Wealth Management IMI

8/2/2019 Wealth Management IMI

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Wealth Management

K K JINDAL

Managing DirectorGlobal Management Services

New Delhi

Email: [email protected]


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--wealth management

Defined as-----

Client- centric

Consultative approach to Delivering financial services

Across life cycles


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Wealth Management

the term originated in USA in 1990s

Advanced form of financial planning providingindividuals and families with services such as

Private banking

Estate planning

Asset management

Taxation advice

Portfolio management


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4

Places to save money

Would you save your money in any of these

places? Why?Why not?

Can you think other place to save money?

Bed & Mattress

Cookie Jar

Pillow

Wallet Money belt

Small house safe

But Rememberif you save y

our money here you will not

generate any returns out of it


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The Goals


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Wealth Management Dynamics


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Wealth Management Matrix


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Wealth Management DynamicsLifecycle

No Income,Focus is onSpending,

Not TG

Acquisi

tionPh

ase:

Excessofs

pending,

Hidebts,Min

savings

-hihighrisk

appetite,

Investme

ntsmainly

inutilitya

ssets

Accumulation

Phase:Ltd

excess income,

hi-riskappetite&

investmentfor

longterm&in

capitalassets,

Familyinsurance sdd

onsolidationPhase:

ExcessIncome,ltd

expense &debtspaid...

Carefulinvestmentfor

preservation&

retirement.Addon

investmentsissecure

assets.Take

insurance/pensionplans

forpostretirement

SpendingPhase:

Postretirement,

Usepastsavingsforliving& health,

returnsonpast

investments.Encash

investments


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1. In The Past For decades prior to 1991, the Indian Middle Class had an

ideological bias against having too much wealth.

Money was always considered, as a means for meetingonly basic needs. Moreover, needs and aspirations weresimple and limited.

Avenues to invest excess wealth were also limited and

most of the investments at that time were into Real Estate. Concepts such as wealth creation and financial planning

remained alien to a large proportion of the populace unlikethe Westerns who were much more focused and

since the late 1960s wealthy families had startedentrusting their personal balance sheets to ProfessionalPrivate Wealth Managers to achieve their long rangegoals for wealth creation.


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2. In the Transition Phase

Post 1991, the mindset of the Indian consumer underwent a seachange. Liberalization made the Indian consumer a king andthere was a much larger basket of goods and services he couldchoose from. It was first the value for money brands whichsucceeded in the Indian market and now with the increasedwealth creation even highly priced lifestyle products andservices have found a place in the Indian psyche.

The same Middle Class family which saved for buying atelevision, air conditioner and fridge can now afford all in thesame month due to ease of credit and flexibility of EMIs.

To sum up, discerning social economic trends leading to achange in the mindset of the Indian consumer have led to:

Increased wealth creation

Higher aspiration lifestyle goals Market linked avenues for investment such as equity markets

Uncertainty of investment returns due to inherent volatility inthe asset class

Much lesser time to manage the above


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3. In the Present Phase

Hence, wealth management has become a critical needfor every individual and the sooner one starts to plan hisfinances the larger the probability to achieve his lifetimegoals.

The growing importance of wealth management demands

a great deal of importance in understanding the psyche ofthe Indian investor and how to meet their expectations. To understand the same, it is better to outline certain

discerning changes in the mindset of the Indian investorover the last few years where we have seen a continuousbull run to the current day where the markets arecontinuously correcting and moving within a bandwidth:

4 T d i ttit d


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4. Trends in consumer attitudesand preference

Objective Financial Advice - clients expect advice which ispertinent to them and without any conflict of interest. Clientswould expect wealth managers to structure the best possiblesolution which are relevant to their financial situation.

Creative solutions to financial problems - wealth managers areexpected by clients to be knowledgeable individuals who canaddress the client concerns by stepping into their shoes. Theymust portray a broad array of sophisticated strategies to

ensure best financial solutions which may come out by a mixand match of various asset classviz equity, debt, gold, realestate, art etc. Concepts must be explained to the client, beforeeven recommending financial products.

Advice on the complete individual balance sheet - wealthmanagers need to take a look at the overall balance sheet of

any individual rather than focus on deploying the currentavailable corpus. Decisions taken on the overall balance sheetof any individual will be more in line with the risk appetite ofthe client and help them meet their life term goals.


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Trends contd

Consistent delivery of services - a client would expect his wealthmanagers to be available for meetings and discussions on marketmovements and require a periodic review of his progress. This willhelp a client to track his progress and take effective decisions at theappropriate time interval. This requires a certain amount of handholding on the part of the wealth manager and create conviction onhis advice to the client.

Long term view of relationship building - a wealth manager must alsoaim at managing the clients' wealth for generations to come and thatcan only happen if there is a deep understanding of the entiresituation of the client and his attitude towards risk and return.Relationship building approach helps to create a greater level ofcomfort for the client and helps the wealth manager to attain theposition of a trusted financial advisor for the family as a whole. Justlike a family doctor, family lawyer there must be a family wealthmanager managing the family finances and acting as a Chief FinancialOfficer (CFO) to the client family.

5 I th F t Ph


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5. In the Future Phase

Future evolution pattern of Wealth Management Industry would result into emergence of differentstructure of wealth management firms. Based on the changes in the psyche of the Indian investor,the following is the structure for the industry, which could be envisaged, with increasing complexityand demand for more integrated and specialized services with each level. From a generic level ofFinancial Planning to the overall family model firms which would bring to the client's table aboutique of tailor-made personalized concept:

Structure 1

Financial Planning Firms that would be engaged in budget and cash flow forecasting, genericinvestment diversification and event driven financial planning etc

Structure 2

Investment Advisory Firms which would be engaged in strategy and policy development, risk returnassessment and tracking etc

Structure 3

Wealth Advisory Firms which would focus on tax planning, estate planning, trust creations,

execution of wills etc

Structure 4 Family Wealth Management Firms which would be incorporating all the above structuresplus provide special personalized focus on integrated financial planning in the overall financialcontext of the family, lifestyle management and goal orientation, trusteeship, risk management,strategic social investment (philanthropy), inter-generation wealth transfer and family continuity etc

O f


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Outlook of an Indian Investor

As Indians are creating wealth like never before and arebecoming increasingly integrated with the globaleconomy, an individual based on the complexity of hiswealth and life time goals would approach a relevant firmfrom the above category, to bring a whole lot of efficiency

and a fresh outlook to personal investments and moneymatters and to manage their wealth better.

No doubt, professional wealth management firmscomplying certain self outlined benchmarks and run onwell designed process with sophisticated service level

commitments to their clients will be of great demand fromnow on by the aspiring Indian wealth creators.


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Wealth Management in IndiaTrends, Analysis and Forecast (2010-2015) by MarketsandMarkets

Key findings from the report:

HNWIs consist of 8% of the total wealthy households but constitute around 45% of the totalwealth. Among the total HNWIs in India, only 20% of the HNWI take advice from the financialadvisors.

Advisory asset management and Tax planning is the most demanding among HNWIsfollowed by Financial Planning

Investment in Fixed income products accounts for maximum percentage of HNWI investmentin various investment products.

Business income contributes the maximum (39%) wealth for HNWIs in India and requiressolutions which can help to protect wealth and risk mitigation

The majority (69%) of the HNWI population lies in the age group of 30-55 and they preferwealth accumulation, and risk mitigation and require sophisticated products which can offerhigh returns in a short period of time.

Indias HNWIs wealth will grow by a CAGR of 12% and it will reach close to $949 billion by2015.

Wealth manager now started focusing on Tier II and Tier III cities.

Top players in India wealth management Industry includes ICICI, HDFC, and Kotak


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Instruments

Equity Linked Investments

Structured Savings Products

Structured Investment Products and Derivatives

Foreign Exchange Mutual Funds

Alternative Investments like private equity, arts, andprecious metals


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Topics for Term Project

Private banking

Customer profiling

Investments in Money market instruments

Investments in Capital market instruments

Investments in Mutual funds

Role of Insurance for protection of assets, life and non life

Alternative investments -Metals

Alternative investments Art ,antiques, stamps

Portfolio management

Estate planning


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Instruments....

Bank - Savings Bank, Recurring Deposits, Fixed Deposits, PPF

Post Office - Savings Bank, Recurring Deposit, Fixed Deposits, MIS, PPF

Stock Market

Primary Market IPO and FPO

Secondary Market NSE / BSE / Private Purchases / Gold Bees

Equity and Debt

Insurance - LIC

Mutual Funds - One time, SIP, Gold ETFs

Office

Provident Fund (Statutory, Voluntary), Gratuity, Super Annuation Employees Welfare Society

Advances and Loans

Private - Chit Funds, Gold Schemes, Hire Purchase

Stamps and Coins

Commodities Gold and Silver, Pulses and Cereals


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Major Players

Axis Bank

Citi Bank

HDFC

ICICI

Kotak Mahindra Bank

State Bank of India

Union Bank of Switzerland

Religare

Future Capital Holdings (FCH)

Reliance Money


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Wealth Management ServicesBroad Spectrum

Portfolio Management and Portfolio Rebalancing

Investment Management

Trust and Estate Management

Private Banking and Financing Tax Advice

Asset management

Client advisory services

Distribution of financial products


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Financial Planning and WealthManagement

In financial planning, individual service providerknown as Financial Planner looks in to thefinancial needs and advises on asset

accumulation [investment products] In wealth management, a team of professionals

co ordinate a clients investment, tax and Estateplans in to a comprehensive plan of distribution

based products

to achieve the personal goals of clientsWeb Definition


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Wealth Management

Managing investors funds

Aims at optimizing returns to suit the risk appetite of theinvestor

Non-Fund Business

Commission based revenue for banks

One to one relationship clients handled by the

Relationship Manager (RM)


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Evolving over time

10 years ago wealth management rolling out the redcarpet was the issue

Today core subject is much more concerned with

delivering profits and substance However Risk-Reward correlation gains over simply

achieving greatest possible capital gain


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Wm- drivers

Emerging wealth due to economic growth

Better employment terms

Disposable surplus

Knowledge gaps

Time factor

Ageing population

Technology platform

Industry regulations


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AFFLUENT

$100,000

HIGH NET WORTH

$ 1mn+

VH NET WORTH

$5mn

ULTR

HIGH

NET

WORTH

INTERNATIONAL WEALTH PYRAMID


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AFFLUENT

Wealth Management IMI

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