 2,000 wealth management
professionals, including 600-plus private bankers, financial advisors and
investment specialists, serve 6000 high net worth individuals and families,
including half of all billionaires in Asia ex-Japan. Citi Global Wealth
Management is a top-tier global wealth manager providing some of the best
institutional capabilities available today. Serving both private and institutional
79
clients, Citi Global Wealth Management taps the strength and resources of
Citigroup to maximize value and service.
The Global Wealth Management division at Citi comprises three of the most
respected brands in wealth management
PRODUCTS
Citi Private Bank
Citi Smith Barney
Citi Investment
ASSET SIZE Rs.530Cr.
ASSET CLASSES USED
1. Deposits
2. Demat
3. Mutual Funds
4. NRI services
5. Insurance products
6. Structured products
7. Art advisory services :
In today’s market, art presents an attractive investment option. To assist you 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.
80
Osians is based in Mumbai and possesses the expertise, archival infrastructure and
professional capacity to systematically cohere various services of knowledge and
provide Citigold clients objective information on purchasing, preserving, valuing
and selling art for seasoned connoisseur and emerging collectors.
Citigold together with Osians will help in strengthening 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 Deposits
Deposits held in units of Rs. 1000 for easy liquidity.
Flexible tenures from 15 days to 5 years.
Overdraft facility of up to 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 PHILSPOHY
81
Citi bank is investing customers portfolio according to which stage of life they are
Young adult
Married and yet to have kids
Parent with young kids.
Parent with settled child.
And according to expenses they are thinking of :
Buying a house
Going on a holiday
Getting married
Going abroad
RESEARCH
MEDHODOLOGY
82
RESEARCH DESIGN
1. Sampling Methodology:
The design of the sample is as follows:
Sample technique: - Convenience sampling.
Sample Size: 1
2. Type of Research:
Research type of my project will be exploratory research.
3. Method of Data Collection:
Primary data collection: Primary data are collected by interaction
(both formal and informal) with the managers of Bank and other officials
who are directly associated with the wealth management industry in India
Secondary data collection: Secondary data are collected from the
various Annual reports of banks, websites, magazines, journals, books.
4. Hypothesis:
Banking sector is successful at wealth management practices.
83
DATA ANALYSIS AND
INTERPRETATION
84
FINDINGS
85
CONCLUSIONS
86
RECOMMENDATION
87
BIBLOGRAPHY
88