Concept Clearance By Prof Dr. Kamal Tandon

Wow...... First Lecture of Our Director Prof Dr Kamal Tandon and by the End of The Lecture there was only One Question In My Mind..... Where was he in The First Semester???? And Why He is Taking only One Subject in this Semester???... This was one of the very Few Sessions where I as a Student felt that i am Doing MBA..... Had it been all Professors of his calibre, life as a MBA student By now would have been entirely Different..... Our Base would have been very very Strong with all the Concepts and Fundas... Rather I would say by now we would have been Capitalizing on all The Management Fundas... Dr. KT showed that Position Held By him In office is altogether Different when he is in Classroom. He was or rather is Down TO Earth... Super Humble Person and Very Very Cool Person.... He rightly Said,

" Nothing is Written In the Books, Every thing is Written in Brain. His Students are capable of Writing Books Provided they uses their Brain."

When he said this i could only Whisper with a Bow, "I agree SIR."

Following are the Concepts which he Cleared In first Lecture and which gave me above impression of his...

1) Finance : Sourcing of Funds.

2) Loans and Advances : Outsourcing of Funds.

3) Money : Instrument Guaranteed by the Government of the Country for the Face Value Printed on it.

4) What Can be Exchanged By Money??

Goods: Yes

Services : Yes.

What Else?? ???

And Money can be Exchanged for Money....

5) Management : Optimum Utilization of Existing and Available Resources.

6) When we see Balance Sheet, what are the items which can bring Funds???

Ans: Only Non Fixed Assets can Bring Funds...

7) What does Economic Condition Includes??

Ans: Economic Condition includes Financial Condition and Assets of Country, Company or Individual.

8) Marketing: All the Activities which generates Sales.

9) Obejctive of Marketing: Sales.

10) Objective of Sales: Profit.

Keep an Eye on this Post.... More will Come.

Wealth Management

Hey Guys Please refer to this Blog in Chronlogical order....... U will Find All the information on Wealth Management Right from Intro to Conclusion....

This Blog is Created with intention f Helping Students for their Project on Wealth Management. This Project was started in December 2007 and completed in November 2008. This is combination of Both Primary and secondary data.

Information on Wealth Management is Basic and its for Beginners.....

Students can reach me on shahdharmish@rediffmail.com

Regards and Best Wishes,

Dharmish Shah.

Conclusion

For the conclusion I would like to say that in spite of so much research and matter that has gone into this paper, it only covers a fraction of a fraction of the entire subject and topic of wealth management. As of today not even five percent of the wealth, both government and private, has come under the wealth management discipline. The opportunities are immense and there still remains a lot of scope for further study. Moreover as per the article dated 6^th September 2008 in Hindustan Times it says that India has only 1% of Global Wealth Market.

Through this study I have not only realized the beauty and the benefits of wealth management but also the necessity of it.

Findings

It is always going to be a win-win situation for the investor and the amount invested under wealth management. Now especially with the advent of technology that communication time gap has reduced itself to being almost real time. That means zero loss of time. Moreover thousands of crores of rupees can be transacted upon with efficiency and no hitches of procedural delays. These mediums are reliable, fast, smart and intelligent. The advent of technology is what has been the main crusader towards enriching India.

Technology has facilitated demat accounts which I think is a major hurdle that has been overcome. Through demat now millions of transactions are possible through a single person which was unthinkable until recently. It would generally take days on end to process only one transaction.

Apart from that millions of dollars are saved on a daily basis only saving the ink and paper which would have otherwise been used.

Not deviating from the topic however if we talk about wealth management, it is an awesome tool to save time and money. The beauty of it is the more you employ wealth management strategies the more time you will save in earning that much money and you’ll consequently save money in the process. It is like a dynamic system where the growth of the money is not a linear addition terms but mostly in multiplicative terms.

Most companies may just perish due to not knowing how to manage their own funds. Dell for example came to a point in existence where Michael Dell didn’t know what to do and how simply because his profits were soaring and the company was expanding almost uncontrollably. At that point it not only becomes should-be-managed thing but a necessity. There have been instances where people and companies have been able to bail themselves out of situations only on the basis of the returns accrued due to the wealth management.

There is a very thin line between resource allocation and wealth management. In resource allocation one makes money more manageable whereas wealth management makes sure that one allocates the money to the right channels and gets a benefit out of it.

Today retirement has become a major concern. Today people are deciding to retire earlier and most will not have enough only on savings to last them their entire remaining life. Today I think it has become more important for the youth of the nation to recklessly indulge in wealth management. This will not only take care of his retired life but also enable extra income currently and may help in times of sudden crisis that develop during the course of one’s life time. Any individual’s needs for more income are undying. A youth may have a wife in the very near future. Then kids. More and more money will be required to lead a comfortable life in the future. Especially in an age of rising cost of living and cost of education.

Though wealth management, share markets, insurance, finance may sound scary (at least for the 60-80% of the people who fear numbers), the fact is it is not all that difficult. it may sound complicated at the beginning but once you get the hang of it you will almost laugh at yourself. I say this because I would always maintain a safe distance from anything related remotely to something as monstrous as finance. But then I realized that money itself is the source of survival, livelihood and the very basis of why anyone would or should work. And one day everyone has to deal with money. Dealing with money doesn’t start and end at any given points. It starts and goes on. So might as well be prepared when it is inevitable.

Wealth Management: A Road Ahead

Global stock markets have rebounded sharply and posted hefty gains during the last four years, after bottoming out in 2003. Property and commodity sectors have done exceptionally well. Buoyed by rising global wealth, private banks and wealth managers globally are upbeat about the prospects for this sector. Notwithstanding the US sub-prime meltdown in 2007 and its attendant impact on the US and world economy, the core drivers for wealth creation including increasing integration of world economies, use of technology, changing demographics, creative finance, supportive governments, rule of law and immigration and trade are likely to ensure that wealth and correspondingly the wealth management business continues to grow at above average rates during the foreseeable feature.

Some of the current trends impacting the wealth management industry are:

Wealth Managers Seek Increased Share of Wallet

Unlike mass-retail financial services where a person deals with a large number of service providers, clients tend to entrust their wealth with no more than 2-4 wealth managers. This still means that very few wealth managers can claim to have at least 50 to 60 per cent of a client’s wealth. This is changing. Wealth managers are seeking an increased share of wallet. First, this is an excellent source of new assets, revenue and increased profitability, with low acquisition costs. Second, a greater share of wallet makes it more difficult for the client to leave. This has negligible impact on the wealth manager’s scarcest resource – the Relationship Manager.

Increasing Breadth of Offerings

Breadth of offerings is likely to be a potent differentiator for wealth managers going forward. As the range of products on offer for wealthy customers is quite large, wealth managers are moving into a hybrid producer-plus-distributor model. Wealth managers realize that it is not possible for them to produce each and every product. At the same time, they require a bouquet of products to acquire and retain clients. Alternative investments are seen as key with structured products, property, private equity and hedge funds all rated highly within the range of required offerings. To this end many are seen working on striking alliances with manufacturers of these products.

Increased Investment in IT

Historically wealth managers have not paid sufficient attention to systems as their counterparts in retail financial services; but that is changing. This is due to additional requirements imposed by rapid and unprecedented growth, increasing client expectations on business responsiveness and quality, as well as increasing regulatory and fiscal changes. In this context, robust IT systems are seen as a key enabler for growth. To this end, wealth managers are reviewing operational processes, seeking core banking systems supporting wealth management products, improving aggregated reporting, adopting e-banking platforms to help clients service themselves and providing remote access technology to their Relationship Managers. Adopting core banking systems with investment products and e-banking support is likely to gather momentum in the immediate future.

High growth accompanied by pressure on margins

Growth is booming in the Asia Pacific, especially in India, where growth upwards of 50% YoY is expected over the next five years. However there will continue to be pressure on business margins due to c hanging client demographics, the entry of new product providers with different pricing strategies and wider use of technology. Wealth management will, however, continue to generate excess margins compared to retail mass market.

Structurally higher margins will continue because clients demand complex and sophisticated products. In contrast, non-structural margins come about because of imperfections in the market and, eventually, these margins will be eliminated by

regulation, technology or competitive pressure. Clients are increasingly reluctant to pay for ad valorem charges and prefer paying separately for the advice – which incidentally is not related to the assets under management. Although the wealthy are prepared to pay premium prices for established exclusive and luxury products, they are increasingly reluctant to pay a premium for products or services that are simply re-branded mass market products, available at a lower cost elsewhere.

War for Talent

The current Relationship Manager (RM) model is under severe strain and needs re-engineering. Asia Pacific already has the lowest ratio of RMs to clients compared to the Americas and EMEA, and with anticipated growth rates this is expected to further deteriorate. Wealth managers have to

bring forth new strategies to increase the supply of available RMs and improve training for existing ones. Though poaching RMs from competition is likely to remain an attractive strategy, wealth managers are likely to look at training employees from other areas and at fresh graduates with wealth management qualifications to ensure an adequate supply of RMs. In addition, relationship manager training is likely to focus on areas such as third party and own products, AML and KYC policies, taxation and legislation update and financial markets updates.

Branding

Branding has always been important in attracting and retaining clients, now likely to get more attention going forward. In branding, the important features to be addressed are familiarity, positioning, differentiation and emotional attachment.

Changing profile of wealth management customers

The composition of the wealth management clientele is changing rapidly. The number of

“traditional” HNW individuals continues to fall and this is being replaced by individuals with far greater financial knowledge and confidence, prepared to devote more time to financial matters. ‘Traditional’ clients are content to let their portfolio be managed by a wealth manager on a discretionary basis. ‘Self directed’ individuals, on the other hand, are confident of their own financial skills and are often reluctant to pay for advice. They tend to be very interested in the performance of their investments and use journals, newspapers and the Internet as sources of financial information.

Changing profile of wealth management service providers

Wealth managers typically come from retail banks wishing to expand into the investment space on one hand with brokerages, and trying to move into the ‘trusted advisor’ space at

the other end. Technology is bringing about far reaching impact on how competition plays out in this space. It is making it easier for new entrants to enter and for existing players to expand their offerings quickly. Worldwide wealth management offerings are provided by specialized private banks, retail banks, brokerages, investment managers and specialized personal financial advisors (PFA). In India this service is currently being offered by leading private banks, foreign banks and brokerages.

Solution Framework

Generic services offering model is going to play a big role in case of wealth management services. A HNWI client expects exclusiveness in services in a normal manner. In highly competitive market, key to success for a firm lies in offering exclusiveness in services delivery (high quality services on most personalized basis), going beyond the client expectations.

A solution framework with considered inclusion of following key elements would help firms in meeting and exceeding client needs towards sustainable business growth.

Quality of Service Level

Quality of service level provided by the service provider firm would the key determinant of growth and success in client acquisition, client satisfaction and client retention aspects.

In a sense, service offering could be developed in the form of partnership with the client based on trust and integrity, where the relationship manager remains highly responsive to client sensitivities and expectations.

Without over-emphasizing, a satisfied client would provide multitude of opportunities of growth of business – through deepening the relationship, direct / indirect referencing as well as cross selling of products. In the other situation of deficiency in service level, he would not hesitate to move the business to another firm.

This keeps strong emphasis on continued engagement with the client on the aspects of client expectation and servicing, rather than showing extra attention only during the period of client acquisition. Focused around client needs, a broad framework of service offering during whole lifecycle of client investment management would be revolving around: Anticipate, Analyze, Advice, Act and Monitor cycle.

Universal Service Offering

To meet the client needs in holistic manner, product and service offering range of the firm should be wide enough to cover the investment spectrum across its lifecycle.

In an ideal situation, a client would expect to deal with a single firm to get complete range of investment management services. However, for various business considerations of the service provider firm, in many situations it may not be a viable proposition to offer those services.

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

client satisfaction towards the firm.

Investment in People Processes

As relationship manager remains the face of the firm to a client, success of the firm would be greatly dependent on the skills, drive and enthusiasm of relationship managers (to take an extra mile), while bonding and dealing with any of client issues.

This aspect is more challenging than as it appears. This necessitates transformation of organizational philosophy towards its people and people processes contributing to business success. Firms would be required to invest heavily in human processes to attract, groom and retain a motivated team of relationship managers, who will make the real difference between winning and losing the game.

Price not a True Differentiator

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

to him meeting and exceeding his expectations.

Unconventional Delivery Channel and Communication

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

Flexibility of Technical Architecture

While business potential appears to be quite high, existing business architecture still does not provide any sound basis to formulate technical roadmap. Added to that, dynamic characteristics of client profile bring an increased challenge in drawing a firm implementation blueprint.

In the given situation, any big-bang commitment towards technical implementation plan would not be a wise idea. A prudent approach would be to get started on modular basis with progressive integration of functional components in order of its functional significance. Gaining insight and confidence around the business processes, this could be gradually scaled over the period of time.

To meet the information technology requirements, a firm has several alternatives (or combination of alternatives) to consider:

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

Ö Service Bureau /ASP Model: A recent trend has been witnessed in the solution provider’s landscape. Many of information technology service providers have come out with novel solution for investment management / investment processing platform in the form of service bureau / ASP. This platform provides integrated end-to-end processing infrastructure and services including core of business processes of wealth management.

On the part of a wealth management firm, paying agreed charges to service bureau provider, option of service bureau completely eliminates the requirement of ongoing resource commitment and cost of maintaining information technology infrastructure.

While total cost of owning may be the key motivating point for a wealth management firm to adopt service bureau model, the key consideration of providing high quality of service level with enhanced responsiveness may not be adequately answered. The question remains to be answered is – what would be the key differentiator in service offering of two wealth management firms operating from the same service bureau?

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

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

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

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

Ø Decision support and client oriented analytics acquire more importance.

Ø Applications should provide adequate flexibility to incorporate manual processing interfaces

Key Challenge Areas

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

Highly Personalized and Customized Services

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

Personal relationship driving the business

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

Evolving Client Profile

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

Client Involvement Level

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

Passion Investment (Philanthropy and Social Responsibility)

In the recent years a trend has been observed that bulk of investments by HNWIs has been directed towards passion investments (art, antique, jewellery, coins, unique assets, luxury), philanthropy and social/community causes.

As per World Wealth report, 11% of HNW investors worldwide contributed to philanthropic causes with a contribution over 7% of their wealth in year 2006. Ultra-HNWIs contribution was even more - 17% of Ultra-HNW investors that gave to philanthropy contributed over 10% of their wealth. In total, this equates to more than US$285 billion globally.

Against this backdrop, new breed of HNWIs expect to strategically manage the wealth and personal resources allocated to philanthropy purpose, in order to maximize its impact. This demands a relationship manager not just to be a passive financial advisor rather a passionate partner sharing interest and inclination of the associated client.

Limited Leveraging Capabilities of Technology (as an enabler)

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

Technical Architecture and Technology Investment

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

Intricate Knowledge of Cross-functional Domain

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