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- [Vijay Birajdar (Bcom, MBA)]

What comes in our mind when we think of ³Bank´ what picture you see in your mind when you
visit any bank? Lots of Cabins, Special Branch Manager cabin, Q in front of 2 cabins for
deposits & withdrawal of money, etc.. am I right ??? yes I am bank is nothing but in layman
language where you can deposit & withdraw money this is what we call it as Traditional Banking
method where banks were much focusing on deposits & withdrawal, lending of loans etc.

Now the entire banking system has changed, now most of private player has entered in the
market because of which competition has increased as Private players are providing much
better banking services as compared to public players.

These days because of tough competition banks have turned themselves as not only for
deposits or withdrawal of money but also banks are playing a major & vital role in regards with
Financial planning of customers / acts as an investment advisor.

Almost all banks today have come with some or the other financial products either they start
themselves or some Investment companies get tied up with banks to sell their products to the
customers of bank, like we have ICICI group which is into Insurance, Mutual fund, Banks
Investment Management thus an ICICI bank has many product to sell to their customers. Lets
take another example of IBDI Bank which got tiedup with Fortis )a renowned healthcare
company of India ) to provide health care plans to the customers of IDBI Bank and the list goes
on.

Now you came to know the shift of traditional banking business to modern banking business.
Now let us know that weather Banks really play a vital role as an investment Advisor.

What you do when you want to plan for investments/savings????? Offcourse you would go to
an LIC agent because LIC is a dominant player and their agents are spreadout in more numbers
however they lack professionalism and they would mostly slap you with some or the other LIC
product so that they can earn commission« I hope this has experienced by many people.

If not LIC agent wher will you go??? But natural your second thought would be your own bank
yes your own bank which is into business of not only banking but also investment advisor now
you will think of professionalism right?????, we think of trained, knowledgeable, intelligent
advisors that will tell us exactly what we need to do, in terms of everything from cash in our
accounts to documentation to investment avenues, advisors who will always keep us up to date
on the best place to invest our hard earned money.

Now let us see who really does business of investment consultant/ advisor in a bank. Bank has
a separate department of consulting wherin they have expert professionals who can advise you
for investment & savings. They may be Sales Managers/Relationship Officers/Managers/
Financial Planning manager etc. designations might be different in different banks however their
role remains the same x ale of financial product´ please note I have some reasons why I
have highlighted the sentence sale of Financial Products. Think & re think again yesss these
experts are recruited for sale of financial products & not to advice for the best investment
options available in market suitable for the customer taking into consideration of his income &
savings.

With the recent spate of articles in the news about bank advisors that are blatantly mis-
managing their customers money, eyebrows are raised as to whether this impression that we
have of our bank Relationship Managers (RMs) is in fact true to form.

Far from managing your relationship with old fashioned care and dedication, keeping your
interests at heart, some RMs appear to be working for themselves more than for their clients.

The key to dealing with this reality, is to understand the situation fully.
Let¶s see why your bank RM might not be entirely unbiased in his or her recommendations.

As a bank employee, your RM¶s salary is structured into a fixed and a variable pay component.
This means that part of his or her salary is fixed, and part of it gets paid out based on whether or
not your RM has met certain work related targets. These targets might include things such as
acquiring new clientele, and also things such as product sales. For example, an RM from a
reputed international bank once candidly admitted that depending on how many ULIPs he sold,
his bonus would be boosted.

The fault is not with the RM. Your RM is merely doing the job as required within the
remuneration package stipulated. The fault is with the system, and it will most likely take some
time for this system to change and become entirely customer-centric.

But, that doesn¶t mean that you are helpless. There are things that you can do to ensure that
you do not get sucked into the wrong investment product. The first thing is to ask the right
questions.

º

ALÑ is here to help you with that.

There are 2 types of questions you must ask before investing in a particular product.

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When you invest in a product, it is absolutely essential for you to clear all your queries about this
product / investment avenue before investing in it.
If your RM has been correctly trained, which he or she most likely has been, then all your
queries will be answered with the correct facts about the recommended scheme / instrument.

If your RM is recommending certain mutual funds or other investment products such as ULIPs,
here are some essential questions you should be asking about the product specifically:

a. Does it invest in equity?

b. How old is this scheme / product?

If it is new, for what specific reason is it being recommended? What is the benefit of
choosing this product rather than an existing peer of the product?
If it has been in existence for some time, please indicate the past performance over a long
time period for example what are the 1 year, 3 year and 5 year returns?
How has it performed against its peers in the same category of investment? For example,
if it is a midcap fund, how has it performed vis-à-vis other midcap funds in the same time
period?

c. Is there a lock in period? Do I need to invest once, regularly, or in a continuing manner?

What happens if I halt my investment after some time?

d. What are the tax implications?

e. What are the different charges associated with the product? How will they affect my
returns?

f. What kind of returns can I expect on this product? Is that pre or post tax returns?

If the product is linked with equity markets i.e. it invests in equity, even partly, then your own
investment horizon should be atleast 3 years.

For example, if you are investing in a balanced fund, which has a major portion (65%) of its
investment into equity, then be sure to have a 3 year investment horizon at least.

Also remember, equity means market risk, so if your risk appetite and tolerance is low, you
might want to invest in a more debt oriented product such as an MIP (monthly income plan with
up to 30% of its portfolio into equity), or a straightforward debt investment such as an FMP
(fixed maturity plan) or an FD. As a prudent investor, you must be sure to get the details of the
product from your RM / advisor, before investing in it.
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If you are planning on utilizing these funds in the short term (less than 3 years), then you should
be investing into debt or any fixed income product, to avoid exposing the funds to the risk of the
equity markets.

If you have a medium term goal (3 to 5 years), then you can invest partly into equity, majorly
into debt, letting the equity component give your investment a boost, while the debt component
ensures that you do earn a safe return each year.

If you are investing for the long term (more than 5 years) then you can invest predominantly into
equity for this goal.

Remember that as your goal draws nearer you should start shifting the funds from equity to
debt, so that when your goal approaches, you will be redeeming the money from debt
instruments that are not affected by equity market risk.

Also keep in mind your existing portfolio. If you are already heavily into equity, and you are
nearing retirement or have another major 
 approaching such as a house
purchase or your child¶s education, then you need to be invested into debt instruments.

Similarly, if your existing portfolio is more into debt than equity and you are a young investor
with atleast 10 years to go till your retirement, you can invest more into equity to make the most
of the remaining time horizon before your goals.

These are the questions you must ask yourself, and then discuss with your RM before going
into specific product details.



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Gone are the days when you could count on your bank RM to provide you with advice that is
suited to your needs and will not line your RM¶s pockets. This is the reality today ± that your
bank RM is no longer working only for you.

The only way to tackle this is to have an unbiased advisor ± and to check everything that your
bank is recommending against your unbiased advisor. Your unbiased advisor / financial planner
will work in your interest and will give you the real truth about where is the best place to put your
hard earned money.
Also ± you must educate yourself. Read the newspapers, magazines and also a good personal
finance website, to boost your own knowledge and awareness.

If you would like to make the most of your finances and build as much wealth as you can, speak
to an 
  from º

ALÑ today. Or else, simply ask for a free consultation.
We would be happy to assist you with your 
 needs.