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INSTITUTE OF TECHNOLOGY AND MANAGEMENT

GURGAON
PROJECT REPORT
ON
FUTURE OF WEALTH MANAGEMENT
IN INDIA
SUBMITTED TO: GUIDE:
Controller o E!"#$n"t$on Mr% &$'e( B)"t$"
MDU* Ro)t"( ITM*GURGAON


SUBMITTED BY:
SANDEEP ARORA
BATCH: +,--./,--01
ROLL NO%: -./MBA/23-
ITM* GURGAON
CERTIFICATE FROM GUIDE
This is to certify that this Project report titled F4t4re o We"lt) M"n"5e#ent $n
In6$" is prepared and completed successfully by SANDEEP ARORA under my
guidance.
The project report has been completed to my satisfaction and I wish her all the best in her
future
Endeavor.
Mr. Vivek hatia
!
AC7NOWLEDGEMENT
The present work is an effort to throw some light on "F4t4re o We"lt) M"n"5e#ent
$n In6$" The work would not have been possible to come to the present shape without
the able guidance# supervision and help to me by number of people.
$ith deep sense of gratitude I acknowledged the encouragement and guidance received
by Pro% &I&E7 BHATIA* for completion of my project report.
S"n6ee8 Aror"
%&'(M)(*+&,
-
TABLE OF CONTENTS
CHAPTER 2 INTRODUCTION//////////////////////////////9/
.
.ources of $ealth
CHAPTER , OBJECTI&ES OF THE STUDY////////////:/
0
CHAPTER ; RESEARCH METHODOLOGY////////2-/2,
.ignificance of the study/
CHAPTER 3 LITERATURE RE&IEW//////////////////2-/
9;
Position of India in wealth management
.tate of world wealth
The state of asia pacific wealth
.tate of wealth management industry in India
0pportunity for local and foreign players
Major wealth management agencies in India/
Instruments of wealth management
.tock markets
Mutual funds
1isks
CHAPTER 9 DATA ANALYSIS//////////////////////////93/.3
CHAPTER < CONCLUSION//////////////////////////////.9/..
CHAPTER . BIBLIOGRAPHY///////////////////////////////
.:
CHAPTER : APPENDI=///////////////////////////////////.0/
:2
2uestionnaire
+
3
INTRODUCTION
DEFINE WEALTH
$ealth usually refers to money and property or something which has economic value
attached to it. It is the abundance of objects of value and also the state of having
accumulated these objects. The use of the word itself assumes some socially(
accepted means of identifying objects# land# or money as 4belonging to4 someone#
i.e. a broadly accepted notion of property and a means of protection of that property
that can be invoked with minimal %or# ideally# no, effort and e5pense on the part of
the owner. 6oncepts of wealth vary among societies. )nthropology characteri7es
societies# in part# based on a society8s concept of wealth# and the institutional
structures and power used to protect this wealth. .everal types are defined below.
They can be viewed as an evolutionary progression. Industriali7ation emphasi7ed the
role of technology. Many jobs were automated. Machines replaced some workers
while other workers became more speciali7ed. 9abour speciali7ation became critical
to economic success. :owever# physical capital# as it came to be known# consisting
of both the natural capital %raw materials from nature, and the infrastructural capital
%facilitating technology,# became the focus of the analysis of wealth%
;
ECONOMIC AND PHILOSOPHICAL ASPECTS OF WEALTH
)dam .mith saw wealth creation as the combination of materials# labour# land# and
technology in such a way as to capture a profit. The theories of <avid 1icardo# =ohn
9ocke# =ohn .tuart Mill# and later# >arl Mar5# in the *?th century and *@th century
built on these views of wealth that we now call classical economics and Mar5ist
economics. Michel Aoucault commented that the concept of Man as an aggregate did
not e5ist before the *?th century. The shift from the analysis of an individual8s wealth
to the concept of an aggregation of all men is implied in the concepts of political
economy and then economics. This transition took place as a result of a cultural bias
inherent in the Enlightenment. $ealth was seen as an objective fact of living as a
human being in a society. .ome people believe wealth is a 7ero(sum game# where
there is a limited amount of wealth and some must lose in order for others to gain. )s
a result they are concerned primarily with issues of wealth distribution rather than
wealth creation.
0thers believe that wealth can be readily created. They feel that wealth is not a fi5ed
amount to be distributed. To most of these people# organi7ing a society so as to
optimi7e the growth of wealth is more important than distribution issues. Many of
these people believe in some version of the trickle(down theory in which newly
created wealth 4trickles down4 to all strata of society# thereby making the Buestion of
distribution mute.
'
SOURCES OF WEALTH
$ealth is created through several means.
Catural resources can be harvested and sold to those who want them.
Material can be changed into something more valuable through proper
application of labor and eBuipment.
etter methods also create wealth by allowing faster creation of wealth.
Ideas create wealth by allowing it to be created faster or with new methods.
THE CONCEPT OF WEALTH MANAGEMENT
The concept of wealth management refers to management of both the sources and the
facets of various forms of both tangible and non(tangible wealth. India has become a
highly potential market for wealth management because wealth managers# both
domestic and international# are able to establish the beginnings of a market with few
obstacles# relative to the other emerging markets. $here there are regulatory
restrictions# these are less problematic than those in 6hina or the Middle East.
?
@
OBJECTI&ES
To analy7e the evolution and growth of wealth management market in India.
To analy7e whether Indian economic development is creating a broad and
competitive wealth management market in India.
To discuss the factors that have acted as facilitators and obstructions for the
growth of wealth management market in India.
Arom the above three objectives# to derive the potentiality and the future prospect
of the wealth management industry in India.
This project report also analy7es both the onshore and offshore aspects of liBuid
wealth in India and si7es the mass affluent and high net worth customers by
onshore wealth.
*&
**

RESEARCH METHODOLOGY
The present study is purely an e5ploratory study# dependent on both the primary and
the .econdary sources of data. The primary sources of data constitutes the interaction
%both formal and informal, of the researcher with the managers and other officials
who are directly associated with the wealth management industry in India. The
officials were selected on the method of simple random sampling. The )nnual
1eports of the concerned agencies and the relevant literature and facts and figures
available on the problem of the study in various books# journals and maga7ines
constitutes the .econdary sources of data.
Macroeconomic and savings and investment data collected directly from
governmental sources such as the 1eserve ank of India.
Insight into the Indian financial services market .
*!
SIGNIFICANCE OF THE STUDY:
)llows wealth managers to monitor threats and opportunities posed by their main
competition.
:elps plan products and services by giving key information on customers
financial services preferences.
9ooks at the onshore liBuid wealth of mass affluent and high net worth
individuals in India and in India8s largest and most affluent states.
0ffers access to key statistics providing a clear picture of the scale# composition
and direction of the developing landscape on a regional basis.
Aind out why India is an attractive market and its advantages over other emerging
economies.

*-
*+

LITERATURE RE&IEW
POSITION OF INDIA IN WEALTH MANAGEMENT
)ccording to the report# India is slated to become a D.E* trillion market %in assets
under management, for wealth management providers by !&*!# with a target market
si7e of +! million households
In the annual survey done by 6ap Femini# .) and Merrill 9ynch it was found that
ranks of millionaires grew ;G in the previous year# because the number of richer
people grew in India H 6hina where India is competing 6hina. India H 6hina posted
the biggest gain in millionaires advancing by !-G H !&G respectively.
$hen They are watching the world wide increase in number of millionaires the facts
collected by 6ap Femini# ..). and Merrill 9ynch survey report. India has !-G
growth in the year %!&&;(&',. The biggest )sian economy 6hina stands on second
position with !&G# west )sia *;G# Dnited .tates +G and Dnited >ingdom %D>, !G.
.o They can understand that there is more opportunities in the $ealth management
business in )sia specially in India.

SOURCE:
IC<I) is now home to a new breed of billionaires/ Those created by an almost
ine5plicable rise in the values of the stocks they hold.
Aorbes 9ist of Top *& 1ichest People in India
1ank Came Cet $orth %E in
illion,
' MD>E.: )M)CI *@.3
? 9)>.:MI MITT)9 *@.-
-+ )CI9 )M)CI *&.*
3@ .DCI9 MITT)9 '.'
?- )III P1EM=I 3.'
?; .:).:IH 1)VI 1D=) 3.;
@? >D.:)9 P)9 .ICF: 3.&
*!+ >DM)1 I19) +.!
*3
*?- )<I F0<1E= H A)MI9J -.-
!&3 <I9IP .:)CF:VI -.&
The combined wealth of the !&(million strong non(resident Indians community is
estimated to be over E* trillion dollars (( more than the country8s entire economy.
0verseas Indians are estimated to hold financial wealth# apart from real estate# gold
and art# of over E3&& billion. The total wealth would be over E* trillion# according to
the report by :igh(Powered E5pert 6ommittee appointed by the 6entre to suggest
ways to make Mumbai an international financial centre. These C1Is were a natural
beachhead as a customer base where an Indian Personal $ealth Management
industry can get started. Their wealth management services were presently being
sourced almost e5clusively from abroad# the report said. The report listed **
activities typically provided by an international financial centre %IA6, and referred to
P$M as one of the most important activities undertaken at an IA6. )ccording to the
report# P$M for high(net worth individuals is estimated to involve management of
personal assets of E?(*& trillion globally.
The acceleration in growth during !&&;(&' is driven by continued momentum in the
services and manufacturing sectors# growth of which are e5pected to be in double(
digit figures.
India is both attracting foreign wealth managers to set up business and domestic
banks to set up wealth management businesses. Foing forward this is a trend that
is likely to continue# with IndiaKs key advantages attracting more and more
competitors.
The attractiveness of Mumbai as a location for banks is backed up by the figures
on deposits held by foreign banks in India. 0f the total value of deposits held by
foreign banks L D.<*;bn L +@.!G is in Maharashtra and all of this is in
urbanMmetropolitan areas of which Mumbai is a large part.
In the view of many in the industry there is a challenge of client education that
must be addressed going forward. The primary area of concern is in eBuity
investment and the need to invest long(term rather than short(term. This is not a
*;
problem that is confined to IndiaN many other countries around the globe have
similar problems.
In view of the above stated conditions# it is highly likely that over the ne5t !&
years# wealth management will witness significant developments in the way that
clients are segmented. Aollowing from this# client service will change to
complement the shift in emphasis# as factors other than the level of the client8s
wealth are taken into consideration.
<atamonitor research indicates that there are significant benefits in the area of
liability management for the wealthy# and that the importance of liability
management as part of wealth management will inevitably grow over the ne5t !&
years# until it becomes a key service area.

*'
STATE OF WORLD WEALTH
:C$I %high net worth individuals, .E6T01 F)IC. IC !&&'
*&.* million individuals worldwide held at least D.E* million in financial
assets# an increase of ;.&G over !&&;.
Flobal :C$I wealth totaled D. E +&.' trillion# a @.+G gain from !&&;# with
average :C$I wealth surpassing D. E + million for the first time
The Dltra(:C$I "wealth bandO e5perienced the strongest growth# gaining
?.?G in population si7e and *+.3G in accumulated wealth
Emerging markets# especially those in the Middle East and 9atin )merica#
scored the greatest regional :C$I population gains
:C$I financial wealth is projected to reach D. E 3@.* trillion by !&*!#
advancing at an annual growth rate of '.'G
Aor the global economy# !&&' was a transitional year that began and ended with
sharply opposing macroeconomic environments/ Momentum that was carried over
from !&&; sustained unabated growth in the early months. y the latter end#
heightened uncertainty and instability marked the deep change that was underway.
0verall# market performances were solid in !&&'. :owever# 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 Dnited .tates and several mature European nations. Evenly
split# the two halves of the year tell very different stories/ steady global growth in the
first si5 months# followed by sharply diverging paths between mature and emerging
economies in the second half.
In early !&&'# strong economic gains spurred impressive performances in eBuity
markets and various investment products# reflecting high levels of investor
confidence. 1obust growth in emerging markets# driven by high commodity prices
and rising domestic demands# supported solid growth in mature economies. .tock
markets worldwide performed well into the summer# led by 9atin )merica and
*?
Emerging )sia# which saw roughly !3G and *'G growth# respectively# through
=uly.* ) variety of investment products performed well during the first half of the
yearN for instance# total announced private eBuity deals worldwide were on pace to
shatter their !&&; record.
The second half of !&&'# however# revealed a distinct and growing divergence
between mature and emerging economiesPwith the advantage going to emerging
nations. $hether hobbled by the downturn taking hold in the Dnited .tates or
challenged by the slowed growth of a major trading partner# with few e5ceptions# the
performances of mature economies weakened significantly in the closing months of
the year. In the European Dnion# for e5ample# growth was dampened by a confluence
of key market forces/ slowing domestic consumer spending# a result of high levels of
personal debt amid tightening credit conditionsN a drop(off in e5ports brought on
by easing demand in the Dnited .tates# which received nearly !+G of E.D. goods and
services shipped abroadN and an appreciating euro.Frowth slowed among other
global powers as well/ In =apanPthe worldKs second(largest economyPa decline in
housing investment and low levels of consumer confidence took their toll.+ In
essence#
a long period of "easy moneyO in mature economies was routed by financial and
credit market turmoil.
y contrast# emerging markets proved resilient and posted robust gains in the second
half of !&&'# even as uncertainty grew in mature markets. uilding on their core
competency# e5port(driven growth# many emerging economies converted sharp
increases in energy and commodity prices into sources of high profitability and
significant growth. oth F<P and market capitali7ation gains# particularly in
ra7il# 1ussia# India and 6hinaPthe 1I6 nationsPwere strong# capping another
impressive year for :C$I growth and investment opportunity. Fiven these nationsK
more stable consumption habits# rising domestic demand and healthy business
environments# the slowing Dnited .tates economy# which accounts for !*G of global
F<P# did not appear to significantly compromise their economic growth in !&&'
*@
BRIC N"t$on> Are "t t)e Foreront o Glo?"l Gro@t)
In !&&'# the 1I6 nations continued their roles as pivotal economies# building on
relationships with their mature trading partners and capitali7ing on the growth of
their emerging counterparts. )s mature economies slowed# the 1I6 nations turned
in particularly strong performances. They posted in aggregate the greatest gains in
:C$I populations# *@.+G# and accumulated wealth# !3.*G# driven both by
impressive economic gains and robust market capitali7ation growth. )s a result of
these record(setting performances# the 1I6 nations are rapidly winning fiscal
credibility and increasingly playing a central role on the world stage.
Today# the greatest single impediment to the 1I6 nationsK continued growth is the
high level of inflation now sweeping the globe and most pronounced in emerging
markets. In 1ussia# year(over(year money(supply growth in e5cess of 3&G has kept
inflation rates propped at around *!G. .imilar levels of e5cess liBuidity are evident
in 6hina and across the Middle East. $ith 1I6 nationsK inflation rates averaging
roughly '.3G at year(end#it is increasingly clear that this is the challenge most likely
to shape !&&? outlooks.
In !&&'# India led the world in :C$I population growth# rocketing ahead !!.'G and
e5ceeding gains of !&.3G in !&&;. oosted by market capitali7ation growth of **?G
and real F<P growth of '.@G# :C$I sector gains reached all(time highs. )lthough
the countryKs real F<P growth decelerated from @.+G in !&&;# current growth levels
are considered more stable and sustainable. Market capitali7ation growth more than
doubled from roughly 3&G# accounting for greater :C$I gains. IndiaKs two largest
e5changes# the ombay .tock E5change and the Cational .tock
E5change of India# benefited from rapidly e5panding initial public offering %IP0,
markets and heightened international interestN by the end of !&&'# they ranked among
the worldKs top(*! e5changes in total market capitali7ation terms. 0nce recogni7ed
as a manufacturing superpower# characteristic of a more nascent market# much of
IndiaKs recentgrowth has been driven by the technology# financial services# property#
!&
construction and infrastructure sectors. Frowth in these arenas is indicative of the
developing state of the Indian economy relative to other high(growth players.
6hina ranked second in :C$I population growth# advancing !&.-G in !&&'# more
than two(and(a(half times greater than its !&&; pace. Market capitali7ation and real
F<P growth rates e5ploded last year# at !@*G and **.+G# respectively. Aueled by
impressive price increases and strong IP0 activity# the .hanghai E5change grew to
be the si5th largest e5change in the world in terms of total market capitali7ation. Jet#
despite rapid growth in its financial services sector# 6hinaKs economy still is built on
its manufacturing capacity. This helps e5plain why its :C$I population growth is
slower than that of IndiaPand why the gap continues to widen between 6hinaKs
richest citi7ens# a group with a particularly high concentration of wealth# and the
middle(class# which continues to grow in si7e but remains largely unable to cross the
:C$I threshold. Conetheless# !&&' :C$I growth in 6hina greatly e5ceeded its
!&&; performance of '.?G growth# reflecting strong economic fundamentals and
great potential for future gains.
!*
T)e St"te o A>$"/P"A$$AB> We"lt)
The number of :C$Is grew by?.'G in !&&'#to !.? million# e5ceeding global
:C$I population gains of ;.&G.
)sia pacific :C$I wealth e5panded by *!.3G in !&&'#to D. E @.3 trillion
#e5ceeding both the *&.3G rate posted a year earlier and total world wealth
growth in !&&' of @.+G.
)sia pacific is home to !'.?G of the worldKs :C$I population and !-.-Gof
global :C$I wealth.
India #6hina # .outh >orea e5perienced the highest :C$I population growth
with in the region #gaining !!.'G#!&.-G and *?.?G respectively.
Together =apan and 6hina accounted for ;?.?G of the pacific :C$I
population and ;!.+G of its wealth.
0ver the past five years# :C$I wealth has soared in the )sia( Pacific region. In
!&&'# five of the worldKs *& fastest(growing :C$I populations were concentrated in
)sia(Pacific markets# with India and 6hina posting the largest gains. :owever# the
slow growth of some of the larger )sia(Pacific :C$I populations# such as the !.!G
rate posted in =apan# kept overall regional growth levels at or near global averages.
)s a result# )sia(Pacific :C$I gains e5ceeded global averages but fell short of
advances made in the very highest growth regions# namely the Middle East and
9atin )merica.
1eal F<P and market capitali7ation continued to be key drivers of )sia(Pacific
wealth generation# despite mi5ed results relative to !&&; performances. Two(thirds
of the markets reported on! boasted real F<P growth above the 3.*G global
average#- while market capitali7ation in all of the )sia(Pacific economies analy7ed#
with the e5ception of =apanKs# e5perienced strong# positive growth throughout !&&'.
The global "story of two halves#O as told in the !&&? $orld $ealth 1eport#
accurately reflects !&&' trends evident in )sia(Pacific as well/ .teady growth across
the region defined the first half of !&&' whereas heightened volatility and a sharp
!!
divergence between mature and emerging economies characteri7ed the second.
Dnlike some other
parts of the world# the economic slowdown in the Dnited .tates did not dampen
overall !&&' )sia(Pacific gains. :owever# deteriorating global conditions over the
course of the year heightened uncertainty regarding the global economic outlook and
cast a shadow on many of the regionKs primary e5port markets. Aurther# while some
)sia(Pacific economies were faced with slowing growth# highPand steadily risingP
inflation became the most pressing challenge for the entire region. This issue grew
more pronounced in !&&?# amid severely weakened )sia(Pacific eBuity markets# and
drew attention to related policy(action decisions. Conetheless# in !&&'# rapidly rising
domestic demand and improving socioeconomic and political fundamentals within
the region# particularly among the emerging markets# buoyed growth in most )sia(
Pacific economies.
The net result of strong growth in emerging markets and weak performances in
mature markets was above(global(average gains for :C$Is in the )sia(Pacific
region. In !&&'# the number of :C$Is in the region grew by ?.'G# to !.? million.
$ith those gains# )sia( Pacific ended the year hosting !'.?G of the worldKs *&.*
million wealthiest individuals# with the nine key markets studied accounting
for @-.*G of the regionKs :C$Is. <uring the same period# :C$I wealth in )sia(
Pacific e5panded by *!.3G# to D.E@.3 trillion# significantly e5ceeding gains of
*&.3G in !&&;. y year(end !&&'# )sia(Pacific :C$I financial holdings accounted
for !-.-G of the D. E +&.' trillion held by :C$Is globally.
In !&&'# the Dltra(:C$I+ population in )sia(Pacific grew by *;.+G# to !&#+&&
individualsPnearly double the ?.?G growth of the global Dltra(:C$I population
and significantly higher than the *!.!G growth witnessed in the region a year earlier.
Cotably# )sia( PacificKs Dltra(:C$I segment accounted for only &.'G of its entire
:C$I population# less than in any other region. This trend has been consistent over
the past few years and reflects how the )sia( Pacific :C$I population is weighted
more heavily in the lower wealth bands than :C$I populations in other regions
!-
STATE OF WEALTH MANAGEMENT INDUSTRY IN INDIA
$ealth management is just emerging in India. The growth of the economy has
already been widely showcased. $ealth management services have been getting
more attention over the last two years. ) booming economy# rising stock prices and
an increase in salaries and spending power have turned the spotlight on this sector.
The wealth management space was earlier the preserve of some foreign banks which
offered these 4e5clusive services4 to a select few. This was not a service you could
apply for. The unsaid tagline was 4<on8t call us. $e8ll call you %if you are that
wealthyQ,.4 Today# a number of private banks offer this service. )lso entering this
arena and carving a niche for themselves are standalone entities that offer the full
range of services P investment advice# portfolio management# ta5ation advice et al.
) new report from independent market analyst <atamonitor %<TM.9, reveals the
Indian wealth market is offering competitors enormous opportunities. In the last five
years# affluent wealth in India has grown at a rate of *'.;G with affluent individuals
totalling ;*?#&&& at the end of !&&'. IndiaKs large skilled population and robust
domestic stock market will ensure that this wealth continues to grow to almost one
million individuals# with a collective wealth of over D. E !&&bn by !&*!. 4India has
its own merits as one of the developing 1I6 economies %ra7il# 1ussia# India and
6hina,. 6ompetitors are realising this fact and are beginning to bring their
propositions to the table. Today# India is attracting both foreign wealth managers and
domestic banks to set up wealth management businesses. Foing forward this is a
trend that is likely to continue#4 says )lan .hields# <atamonitor financial services
analyst and author of the study. The number of mass affluent individuals in India has
more than doubled since *@@?. India is becoming an increasingly attractive market in
many industries# and wealth management is no e5ception. <riving the attractiveness
of the market has been the countryKs e5ceptional economic performance over the last
decade. The economy has grown at an average of '.;G since *@@+# due to the
continued development of the service industry and strong growth in the technology
!+
sector. The opportunities that have been created by a booming economy have in turn
driven individual wealth growth. The wealth of IndiaKs residents has grown from
D.E'@bn in *@@? to D.E*''bn at the end of !&&?. This amounts to an increase of
*!-G in just five years. 0f IndiaKs *.* billion population# wealth is concentrated
among a ;*?#&&& individuals. 0f the total individual wealth in India# more than ;3G
or D. E **;bn is owned by both mass affluent and high net worth individuals.
6ombined# this amount of wealth in the hands of just ;*?#&&& individuals. Those
with more than D.E-m in liBuid wealth represented the most valuable sub(segment
of the wealth market in India at year(end !&&-# owning D.<*'bn. The band
accounted for over @G of total savings and investments despite only accounting for
only a tiny percentage of the adult population.
OPPORTUNITIES FOR LOCAL AND FOREIGN PLAYERS
The fact that affluent wealth is growing at a rate of *'.;G compounded annually is
attracting both foreign wealth managers to set up business and domestic banks to set
up wealth management businesses. 4There are certainly opportunities to be had in the
Indian wealth market4 says )lan .hields head of )sia(Pacific wealth management
analysis at <atamonitor. 4$hilst on the world stage# the Indian wealth market is
underdeveloped# there are still a large number of affluent individuals who are not
being served by the current competitors and the pool of potential clients created each
year is huge.4 <atamonitor forecasts that affluent wealth in India will grow rapidly .

India is still at a stage where the wealth manager is not necessarily a certified entity
and the term itself is used rather loosely. $ith banks and distribution houses#
insurance agents# mutual fund distributors and chartered accountants liberally calling
themselves 8wealth managers8# there is a mind boggling array of people to choose
from. .o# it becomes imperative to first identify the type of people you can sign on as
your wealth managers. There are wealth managers in banks who will eagerly do your
financial planning if you fall in the :CI %high net worth individual, block. The banks
assign a relationship manager %1M, to you# who is e5pected to manage the
relationship with you by proactively using his knowledge to tailor uniBue and
!3
innovative financial solutions that will create value. :owever# he is restricted by the
number of distribution tie(ups he has (( not all of them can sell all products. esides#
as banks and distribution houses increasingly compete with each other with a similar
set of products# an 1M may end up just pushing his own brands instead of delivering
long(term advice. The high churn among 1Ms in banks often leads to sudden breaks
in 4relationship4 building and a whole lot of miscommunication between the
customer and the bank ensues.
Then there is everyone else keen on getting a slice of your pie with assurances to
make you richer than you are today. Jour friendly neighbours who sell insurance and
mutual funds may not always be the right source. )fter all# their interests in selling
you a particular product is the commission that they earn through selling you a
financial product. esides# your accountant or stockbroker may not adopt a holistic
approach to all your financial planning needs. If you strictly go by the book and look
for a Bualification that befits a wealth manager# then you should go to the *3&(odd
certified financial planners %6APs, who have been certified by the Ainancial Planning
.tandards oard %AP.,# India. 1emember that a true wealth manager uses the
financial planning process to help you figure out how to meet your life goals through
the proper management of your financial resources. 0nce you have identified the
category of your wealth manager# it boils down to choosing one. :ere are nine
Buestions to ask before you hand over that cheBue. )nd remember to keep asking as
you go along.
$ealth management reBuires hands(on e5perience and a strong technical
understanding of topics such as personal ta5 planning# insurance# investments#
retirement planning and estate planning and# how a recommendation in one area can
affect the others. )sk the planner what his Bualifications are to offer financial advice
and if# in fact# he is a Bualified planner. )sk what training he has successfully
completed. )sk what steps he takes to keep up with changes and developments in the
financial planning field. )sk whether he holds any professional credentials including
the 6ertified Ainancial Planner certification# which is recognised internationally as
the mark of a competent# ethical# professional financial planner. Aind out how long
the planner has been in practice and the number and types of companies with which
!;
he has been associated. )sk about work e5perience and its relation to current
practice. 6hoose a financial planner who has e5perience counselling individuals on
their financial needs.
MAJOR WEALTH MANAGEMENT AGENCIES IN INDIA:
)ssociation of Mutual Aunds in India.
)C()M10 ank# India
9otus India )sset Management.
1eliance 6apital )sset Management.
<awnay <ay )V Ainancial .ervices.
).> 1aymond =ames# India
Emerging Portfolio Aund 1esearch# D.)
=eetay Investments# India
.I Aunds Management# India
)mas ank# .wit7erland
Ma5 Cew Jork Insurance# India
>otak Mahindra 0ld Mutual 9ife# India
6enturion ank of Punjab# India
Caissance 6apital# .wit7erland
Everest 6apital
Foldman .achs# D>
AMF Aund Managers# D.)
The .ynergy Partnership# Malaysia
aseTen 6apital Management# India
I6I6I ank# India
irla .un 9ife Insurance# India
.tandard 6hartered )sset Management# India
Prudential I6I6I )sset Management# India
!'
I6I6I Prudential 9ife Insurance# India
Parag Parikh Ainancial .ervices# India
.andstone 6apital# D.)
6anonbury Froup# D>
6orporate Ainance India# India
Ainancial Planning .tandards oard# India
6redit .uisse )sset Management# D>
Pioneer 6lient )ssociates# India
Feneral 9ife Insurance 6ouncil# India
<ubai International Ainance 6entre# D)E
:.6 )sset Management# India
EM 6apital Management# D.)
.I Aunds Management# India
Ainancial Planning .tandards oard# India
CP Paribas# India
Pension Aund 1egulatory H <evelopment )uthority# India
lue 1iver 6apital# India
)C )mro ank# India
irla .un 9ife )sset Management# India
.ecurities and E5change oard of India# India
Feojit Ainancial .ervices# India
I9H A.# India
Fandhi H )ssociates# India
<ubai ank# D)E
onan7a is a leading Ainancial .ervices H rokerage :ouse with acknowledged
industry 9eadership in e5ecution and clearing services on E5change Traded
<erivatives and cash market products.
>ey elements that place onan7a amongst the leading rokerage :ouses and make it
the preferred service provider for value based financial services are/
!?
) 6lient(driven foundation and strategy committed to client(specific investment
needs and objectives.
Integrated and innovative use of Technology enabling clients to trade offline#
online and .trategic tie(ups with latest technology partners to facilitate trading
access and direct processing across +&& outlets in *;& cities.
6lient(focused philosophy backed by memberships of all principal Indian .tock
and 6ommodity E5changes makes onan7a a preferred service provider in the
Industry for value based services.
M$n$#4# 8ortol$o >$Ce: 1s.*& lakhs. Jou can also open a PM. account by
transferring your e5isting portfolio of stocks or mutual funds.
PMS Fee>: *3G of profits plus government ta5es. 6harged Buarterly (due only if the
portfolio has made profits in that Buarter.
Bro(er"5e/ &.3&G plus all applicable regulatory charges and government ta5es.
onan7a portfolio 9td. )nd onan7a .tock roker 9td. will be appointed as brokers
9td. $ill be appointed as brokers to the scheme.
Ot)er A)"r5e>: <epository and other charges# e5penses and ta5es will be on actuals.
The Indian wealth management market is ripe for development. .trong economic
growth has created wealth that needs somewhere to go and consolidated the position
of those with old money. <espite the country8s rapid development the market is
immatureN investment propositions have traditionally centred on deposit accounts and
currency controls limit access to the international capital markets. ut change is in
the air and both domestic banks and international players alike are now gearing up to
meet the needs of the wealthy. The natural evolution of the wealth management
market can only be helped along by continued economic growth that will do much to
stimulate demand. 1aj Parmar# head of Flobal .outh )sian <iaspora at :.6
Private ank says/ 4.ustained F<P growth in the last few years has created wealth in
many sectors of the Indian economy# both old# such as gems and jewellery# and new#
such as outsourcing# have benefited and growth is now considered sustainable.4 The
!@
money being made in the new industriesN retailing# financial and P0 %business
process outsourcing, seems to be limited to urban areas. ) recent report from
<atamonitor found F<P highly concentrated in three regions/ Maharastra# Dttar
Pradesh and $est engal. Those three regions# according to the report# accounted for
!@.'G of total F<P in !&&;M'. <epositary holdings in those regions are
correspondingly high/ Mumbai# a part of Maharastra holds +@.!G of deposits held by
foreign banks according to <atamonitor. 0ld money# meanwhile# should not be
underestimated. 1egional market leader at arclays Private ank e5plains that
historic wealth stems back to India8s independence when perhaps -& or +& families
controlled whole industries. 4Today they form the ultra high net worth population
and in addition each province has its wealthy landowners and regional powers#
especially in the .outh. Meanwhile# in <elhi there is a lot of political wealth and a
large cash economy for lu5ury goods e5ists. In Mumbai there is a lot of
entrepreneurial wealth# most of which is tied up in companies#4 he says.
.o with such an abundance of wealth then how can banks# both domestic and
international# best meet demandR The wealth management industry at present is
immature compared with offerings by private banks and wealth managers in the
$est. There is no doubt however than the Indian market is in the early stages of
development. Indeed Indian banks have traditionally placed most emphasis on broad
asset gathering rather than catering to any one specific group. There is plenty of
evidence the majority of wealth management propositions are# in fact# more focussed
on the mass affluent as it is they who are driving economic growth and thus have
most power of influence over how the investment industry evolves alongside that.
Placing money offshore is not a particular growth area either. )lthough historically
wealthy Indians may have held assets offshore in the face of the long(term decline of
the 1upee# currency strength now means they are better off at home. In addition# the
terrorist attacks of .eptember ** and subseBuent tightening of international
regulatory standards have contributed to a steady and significant flow of money back
into the country. $here company owners may have floated and issued )<1s as
recently as the early *@@&s# the current tendency is to plough money back into the
company# according to Fulam/ 49ower interest rates and a stronger 1upee ( not even
-&
offset by high oil prices# means that people can get good returns in the home
currency. 6onfidence is at an all time high.4 )ll this points to rich pickings for those
wanting to get involved with the wealth management market. 6ertainly all the
reBuisite ingredients are thereN the wealth itself# the confidence in the domestic
economy# the readiness to get involved in a variety of different asset classes and
widen geographic allocation of assets. $hy then is the market so underdevelopedR
$hy are ?3G of assets# according to <atamonitior# still in deposit accountsR
1elationship manager says 4To all intents and purposes the :C$ market has yet to
be created. 0fferings tend to be the same for all those with money to invest.
.ophisticated products such as derivatives and hedge funds are barely legislated for
and in the conte5t of the middle classes driving the development of the investment
landscape# they are not high priority either. 0ne area where :C$s do tend to invest
is in property ( reflective of the undeveloped nature of the market.4
The answer also lies in the regulatory environment. .amir .ayeed# global market
manager for the India business at 6itigroup Private ank# adds/ 4)s wealth has
grown and people have e5cess liBuidity they have become more demanding in their
financial needs. The gradually easing regulatory environment is helping meet some
of those needs. 6urrently portfolio management# mutual funds# insurance products#
eBuity brokerage and mortgage lending are all allowed but the market remains
untapped.4 $ithout a doubt the biggest reason for this is currency control. Initially
introduced as a means to keep currency outflows at a manageable level# the controls
are now acting as a barrier to the country8s retail investment industry at all levels. The
good news is that all this is set to change.
4.ince !&&-# within a set of criteria laid down by the 1eserve ank of India %1I,#
investments can be made in overseas instruments without any Buantitative
restrictions. More recently# the 1I has introduced a liberalised remittance scheme
under which resident Indians can invest up to D.E!3#&&& per annum in any overseas
security#4 Parmar says. Pressure on the government from the entrepreneurial
generation that is young# highly educated and mobile is likely to intensify. In addition
India8s domestic pension funds are also complaining that they are unable to diversify
sufficiently into international capital markets. .ayeed adds/ 4This time last year the
-*
annual E!3#&&& allowance for Indians to maintain overseas accounts did not e5ist so
liberalisation is clearly ongoing. In addition companies that e5port have slightly
different rules for holding foreign currency and we see that as positive.4 Irritating it
may be but currency control has not stopped international players from trying to
reach this segment of the market and from there establish a presence in the market.
$ithin what is allowed moves are already afoot by players such as arclays#
6itibank# :.6# <eutsche ank and CP Paribas who are all involved to a greater
or lesser e5tent in the market. )nd the way to play it is seems to be to gain a toehold
in one area# such as structuring debt in the case of arclays# and then e5tend the
range of activities# products and services on offer as soon as regulation and investor
appetite allows. .ervicing the onshore market will soon mean the provision of both
advisory and discretionary 4wealth management4 solutions for the :C$ market.
Even local banks such as I6I6I and :<A6 ank are pouring in resources to tap this
rapidly growing business. .ayeed says/ 4$e are aiming not just to play a part in the
wealth management market but we also want to have a hand in creating it in the first
place.4 Fulam thinks domestic banks should not be underestimated# adding/ 4) huge
mutual fund comple5 is in the process of being built. In addition# a series of ta5
amnesties over the last few years has also meant that the parallel economy is
diminishing.4 Dltimately the Indian wealth management market is about patience
while waiting for the regulatory breadth and depth to become established. 4In five
years8 time we e5pect to see continued liberalisation and an end to currency controls.
ut it8s important to understand that a major dynamic of the Indian market is internal
demand# not just access to international currencies#4 .ayeed says. $ealth there were
an estimated '&#&&& high net worth individuals %defined as those with financial assets
of at least E*m e5cluding their residential property, in India at the end of !&&+#
according to the !&&3 $orld $ealth 1eport published in =une by Merrill 9ynch and
6apgemini. The number of :C$I8s in India was up *+.;G from with the previous
year# registering faster growth than the world average. 1aj .ehgal# Merrill 9ynch
Flobal Private 6lients8 country head for India# says/ 4India continued to be one of the
high growth areas in !&&+ as around @#&&& more people joined the elite list of
:C$Is in !&&+.88 The high growth in the wealthy arose despite a strong slump in
stock prices in May !&&+ following the election in which India8s pro(market =P
-!
government une5pectedly lost power to a coalition led by the 6ongress Party. The
market however recovered some of its ground as the stock market recorded a sharp
upward rally in the second half. The report acknowledged that among developing
countries ra7il# 1ussia# India and 6hina have emerged as an economic force
together accounting for +*G of the world8s population and ?G of its F<P growth.
The report says/ 4)lthough the combined output of these economies is a small
fraction of world F<P today# the 1I6 countries are significant because of their si7e
and fast(paced economic growth.4 The report added however that# over(investment
and e5cess capacity are e5pected to reduce 6hina8s growth in !&&3# which will also
impact many of its neighbours. ut it cited India as an e5ception as its fortunes are
less dependent on 6hina and the overall economy of East and .outh )sia. The
world8s high net worth wealth grew strongly in !&&+ for a second consecutive year#
increasing by ?.!G to E-&.? trillion# according to the report. Flobally# the number of
:C$Is grew '.-G to ?.- million# a net increase of ;&&#&&& worldwide.
--
INSTRUMENTS OF WEALTH MANAGEMENT
Indian weddings have always been grand and festive affairs# as reflected in films like
Monsoon $edding and ride and Prejudice. ut India8s burgeoning middle class (
now -&& million strong ( are turning weddings into showcases of their growing
disposable incomes and newfound appetites for the goodies of the global
marketplace. The minimum budget for a wedding ceremony is E-+#&&&# say wedding
planners# while the upper(middle and rich classes are known to spend upward of E!
million. %The average )merican wedding costs E!;#-!'., This doesn8t include cash
and valuables given as part of a dowry. )ccording to the Cational 6ouncil for
)pplied Economic 1esearch %C6)E1,# the middle class are those making E+#3+3 to
E!-#&&& a year. C6)E1 projects that the market for all categories of products# from
daily consumables to consumer durables# will double in annual sales by !&*&. $ith
the economy e5pected to maintain steady ; percent annual growth# India is widely
seen as one of the world8s *& largest emerging markets.
$hen it comes to the instruments of wealth management in India# instruments like
the banking sector# stock market# mutual funds can be considered in this category.
BAN7 DEPOSITS
Independent research shows that customers prefer to deal with a local operator for
management of his assets. The wealth management industry has begun to follow the
trend set by the likes of shoe brand Cike and fashion retailer Fap in moving parts of
its operations to cheaper environments. )s ever# the back and middle offices are the
bits that wealth managers want to offload. In India it is both the public sector and the
private sector banks who have demonstrated themselves in the assets management
market to tap the growing potentiality of this sector. .tate ank of India# the nation8s
largest lender# plans to offer wealth management services to affluent clients# seeking
a share of a fast(growing market that is now worth E*& billion# and that may double
every two years. 4$ealth management has tremendous growth potential#4 said
Indrajit Fupta# managing director of .I 6apital Markets# .tate ank8s investment
banking unit. Aoreign banks with Indian collaborations are not also far from others.
Aor e5ample# Aidelity and 6itibank have some operations in India# including call
centres# processing and systems development. 0utsourcing to India is about more
-+
than simply saving costs# according to the high commissioner of India# 1onen .en.
"<epending on the particular operation sought to be outsourced# and the scale of the
project# cost savings range from -& per cent to as much as '& per cent. 6itigroup#
)C )M10 :olding# .tandard 6hartered and I6I6I ank already offer wealth
management services in the nation. )bout '&#&&& Indians had financial assets of
more than E* million each in !&&+# according to a study by the management
consultants 6ap Femini and Merrill 9ynch. <.P Merrill 9ynch estimates that wealth
under management in India totals about E*& billion. I6I6I ank# India8s second(
biggest lender# believes that amount could double every two years# said )rpit
)garwal# the lender8s head of private banking. Cow government(controlled banks#
including .tate ank# are seeking wealth management business as economic growth#
forecast by the government at an annual average pace of ' percent# raises incomes
and as Indians seek more ways to earn higher returns on their wealth. 4In the current
interest rate# ta5ation and macroeconomic environment# with a positive corporate
performance and F<P growth# more and more individuals are seeking professional
management of their finances#4 said .harad Mohan# a marketing director of wealth
management at 6itigroup8s India unit. 6anara ank# the third(biggest lender in India#
plans to open branches catering specifically to affluent individuals# said .
.ukumaran# a deputy general manager. 6anara ank initially would offer financial
advice# mutual funds and insurance products# he said. ank of India# which started an
online stock(trading system in =uly# also said it was studying plans to offer wealth
management services. Dnion ank of India# the seventh(biggest lender by assets# has
also started an online stock trading service for customers# in addition to offering
mutual funds and insurance products. I6I6I has 3&& financial advisers for its clients#
having e5panded the number fourfold in the past three years. It has !;& billion
rupees# or E3.@ billion# of assets under management. 6itibank has a well(organi7ed
system of $ealth Management services in India that give you unparalleled advantage
and opens up the opportunity to ma5imi7e wealth. Aor e5ample# 6itigold $ealth
Management .cheme. 6itiFold $ealth Management offers e5clusive privileges to its
customers that comprises of/
Ta5 and estate advisory services through a leading ta5 advisory firm in India.
Aree for life 6itibank International Fold 6redit 6ard.
-3
Dpdated information on treasury# currency markets.
Invites to seminars on capital markets# mutual funds# budget and ta5ation.
Aree insurance benefits ( upto 1s -& lakh personal accident# and baggage and
householder insurance.
Aree access to airport lounges at <omestic and International airports in India.
<. ank offers power packed .avings )ccount with convenient features and
charge(free banking options. .o now you can bank and transact without the stress of
fees levied on trasnsactions. Co Arills account is made to order# working to provide
vital banking services with nominal average Buarterly balance reBuirements. .aving
Power Plus )ccount is tailored especially for individuals with an investible surplus
of 1s. 3 to !3 lacs. In other words# the account is suited for individuals who are
looking for e5clusive banking services. .aving Power Plus operates in IC1 currency
with a high balance and 7ero charge structure. $ith its features and benefits# the
accounts is a uniBue offering. The minimum balance per month is 1s. *&&#&&&.
)ccount holders receive free monthly and Buarterly statements as well as
personalised cheBue books. .aving Power Plus offers all anking .ervices without
service charges. The <eposit Plus account is for individuals looking for a medium
term investment option with an investible surplus of *3 lacs or more. This is a pure
deposit relationship and is offered in IC1 currency. The difference with this account
is the bundle of banking services and competitive interest rates.
Private banking is emerging as an important segment of business for some banks and
non(banking financial companies %CA6s, in India. anks and CA6s say there has
been an increase in the number of private banking or wealth management clients they
are dealing with today. Aoreign banks# which mostly cater to high net worth
individuals# with financial surplus or investible incomes of over 1s ! crore per year#
say that this segment is e5pected to grow by almost !& per cent over the ne5t couple
of years. )bout the potential for wealth management# Mr. .harad Mohan# Marketing
<irector# 6itiFold $ealth Management# 6itiank# said# 4$ealth management is a
fast evolving domain with tremendous growth opportunity in India. In the current
interest rate and ta5ation environment# more individuals are seeking professional
management of their finances.4
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AD&ANTAGES
anks offer stability for the money put on investment. The degree of
vulnerability and risk is minimum in case of banks than in other instruments of
wealth management.
Aree from market adversity.
anks in India have a wider network covering the rural areas also which has a
potential for wealth augmentation.
DRAWBAC7S
Interest rate offered by banks is less in comparison to other asset augmentation
instruments.
-'
STOC7 MAR7ETS
.tock E5change is a place where the buyers and sellers meet to trade in shares in an
organi7ed manner. There are at present !3 recogni7ed stock e5changes in the country
and are governed by the .ecurities 6ontracts %1egulation, )ct# *@3;. India8s major
stock e5change have seen strong growth in recent times. The domestic market
capitali7ations of the two largest e5changes have grown by more than 3&&G since the
beginning of !&&-. This stands in contrast to 6hina where domestic markets are
underdeveloped and have been on a steady downward trend over the last few years.
DEPOSIT STRUCTURE
WDM
Se5#ent
CM Se5#ent F D O / In6e!
F4t4re> >4?/
>e5#ent
W$t) NSE
Interest Aree .ecurity <eposit 1s. *3& lacs 1s. @* lacs 1s. ? lacs
V.)T <eposit ( 1s. -.!3 lacs (
W$t) NSCCL
Interest(free .ecurity <eposit 1s. @ lacs 1s. !3 lacsS
6ollateral .ecurity <eposit 1s. !3 lacs 1s. !3 lacsS
Payable in cases where the applicants opt to take up the 6learing Membership for the
AH0 .egment as well.
-?
MUTUAL FUNDS
) Mutual Aund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified# professionally managed portfolio at a relatively
low cost. )nybody with any surplus money that can be invested# even as little as a
few thousand rupees can invest in Mutual Aunds. Each Mutual Aund scheme has a
defined investment objective and strategy. The team undertakes this in the most
professional manner.
Markets for eBuity shares# debentures# bonds and other fi5ed income instrumentsN
real estate# derivatives and other assets have reached their maturity and are driven by
latest up(to(date information. ) mutual fund is thus the ideal investment vehicle for
todayKs comple5 and modern financial scenario. Price changes in these assets are
driven by global events occurring every day# in(fact every minute in faraway places.
It will be very difficult# in(fact ne5t to impossible for an ordinary individual to have
the knowledge# skills# inclination and time to keep track of events# understand their
implications and act speedily. )n individual also finds it difficult to keep track of
ownership of his assets# investments# brokerage dues and bank transactions etc. )
mutual fund is the answer to all these situations. It appoints professionally Bualified
and e5perienced staff that manages each of these functions on a full time basis. The
costs of hiring these professionals per investor are very low# as the pool of money
invested is large. In effect# the mutual fund vehicle e5ploits economies of scale in all
three areas ( research# investments and transaction processing.

-@
<iversification of investments in mutual funds reduces the overall investment risks
by spreading the risks across different assets. The investment of the mutual fund
company depends on the objectives the company peruses. .ome mutual funds invest
e5clusively in a particular sector while others might target growth opportunities in
general. )lthough mutual funds have been around for a long time# dating back to the
early *@th century# the first modern )merican mutual fund opened in *@!+ and it was
only in the *@@&s that mutual funds became a part of the mainstream investment.
Today mutual funds collectively manage almost as such as or more money as
compared to banks. The advantages of mutual funds includeN high liBuidity# choice of
investment# low investment minimums# low transaction costs# government regulation#
which assures safety of the fund and professional management of the fund# etc.
Mutual fund investment has also its own drawbacks like lack of insurance of the fund
against losses# dilution of investment value and profit thereof# high management and
operating fees and sales commissions# lack of control of the investor over own
investment portfolio and inefficiency of cash reserves which reduces the investorKs
potential return. The types of mutual funds are subject to large scale variation subject
to investment objective# si7e strategy and style.
+&
AD&ANTAGES AND RIS7 IN MUTUAL FUND IN&ESTMENT:
M4t4"l 4n6 $n'e>t#ent* 8"rt$A4l"rlE #$6 A"8 $n'e>t#ent $n In6$" $> 'erE
'ol"t$le $n n"t4re% T)ere #"E ?e )$5) ret4rn> "n6 )$5) r$>(%
)<V)CT)FE./
*. D$'er>$$A"t$on o F4n6>: ( <iversification of Aunds can reduce the overall
investment risks by spreading the risk across different assets. $hen some assets
are falling in price others are likely to be rising. Thus# diversification of funds
lowers the risk than investment in just one or two funds.
!. C)o$Ae: / Mutual funds come in a wide variety of types. .ome mutual funds
invest e5clusively in a particular sector# while others might target growth
opportunities in general. There are thousands of funds# and each has its own
objectives and focus. The key for an investor is to find the mutual funds which
closely match his investment objectives.
-. L$F4$6$tE: / This refers to the ease at which one can convert his assets into cash.
In the case of mutual funds# it is as easy to sell a share of a mutual fund as it is to
sell a share of stock.
+. Lo@ In'e>t#ent M$n$#4#>: ( )n investor need not be very wealthy in order to
invest in a mutual fund. Most mutual funds allows an investor to buy into the
fund with as little as E *&&& or E !&&& or even allows a no minimum investment
but on the terms of payment of regular monthly contributions.
3. Con'en$enAe: ( Purchasing and selling of mutual fund is very easy. .econdly# an
investor of mutual funds need not to worry about tracking the various securities
in which the funds invest rather all he needs to keep track of the funds
performance.
+*
;. Lo@ Tr"n>"At$on Co>t>:/ Mutual are able to keep the transaction costs at the
minimum because they benefit from reduced brokerage commissions for buying
and selling large Buantities of investments at a single time.
'. Re54l"t$on: ( Mutual funds are regulated by the government through the
.ecurities and E5change oard of India % .EI,. It regulates the way the mutual
funds approach the investors the way they conduct their internal operations. This
provides some level of safety to the investors.
8. Proe>>$on"l M"n"5e#ent and other additional services provided by the
mutual funds.
@. If the fund house has very strong research and is able to really spot strong
opportunities in a disciplined manner# the fund should be a great long(term
investment.
*&. The best returns are always derived from spotting the opportunity early and
holding on for '(*& years or more. These funds test the fund managerKs
conviction.
**. The fund gives an opportunity to diversify across mid(caps as well as use some
scientific method to identify mid(cap stories# rather than the ne5t hot tip from
your neighbour. If you are planning to pick mid(caps anyway# this is probably
the safest avenue.
RIS7S: /
2% No In>4r"nAe: / Mutual funds# although regulated by the government# are not
insured against losses. Mutual fund returns are subject to market risks. <espite
the risk reducing diversification benefits provided by the mutual funds# losses
can occur# and it is possible that one may even lose the entire investment.
,% D$l4t$on: ( )lthough diversification reduces the amount of risks involved in
investing in mutual funds# it may lead to dilution which can be
disadvantageous to the investor. If a single security held by a mutual fund
doubles in value# the mutual fund itself will not double in value because that
security is only one small part of the fundKs holdings.
+!
;% Fee> "n6 E!8en>e>: ( Most mutual funds charge management and operating
fees that pay for the fundKs management e5penses. .ome mutual funds also
charge high sales commissions. )nd some buy and trade shares so often that
the transaction costs add up significantly. .ome of the fees and e5penses are
also recurring.
3% Poor Peror#"nAeG( 1eturns on a mutual fund are by no means guaranteed.
0n an average# around '3G of all mutual funds fail to beat the major market
inde5es. 6ritics have also Buestioned whether or not professional money
managers have better stock picking capabilities than the average investor.
9% Lo>> o Control: ( The managers of mutual funds make all the decisions
about which securities to buy and sell and when to do so. This makes difficult
on the part of the investor in managing his portfolio. Aor e5ample# the ta5
conseBuences of a decision by the manager to buy or sell an asset at a certain
time might not be optimal for the investor.
<% Tr"6$n5 L$#$t"t$on>: ( )lthough mutual funds are highly liBuid in general#
most mutual funds i.e. open ended mutual funds can not be bought or sold in
the middle of the trading day. 0ne can only buy and sell them at the end of the
day# after the current value of their holdings have been calculated.
.% S$Ce: ( .ome mutual funds are too big to find any investment i.e. the funds
that focus on small companies given that where are strict rules about how
much of a single company a fund may own. )s a result# the fund might be
forced to lower its standards when selecting companies to invest in. :owever#
mid cap investment is not suffering from this type of problem.
:% Ine$A$enAE o C">) Re>er'e>:( Mutual funds usually maintain large cash
reserves as protection against a large number of simultaneous withdrawals.
+-
)lthough this provides investors with liBuidity# it means that some of the
fundKs money is invested in cash instead of assets# which tends to lower the
investorKs potential return.
++
+3

TT
2% DO YOU BELIE&E THAT WEALTH MANAGEMENT HAS
INCREASINGLY BECOMING A BOOMING INDUSTRY IN
INDIAH
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yes
no
not sure
Jes (((((((((((((((((((((((((((((( ((((((((((((((((( ?' percent
Co ((((((((((((((((((((((((( ((((((((((((((((((((((( @ percent
Cot sure (((((((((((((((((((((((((((((((((((((((((( + percent
+;
WHAT IS THE STATE OF THE WEALTH MANAGEMENT INDUSTRYH
The summary of the response was that wealth and disposable income are growing
substantially. $e are also noticing that for the first time the ability to earn and save
are slightly different. Earlier you just put away your money in some guaranteed
products. Today# when even the government is withdrawing from those products %it
recently stopped the maturity bonus on post(office savings,# investors# whether they
be doctors# architects or anyone else# need professional help.
+'
,% IS WEALTH MANAGEMENT ONLY FOR THE WEALTHYH
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!&G
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yes
no
not sure
2% Jes(((((((((((((((((((((((((((( !-G
,% Co(((((((((((((((((((((((((((( '*G
;% Cot sure(((((((((((((((((((( +G
0nly !- percent of the respondents were of the opinion that yes wealth management
industry is only for those who are having enormous wealth. ut a massive '* percent
felt that it is for everybody. The person who is earning 1s -&#&&& per month also
needs this advice. Aor instance# if there is a !3(year(old guy who earns this sum# his
first priority is to buy a house for# say# around 1s !& lakh. :e has to now protect
this property from# say# flood# cyclone or other natural disasters. Jou have building
insurance that doesn8t cost more than 1s ?&&(*#&&&. only ; percent responded in
terms of do not knowM can not say.
+?
;% WHICH IS YOUR MAIN MAR7ETH
.tock 0ptions((((((((((((((((((((( ;3G
E5pansion of usiness(((((((((( -!G
Cot .ure(((((((((((((((((((((((((( -G
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stock options
e5pansion of business
not sure
;3 percent prefer getting stock options. -! percent operate on the e5pansion of
business and entrepreneurial capacity. - percent responded in terms of do not knowM
can not say.
W)"t "?o4t Ao#8et$t$on ro# ore$5n "n6 In6$"n ?"n(>H
The response was that basically# the service the foreign banks offer is transaction
oriented. Most of them offer some mutual funds and some eBuity advice. ut
someone who has between 1s ! crore to 1s !3 crore don8t want this. $hereas Indian
banks have a customer(centric model. They work with customers and offer them a
range of services P investment advisory P in debt# eBuity# mutual funds#
derivatives# besides ta5 advisory# succession planning# insurance advisory# etc.
W)"t "re t)e e#er5$n5 tren6> $n @e"lt) #"n"5e#ent $n In6$"H
+@
1eal estate and private eBuity are increasingly becoming important asset classes for
high net worth individuals %:CIs,. The demand for realty is on a high growth path on
account of the burgeoning economy.
$hile a few realty funds have been launched# the agencies believe that retail
investors have been left out as only :CIs and institutional players have the capacity
to participate in these. :owever# eBuity participation will be ensured by the
introduction of real estate mutual funds# which are fairly common in developed
countries.
Ho@ $> t)e 8r$'"te eF4$tE >Aen"r$o 6e'elo8$n5H
)lternative investments including private eBuity allow :CIs to broadbase their
portfolios. Though at a nascent stage# private eBuity in India is on the rise because of
maturing financial sophistication. .econdary research highlights that in the
developed markets# there is a growing conviction among :CIs that investments in
fundamentally strong businesses are a very dependable wealth management strategy.
I> t)e Al$ent ?">e e!8"n6$n5H I> $t ?eAo#$n5 #ore e!8en>$'e or 8eo8le to
#"n6"te " 8r$'"te @e"lt) #"n"5erH
India is becoming an increasingly attractive market for many industries ( wealth
management is no e5ception. There is a promising onshore wealth management
services sector here. <riving the development has been the country8s e5ceptional
economic performance over the last decade. The booming economy has led to
innumerable opportunities and pushed individual wealth growth. )ccording to one
estimate# India has seen about *@ per cent growth in :CI population in !&&3 vis(U(vis
the world growth rate of ;.3 per cent. The fee structure here is yet to be developed
and is currently accrued from brokerage fees and commissions on the services
rendered.
Ho@ A"n " @e"lt) #"n"5er Are"te " 6$erenAe $n 8re'"$l$n5 #"r(et Aon6$t$on>H
$ealth management is a highly speciali7ed service# covering all asset classes. )sset
allocation helps determine an optimal mi5 of asset classes# ranging from eBuity# debt
3&
and real estate to alternatives. The latter may include Vinvestments of passion8 ( even
fine art and collectables ( as well as structured products and hedge funds. 6lients8 life
goals# time hori7on and risk tolerance are three vital factors on this front.
3% WHAT &ALUE/ADDED SER&ICES DO YOU PRO&IDEH
Ainancial planning(((((((((((((((((((((( ??G
Individual reBuirements(((((((((((((((( *!G
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financial planning
individual reBuirements
?? percent responded that their managers offer complete financial planning. They are
able to give the customers advice on eBuity investment# debt# commodities# art#
insurance# international investment# which home loans to take and why# ta5 planning#
estate planning# filing ta5 returns# superannuation# real estate# and do a cash(flow
3*
analysis. *! percent responded that they are speciali7ed to meet the individual
reBuirements of the customers i.e. in portfolio management.
3!
Ho@ #4A) 6o Eo4 A)"r5e "n6 on @)"t ?">$>H
These charges are over and above any other charges like an entry and e5it load
charged by mutual funds when the customers invest in them.
Fee>: They are based on an hourly rate# a flat rate# or on a percentage of your assets
andMor income. )t times# it is on the nature of the work done.
Co##$>>$on>: Though commissions are not paid by you# but by a third party %like a
mutual fund house or insurance company,# it does come out of your pocket. Aund
houses and insurance companies use their entry and e5it loads to fund these
commissions for their brokers and distributors.
Co#?$n"t$on o ee> "n6 Ao##$>>$on>: :ere you are charged fees for the amount of
work done to develop the financial plan and commissions are received from any
products sold.
3-
9% DO YOU RECOMMEND YOUR OWN PRODUCTSH
Jes((((((((((((((((((((((((((( '@G
Co(((((((((((((((((((((((((((( **G
Cot sure(((((((*&G
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yes
no
not sure
)ssuming the four main asset classes are stocks# bonds# alternative investments %such
as real estate and private eBuity, and cash# how should ones investments be allocated
if he is 3& years old or if he is ;3 years old and newly retiredR
3+
The respondents think the total amount of the estate %wealth, should enter into the
determination of asset allocation# along with the health and the e5pected lifespan of
the individuals. The appetite for risk is another consideration# as is the ability to deal
with contingencies. )fter saying all that# I would allocate ;3G to stocks for the 3&(
year(old and 33G for the ;3(year(old. I would use alternative investments only if the
total amount was very substantial and the individuals had some e5pertise in that field.
onds and cash would be divided so that there would be enough cash for about si5
months8 spending# with the balance in bonds.
<% SHOULD THE ALLOCATION CHANGE BE BASED ON
ECONOMIC CONDITIONSH
Jes ((((((((((((((((((((((((((((((((((( 3; per cent
Co (((((((((((((((((((((((((((((((((((( -& per cent
Cot sure (((((((((((((((((((((((((((((( *+ per cent
33
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yes
no
not sure
3;
.% WITH INTEREST RATES SO LOW AND THE STOC7
MAR7ET PERHAPS O&ER&ALUED* WHERE SHOULD
ONE IN&EST TODAYH
<omestic Market (((((((((((((((( 33 percent
Aoreign Market (((((((((((((((((( -? percent
oth ((((((((((((((((((((((((((((((( ' percent
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domestic market
foreign market
both
WHY SHOULD ONE CHOOSE TO IN&EST IN A MUTUAL FUNDH
Aor a retail investor who does not have the time and e5pertise to analy7e and invest
in stocks and bonds# mutual funds offer a viable investment alternative. This is
because/
Mutual Aunds provide the benefit of cheap access to e5pensive stocks
Mutual funds diversify the risk of the investor by investing in a basket of assets
) team of professional fund managers manages them with in(depth research
inputs from investment analysts.
3'
eing institutions with good bargaining power in markets# mutual funds have
access to crucial corporate information which individual investors cannot access.
:% CAN MUTUAL FUNDS BE &IEWED AS RIS7/FREE
IN&ESTMENTSH
Jes ((((((((((((((((( *! percent
Co (((((((((((((((((( ?& percent
Cot sure(((((((((((( ? percent
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yes
no
not sure
HOW DO ONE IN&EST MONEY IN MUTUAL FUNDSH
0ne can invest by approaching a registered broker of Mutual funds or the respective
offices of the Mutual funds in that particular townMcity. )n application form has to be
filled up giving all the particulars along with the cheBue or <emand <raft for the
amount to be invested.
3?
W)"t "re t)e 8"r"#eter> on @)$A) " M4t4"l F4n6 >A)e#e >)o4l6 ?e e'"l4"te6H
Performance indicators like total returns given by the fund on different schemes# the
returns on competing funds# the objective of the fund and the promoters image are
some of the key factors to be considered while taking an investment decision
regarding mutual funds.
W)"t "re t)e 6$erent tE8e> o 8l"n> t)"t "nE #4t4"l 4n6 >A)e#e oer>H
The summary of the response was that it depends on the strategy of the concerned
scheme. ut generally there are - broad categories. ) dividend plan entails a regular
payment of dividend to the investors. ) reinvestment plan is a plan where these
dividends are reinvested in the scheme itself. ) growth plan is one where no
dividends are declared and the investor only gains through capital appreciation in the
C)V of the fund.
The plan one should choose depends on his investment object# which again depends
on his income# age# financial responsibilities# risk taking capacity and ta5 status. Aor
e5ample a retired government employee is most likely to opt for monthly income
plan while a high(income youngster is most likely to opt for growth plan.
WHAT ARE THE BENEFITS OF S SYSTEMATIC IN&ESTMENT PLANH
) systematic investment plan %.IP, offers ! major benefits to an investor/
It avoids lump sum investment at one point of time
In a scenario of falling prices# it reduces your overall cost of acBuisition by a
process of rupee(cost averaging. This means that at lower prices you end up
getting more units for the same investment
3@
0% WHAT PROPORTION OF ONEBS IN&ESTMENT SHOULD BE
IN&ESTED IN MUTUAL FUNDSH
Major portion (((((((((((((((((((((((((((((((((((((((((( !- percent
Minor portion (((((((((((((((((((((((((((((((((((((((((( !& percent
<epends on the economic position of the investor(((((((((((3' percent
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major portion
minor portion
depends on economic
position of investor
W)"t "re t)e tE8e> o ?"n( "AAo4nt> "'"$l"?le to NRI>H
Non/Re>$6ent E!tern"l INREJ R48ee >"'$n5> "AAo4nt
Jour funds in C1E savings accounts are held in convertible rupees ( principle and
interest are fully reparable. Interest income is fully e5empt from ta5 in India. The
savings account can be opened jointly with a Con(1esident individual.
;&
Non/Re>$6ent E!tern"l INREJ R48ee $!e6 6e8o>$t
Ai5ed deposit in Indian rupees where the principle and interest are fully repatriable.
)ll interest earned is fully e5empt from ta5 in India. The account can also be opened
jointly with a non(resident.
Non/Re>$6ent Or6$n"rE INROJ R48ee >"'$n5> "AAo4nt
Jour funds in Con 1esident 0rdinary %C10, savings account are held in India# in
Indian rupees. The C10 account can be funded through C1I income in India. 0nly
the interest in an C10 account is repatriable. Interest income on this account is liable
for Indian Income Ta5es. Con(1esident 0rdinary TC10W 1upee fi5ed account .
Ai5ed deposit in Indian rupees where the earnings in India can be deposited. The
interest is repatriable Tafter payment of ta5W.
Fore$5n A4rrent Non/re>$6ent> IFCNRJ 6e8o>$t
The A6C1 <eposit is a fully repatriable foreign currency deposit available in major
currencies/ D. <ollars# Pound .terling# Euros# )ustralian dollars and 6anadian
dollars.
;*
2-% CAN ONE OPEN THESE ACCOUNTS IN ANY
CON&ERTIBLE CURRENCYH
Jes ((((((((((((((((((((( ;; percent
Co (((((((((((((((((((((( -& percent
not sure (((((((((((((((( + percent
T
&G
*&G
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+&G
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yes
no
not sure
;!
22% CAN AN NRI IN&EST IN MUTUAL FUNDSH
Jes ((((((((((((((((((((((((((((((((((((((( ?@ per cent
Co (((((((((((((((((((((((((((((((((((((((( ? percent
<o not know M 6an not say(((((((((((( - percent
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yes
no
not sure
;-
;+

CONCLUSION
$ealth managers are beginning to investigate innovative segmentation methods to
manage the changing client profile. 0ver the ne5t !& years wealth managers will
hone their segmentation methods. $ealth managers will develop segmentation as a
service efficiency initiative. .egmentation models will apply holistic criteria to
wealth management. The most important segments globally will be entrepreneurs and
.ME.M 6E0s. Ainancial advisers will become an important separate client segment
for wealth managers The organi7ation of direct client ownership will also change
)vailability and fle5ibility will become vital components of the business model
Internal restructuring will aim to integrate client services. The rise of the mass
affluent represents an opportunity for wealth managers in the medium term $ealth
managers will capture the higher value mass affluent market by offering a scaled
down wealth management service. The mass affluent proposition will run along the
lines of the current wealth management service. 9iability management is currently
not part of the wealth management agenda but has proven potential. 6lients in
developed markets are seeking more holistic wealth management services 9iability
management is clearly a profitable area with a proven e5isting client base. The
incorporation of lending into wealth management will shift the focus of the service.
.pecialist forms of lending will also become common additions to the offerings of
many wealth managers. .ome will fail due to a persistence of the "asset focusedO
service model and a lack of commitment. There are significant benefits in the area of
liability management for the wealthy# and that the importance of liability
management as part of wealth management will inevitably grow over the ne5t !&
years# until it becomes a key service area. 1ising income and wealth ineBualities# if
not matched by a corresponding rise of incomes across the nation# can lead to social
unrest. )n area of great concern is the level of ostentatious e5penditure on weddings
and other family events. .uch vulgarity insults the poverty of the less privileged# it is
socially wasteful and it plants the seeds of resentment in the minds of the have(nots.
;3
BIBLIOGRAPHY
*. Economic H Political $eekly ( =uly()ugust# !&&'
!. Ainance India# =uly(!&&;
-. :ow Mutual Aunds $ork ( Aredman and $iles
+. Mutual Aunds in India ( :. .adhak
3. >otler# Philip# Marketing Management# <elhi/ Pearson Education# !&&;
;. eri# F.6.# Marketing 1esearch# Cew <elhi/ Tata McFraw :ill# !&&;
'. Marketing 1esearch L Caresh Malhotra
?. Marketing Management( >otler
@. 6onsumer ehaviour( .chiffman H >anuk
*&. Various 1eports on Indian Insurance Industry
**. Personal Ainancial Planning by )itken and Foodmen# Ainancial Planners
D.)# !&&3# Edition# !&&3
*!. =ournal of the I6A)I# on investments# !&&'
;;
APPENDIX
KUESTIONNAIRE
2% DO YOU BELIE&E THAT WEALTH MANAGEMENT HAS
INCREASINGLY BECOMING A BOOMING INDUSTRY IN
INDIAH
Jes (((((((((((((((((((((((((((((( ((((((((((((((((( ?' percent
Co ((((((((((((((((((((((((( ((((((((((((((((((((((( @ percent
Cot sure (((((((((((((((((((((((((((((((((((((((((( + percent
!. I. $E)9T: M)C)FEMECT 0C9J A01 T:E $E)9T:JR
Jes (((((((((((((((((((((((((((((( (((((!-G
Co ((((((((((((((((((((((((((((((((((((('*G
Cot sure((((((((((((((((((((((((((((((((+G
;% WHICH IS YOUR MAIN MAR7ETH
.tock 0ptions((((((((((((((((((((( ;3G
E5pansion of usiness(((((((((( -!G
Cot .ure(((((((((((((((((((((((((( -G
3% WHAT &ALUE/ADDED SER&ICES DO YOU PRO&IDEH
Ainancial planning(((((((((((((((((((((( ??G
Individual reBuirements(((((((((((((((( *!G
9% DO YOU RECOMMEND YOUR OWN PRODUCTSH
Jes((((((((((((((((((((((((((( '@G
Co(((((((((((((((((((((((((((( **G
Cot sure((((((((((((((((((((( *&G
;'
<% SHOULD THE ALLOCATION CHANGE BE BASED ON
ECONOMIC CONDITIONSH
Jes ((((((((((((((((((((((((((((((((((( 3; per cent
Co (((((((((((((((((((((((((((((((((((( -& per cent
Cot sure (((((((((((((((((((((((((((((( *+ per cent
.% WITH INTEREST RATES SO LOW AND THE STOC7
MAR7ET PERHAPS O&ER&ALUED* WHERE SHOULD
ONE IN&EST TODAYH
<omestic Market (((((((((((((((( 33 percent
Aoreign Market (((((((((((((((((( -? percent
oth ((((((((((((((((((((((((((((((( ' percent
:% CAN MUTUAL FUNDS BE &IEWED AS RIS7/FREE
IN&ESTMENTSH
Jes ((((((((((((((((( *! percent
Co (((((((((((((((((( ?& percent
Cot sure(((((((((((( ? percent
0% WHAT PROPORTION OF ONEBS IN&ESTMENT SHOULD BE
IN&ESTED IN MUTUAL FUNDSH
Major portion (((((((((((((((((((((((((((((((((((((((((( !- percent
Minor portion (((((((((((((((((((((((((((((((((((((((((( !& percent
<epends on the economic position of the investor(((((((((((3' percent
2-% CAN ONE OPEN THESE ACCOUNTS IN ANY
CON&ERTIBLE CURRENCYH
Jes ((((((((((((((((((((( ;; percent
Co (((((((((((((((((((((( -& percent
not sure (((((((((((((((( + percent
T
22% CAN AN NRI IN&EST IN MUTUAL FUNDSH
;?
Jes ((((((((((((((((((((((((((((((((((((((( ?@ per cent
Co (((((((((((((((((((((((((((((((((((((((( ? percent
<o not know M 6an not say(((((((((((( - percent
;@