2009

WEALTH MANAGEMENT
ANKIT PATHAK
in
L.M. Thapar School of Management, Thapar University,
PATIALA
various banks & position of
HSBC in market
Industry Project Report
Personal banking is one of the fastest growing among all the financial
services. The unforeseen proliferation of the high end services like wealth
management has turned the business more competitive and hawkish. This
report discusses the wealth management services provided by top 4 MNC
banks in India (HSBC, ABN AMRO, Standard Charter, and CITIBANK) and how
HSBC is placed in the market in terms of these services.
 ACKNOWLEDGEMENT

It is a matter of great satisfaction and pleasure to present this report on WEALTH

MANAGEMENT IN VARIOUS BANKS AND POSITION OF HSBC IN
MARKET. I take this opportunity to owe my thanks to all those involved in my training.
This project report could not have been completed without the guidance of my project
guide Ms. SEEMA MEHTA (CSM, HSBC). Her timely help & encouragement helped
me to complete this project successfully.
I thank Ms. SAUDAMINI KUMAR (Manager- HR Northern India, HSBC) for giving me
opportunity to work at HSBC, as a summer intern.
I am thankful to Mr. BHAVESH SARASWAT (Financial Planning manager, HSBC) for
his encouragement and able guidance at every stage of my internship work.
I express my gratitude towards staff of HSBC- NOIDA, those who have helped me
directly or indirectly in completing the training.

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 EXECUTIVE SUMMARY
The wealthy Indian has just recently woken up to the concept of international banking.
Until recently, terms like wealth management, private banking, and financial advisory
were almost unheard concepts in India. A leading wealth management consultancy has
found that the industry is now growing at nearly 15% in terms of Assets Under
Management (AUM) figures. Indian HNWIs are beginning to explore investment
opportunities beyond the traditional capital markets, migrating to newer asset classes
such as art, real estate and overseas investment opportunities. The rising incomes and the
unlocking of wealth from closely held businesses have created a whole new generation of
individuals that constitutes a credible market opportunity for asset managers, private
bankers, financial advisors and others. All in all, the reasons for this sudden spurt in
wealth management business could be more than one.
Personal banking is one of the fastest growing among all the financial services and is the
means of managing clients' money by providing various services such as efficient wealth
management, savings, inheritance and tax planning. These banks promise to maximize
returns and minimize risk along with the tax burden of the clients through careful
allocation of their money.
This unforeseen proliferation of these high end banking activities in Asia has suddenly
turned the business more competitive and hawkish. Bankers here have virtually engaged
in a war-like situation by offering more exotic investment options to the clients so as to
grab a larger pie of this lucrative business.
This report will highlight the wealth management practices followed by the top four
private banks in India providing wealth management services; HSBC, Standard
Chartered, ABN AMRO and Citi Bank and analyze the position of HSBC in the market.
For this purpose, the information was gathered by visiting websites of different
organizations which provide data regarding wealth management in various banks, annual
turnover.
The study shows that HSBC has a competitive advantage over other banks in terms of
customer base, brand equity and technology used. HSBC has emerged as the safest and
the most stable bank during the current recession times because of the strict compliance.
The study was conducted at HSBC, Noida.
The project was of 6 weeks duration.

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market
During the project I had taken the guidance of Relationship Managers, financial planning
managers, Sales Managers & staff to collect the data, & also made use of Company’s
various reports. The data collected were then compiled, tabulated and analyzed.

Apart from objectives, some of the points which were considered in this topic to make
project report more comprehensive are:-
1. What a customer expects from a wealth management service provider
2. Solution framework for wealth management.
3. Key Challenge Areas.
4. Core Elements of Wealth Management Services.

WEALTH MANAGEMENT in various banks & position of HSBC in 4

market
 ACKNOWEDGEMENT

On the eve of completion and submission of summer project I would

like to express my deep sense of gratitude to my Management

Institute, Thapar University & HSBC, Noida for providing me

Platform.

I am immensely thankful to my guide Mrs. Manu Sharma (Associate

Vice-President HSBC Premier) for providing me great insight into the

project and for sparing her valuable time with me. Without her co-

operation and guidance it was impossible to reach up to this stage.

I am also thankful to Mr. Nitin Mathur (Branch Manager, HSBC

Noida), Nishi Saraswat (RM) and HSBC staff for their kind support

during the project.

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market
 At last, my sincere regards to my parents and friends who have

directly or indirectly helped me in the project. Without their

inspiration and support I would not have been where I am.

TABLE OF CONTENTS

S.NO PARTICULARS PAGE NO

1 Objective & Scope of Project 08

2 Company profile 09

3 Theoretical background** 18

4 Simplicity & safety are back in fashion 90

5 Bibliography 92

**
1. INTRODUCTION.....................................................................................................18

2. CONCEPT OF WEALTH MANAGEMENT …………………………………..19

• Why do people opt for Wealth Management?..................................................19
• Does technology take a part?.............................................................................19
• Wealth Management Range……………………………….………………….20
• Key Elements of Wealth Management Services……………………………...22

1. WEALTH MANAGEMENT – An Emerging Sector………….………………....23

2. CORE ELEMENTS OF WEALTH MANAGEMENT Services ………...……...26

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market
 2.1 Packaged at various
levels………………………………………………………..26
• Advisory………………………………………………………………………….
.
• Investment Processing (transaction oriented)……………………………………
• Custody, Safekeeping and Asset Servicing………………………………………
• End-to-end Investment Lifecycle Management…………………………………

1.1 Key function areas………..………………………………………………………27

• Financial Planning …………………………………………………………27
✔ Client
Profiling………………………………………………………………….
✔ Investment Objective…………………………………………………………...

•
Portfolio Strategy Definition / Asset Allocation…………………………..28
✔ Defining Portfolio Strategies and Portfolio
Modeling………………………….
✔ Determination of Portfolio Constituents and Allocation of Assets…………….
✔ Strategy
Implementation………………………………………………………..
• Portfolio Management………………………………………………………..30
✔ Portfolio Administration………………………………………………………
✔ Performance Evaluation and Analytics………………………………………
• Strategy Review and Alignment…………………………..…………………30
✔ Recalibration of Portfolio Strategy……………………………………………..
✔ Rebalancing, Reallocation and Divestment of Assets………………………….

1. KEY CHALLENGE
AREAS....................................................................................32

2. SOLUTION
FRAMEWORK....................................................................................35

3. SERVICES PROVIDED BY WEALTH MANAGEMENT INSTITUTIONS____

• Custodian Services………………………………………………………..……
39
Trust •
Services……………………………………………………………………..
• Retirement Plan Services…………………………………………………………

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1. ADVANTAGES AND LIMITATIONS..................................................................42

2. CONSUMER POINT OF VIEW : Wealth

Management………………………...44
• PMS vs. Wealth manager and fund
manager……………………………………..
• How to choose a
PMS…………………………………………………………….
✔ Investment philosophy………………………………………………………….
✔ Scheme benchmarks……………………………………………………………
✔ Minimum investment…………………………………………………………...
✔ Returns………………………………………………………………………….
✔ Cost structure…………………………………………………………………...
✔ Frequency of disclosure………………………………………………………...
✔ Broking house…………………………………………………………………..
✔ Assets under management (AUM)
……………………………………………...

1. CONCEPT OF ASSET CLASSES ………………………………………………47

1.1 Asset Mix…………...………………………………………………………
1.2 List Of Different Asset Class……………………………………………...
• Fixed
Deposits……………………………………………………………….47
✔ Merits and Demerits…………………………………………………………
✔ Interest rates on FDs………………………………………………………….
✔ Effective Return………………………………………………………………
• Mutual Funds……………………………………………………………….48
✔ Open-end fund………………………………………………………………..
✔ Close-end funds………………………………………………………………
✔ Growth/Equity oriented
schemes……………………………………………..
✔ Income/Debt oriented schemes……………………………………………….
✔ Balance
funds…………………………………………………………………
✔ Money market or liquid
funds………………………………………………...
✔ Gilt funds……………………………………………………………………..

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 ✔ Index
funds……………………………………………………………………
✔ Fund of funds…………………………………………………………………
✔ Hedge funds…………………………………………………………………..
• Equity investment…………………………………………………………..53
✔ Direct holdings and pooled funds…………………………………………….
• Commodities Market………………………………………………………54
• Art fund…………………………………………………………………….54
✔ Diversified portfolio…………………………………………………………
✔ Tie-ups with galleries………………………………………………………
• Real Estate Funds…………………………………………………………..56
• Insurance………………………………………………………………………
Product………………………………………………………………….
…...57
✔ General Insurance…………………………………………………………….
✔ Unit Linked Insurance Plan (ULIP)
…………………………………………..
• Structured Product……………………………………………………..…..59
✔ Composition………………………………………………………………….
.
✔ Risks………………………………………………………………………….
.
• GOLD……………………………………………………………………….60
✔ Factors influencing the gold
price…………………………………………….
• Currency…………………………………………………………………….62
✔ Portfolio composition of currency……………………………………………

1. Companies providing Wealth Management services…………………………….64

• Hongkong & Shanghai Banking Corporation…………………………..64
✔ INTRODUCTION……………………………………………………………
✔ PRODUCTS………………………………………………………………….
.
✔ ASSET CLASSES
USED…………………………………………………….
✔ ASSET
SIZE………………………………………………………………….
✔ INVESTMENT PHILOSOPHY……………………………………………...
✔ KEY STRENGTHS AND ISSUES…………………………………………..

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 • ABN AMRO……………………………………………………………..….81
✔ INTRODUCTION……………………………………………………………
✔ PRODUCTS………………………………………………………………….
.
✔ ASSET CLASSES
USED…………………………………………………….
✔ ASSET
SIZE………………………………………………………………….
✔ INVESTMENT PHILOSOPHY……………………………………………...
• STANDARD CHARTER…………………………………………..………84
✔ INTRODUCTION……………………………………………………………
✔ PRODUCTS………………………………………………………………….
.
✔ ASSET CLASSES
USED…………………………………………………….
✔ ASSET
SIZE………………………………………………………………….
✔ INVESTMENT PHILOSOPHY……………………………………………...

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 • CITI BANK…………………………………………………………………87
✔ INTRODUCTION…………………………………………………………....
✔ PRODUCTS………………………………………………………………….
.
✔ ASSET CLASSES
USED…………………………………………………….
✔ ASSET
SIZE………………………………………………………………….
✔ INVESTMENT PHILOSOPHY……………………………………………...

1. HSBC & WEALTH MANAGEMENT………………………………………………

• Procedure for entertaining a client in HSBC…………………………………
• Customer Profiling at HSBC………………………………………………………….
✔ Up to 30 years of age…………………………………………………………
✔ 30-45 years of
age…………………………………………………………….
✔ 45-60 years of
age…………………………………………………………….
✔ over 60 years………………………………………………………………….
1. WEALTH MANAGEMENT: INDIAN CONCERN………………………………
• Position of India in Wealth Management………………………………………
• Risk aversion of Indian
customers……………………………………………...
1. WEALTH MANAGEMENT: GLOBAL
PRESPECTIVE........................................

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 OBJECTIVES
1. Through the past results, to identify the potential of Wealth Management sector.
2. Understand company’s procedure in wealth management department.
3. To do a comparative analysis of the services provided by these banks and various
strategies being followed.
4. To know the comparative position of the top four companies offering wealth
management services in India (HSBC, Standard Charter, ABN AMRO, Citi Bank).
5. To have a general notion on different asset classes available in financial market.
6. To have a conceptualized view on the Wealth Management services.

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 HSBC – Company Profile
The HSBC Group serves over 128 million customers worldwide through around 10,000
offices in 83 countries and territories in Europe, the Asia-Pacific region, the Americas,
the Middle East and Africa. With assets of some US$2,354 billion at 31 December 2007,
HSBC is one of the world’s largest banking and financial services organizations. HSBC
is marketed worldwide as ‘the world’s local bank’.

HSBC Group Members in India

The Hongkong and Shanghai Banking Corporation Limited
HSBC Asset Management (India) Private Limited
HSBC Electronic Data Processing India Private Limited
HSBC Insurance Brokers (India) Private Limited
HSBC Operations and Processing Enterprise (India) Private Limited
HSBC Private Equity Advisors (India) Limited
HSBC Professional Services (India) Private Limited
HSBC Securities and Capital Markets (India) Private Limited
HSBC Software Development (India) Private Limited

Technology
The HSBC Group develops and applies advanced technology for the efficient and
convenient delivery of banking and related financial services via a highly resilient Group
Network (Voice/Data) infrastructure. In India, the Group provides 24 hour banking
services through an extensive network of over 178 in-branches and off branch ATMs,
phone banking through an integrated Contact Centre, SMS alert services on mobile
phone and internet banking available at www.hsbc.co.in. Trade and corporate banking
services are offered with real-time access to a centralized information database and the
Group also has a state-of-the-art treasury dealing system.

Customer Groups
➢ Personal Financials:
The Hongkong and Shanghai Banking Corporation Limited (HSBC) provides a wide
range of personal financial services including personal lending and deposit products,
through its branch network in Ahmedabad, Bangalore, Chandigarh, Chennai,

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 Coimbatore, Gurgaon, Hyderabad, Indore, Jaipur, Jodhpur, Kochi, Kolkata,
Ludhiana, Lucknow, Mumbai, Mysore, Nagpur, New Delhi, Noida, Pune, Patna,
Raipur, Thane, Trivandrum, Vadodara and Visakhapatnam. International platinum,
gold and classic credit cards from VISA and MasterCard and debit cards from VISA
are used. HSBC Premier Services are offered through all branches in India with
specialist business centers in selected branches in major cities.
✔ Non-Resident Indian banking: Non-Resident Indian banking (NRI)
centers located in Europe, Asia-Pacific, the Middle East, and North
America, together with Group offices worldwide, provide the international
Indian Diasporas access to a range of products and services.
✔ Wealth Management: Financial Planners and Premier Relationship
Managers assist clients in identifying their needs and selecting insurance
and investment products to meet these needs. Wealth Management is
offered in Ahmedabad, Bangalore, Chandigarh, Chennai, Coimbatore,
Gurgaon, Hyderabad, Indore, Jaipur, Jodhpur, Kochi, Kolkata, Ludhiana,
Lucknow, Mumbai, Mysore, Nagpur, New Delhi, Noida, Pune, Patna,
Raipur, Thane, Trivandrum, Vadodara and Visakhapatnam.
➢ Commercial banking:
HSBC is a leading provider of financial services to small, medium-sized and middle-
market enterprises. The Group has over 40,000 active customers in India, including
proprietors, partnerships, clubs and associations, incorporated businesses and
publicly quoted companies. Commercial Banking provides a full range of banking
services to these customers including multi-currency business accounts, payments
and cash management solutions, trade services, factoring and a range of borrowing
solutions.
In India, Commercial Banking has presence in all cities where we have a Branch and
for the convenience of our customers, a multi channel service platform including
branches, relationship managers, Internet, ATMs and Phone Banking is provided. It
is the first business within the HSBC Group to lend to Microfinance institutions, thus
providing indirect funding to hundreds of small businesses owned and run by
members of underprivileged sections of society. Commercial Banking also includes
an International Banking Centre team which facilitates the process of cross border
account opening for both inward and outward referrals and promotes the growth of
cross border banking business across the Group.
✔ Trade (international and domestic) and Supply Chain (TSC) services:
HSBC offers a wide range of international and domestic trade products
and is one of India’s leading Trade Services providers. In India, TSC offer
one of the largest trade processing capabilities among peer banks. Each of
the trade processing centers is ISO9001-2000 certified.

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 TSC works closely with Group offices overseas and leverage Group’s
extensive global network to offer structured, tailor made solutions to a
wide range of customers. The Export Trade offering includes
comprehensive solutions like Export Financing, Export Collections, and
advance remittances, Documentary Credit Advising, Documentary Credit
Confirmation and forfeiting. On the Import side, services offered are
Documentary Credits, Stand by letter of Credits, Import Collections,
Warehouse Receipt financing, eSolutions, Internet Trade Services and a
host of advisory solutions. Clients in India include large Indian and
multinational companies, Mid Market companies as well as customers in
the Small and Medium Enterprises segment.
✔ Factoring: HSBC offers a full range of domestic and international
factoring products. Factoring products offer flexible structures, together
with payments and cash management services, to provide seamless supply
and delivery to corporates. Factoring’s product suite comprises end-to-end
supply-delivery chain solutions customized for various segments like
a. Payables Financing (For Vendors/Suppliers/Purchase Channel of
corporate customers);
b. Export Factoring, Portfolio Invoice Discounting, Portfolio Purchase,
Distributor Finance (For the Sales Channel of corporate customers
and SMEs),
c. Distributors financing (for distributors of corporate customers)
✔ Payments and Cash Management: Integrated Domestic and Regional
Cash Management Solutions are provided to Corporate and Institutional
customers in India. The suite of offerings under the Cash Management
umbrella includes Integrated Receivables Management Solutions,
Integrated Payables Management Solutions, Structured Liquidity
Management Solutions and Integrated Delivery Channels, with an
endeavor to completely integrate with the customer’s backend operating
systems and processes.
HSBC provides a comprehensive package of Payments products and
services under its Integrated Payment Solutions (IPS) proposition. Key
components of this proposition include
• Cheque Outsourcing Service (COS), which offers customers the
ability to outsource their bulk paper payable requirements including
Company Cheques, Cashier Orders and Demand Drafts that can be
made payable at HSBC and designated alliance bank centers across
the country.

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 • Priority Payments, which facilitates end-to-end straight through
electronic payments through the various electronic banking channels
using Real time Gross Settlement System (RTGS) and National
Electronic Funds Transfer (NEFT) systems.
• AutoPay service that allows customers to effect large volume low
value book transfer payments.
• Enriched Advising facility whereby Advices containing all payment
& invoice information along with transaction details like Unique
Transaction Reference (UTR) are made available to customers and
their beneficiaries for all the above types of payments.
• Payables Financing, which offers customers the facility to discount
their payables and have them effected upfront to their suppliers.
• E-Tax solutions, whereby customers can instruct HSBC to effect
their Direct Tax, Service Tax and Excise Duty payments
electronically for which HSBC has structured alliances with the
Authorized Agency Banks.

➢ Private banking
HSBC Private Banking, India focuses on offering a full range of banking, investment
advisory and wealth planning products and services to High Networth clients and
their families with a minimum investible surplus of USD 1Million with the Bank.
Private Banking clients are serviced by dedicated client teams that combine
Relationship Managers, Client Service Officers as well as Investment Advisors
across 7 cities in India. Clients are provided with introduction services for succession
planning and wealth management through selected third party service providers.
Customers are offered a suite of in-house as well as third party products including
direct equity advisory, mutual funds, third party portfolio management services,
structured products and real estate venture funds. Besides this a comprehensive range
of banking products like bank accounts, credit/ debit cards, fixed deposits, foreign
exchange, remittances and lending products are also available.

➢ Corporate banking
HSBC’s Corporate Banking team offers a full range of services to multinationals,
large domestic corporate and institutional clients. Corporate Banking represents a
wide range of banking and financial services, which includes access to commercial

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 banking products, including working capital facilities such as trade, channel
financing, and overdrafts, as well as domestic and international payments, term loans
(including external commercial borrowings), letters of guarantee. Clients are serviced
by sector based client service teams that combine relationship managers; product
specialists and industry specialists to develop customized financial solutions. Each
team supports the client’s global needs, ensuring a full understanding of the
company’s business and financial requirements. Based on client’s requirements,
HSBC also assigns Global Relationship Management teams to provide structured
solutions.
✔ Financial Institutions Group
Working closely with Group offices in India and overseas, HSBC offers a full range
of banking services to its institutional clients and is a leading service provider in
areas of debt/equity capital markets, treasury, payments and cash management, trade,
mergers, and acquisitions, custody and fund accounting. Clients include banks,
financial institutions, securities houses, stock exchanges and clearing houses,
insurance companies, asset management companies and developmental
organizations.
✔ HSBC Securities Services
HSBC Securities Services offers a wide range of securities processing and fund
administrative services to local and international institutional clients. As a one-stop
securities solutions provider, the bank offer a comprehensive package of top-rated
award winning Custody and Clearing services, Fund Accounting and Administration,
Corporate Trust and Loan Agency and derivatives clearing services. The leading sub-
custody and securities clearing services provider, HSBC Securities Services operates
across 39 markets in Asia-Pacific, the Middle East, Southern Europe and Latin
America. With experienced staff and the latest technology, HSBC provides unrivalled
services to diverse set of clients including global custodians, fund managers and
brokers/dealers worldwide, and is the premier and largest provider of custody and
clearing services to Foreign Institutional Investors in India.
✔ Global markets
Clients consistently rate HSBC’s Global Markets operations as one of the best in
India. In the latest Greenwich FX and Interest Rate Derivatives survey, corporate
clients have rated HSBC the best in overall service quality (GQI Index). Its 52
members dealing room in Mumbai is one of the largest in the country that serves
corporate and institutional clients in Mumbai and across most major cities in India. It
provides a comprehensive range of products that include foreign exchange, money
market, fixed income, currency/interest rate derivatives across currencies and debt
syndication – both onshore and offshore.

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 ➢ Other Entities
✔ Asset management:
HSBC Asset Management (India) Private Limited, is the investment manager to
HSBC Mutual Fund (trading as “HSBC Global Asset Management” worldwide).
With the Group’s global fund management expertise and investment capabilities, it is
able to deliver products best suited to meet the investment objectives of both retail
and institutional customers. Launched in India in November 2002, HSBC Global
Asset Management manages assets of over INR 17,617 crores, spread across 40
schemes and plans under the HSBC Mutual Fund umbrella, as of 30 May 2008.
HSBC Global Asset Management also offers Portfolio Management services (PMS)
in India to manage wealth for High Net worth Individuals. Currently, the PMS
business offers many products, namely, the Signature Portfolio, the Strategic
Portfolio, Large Cap Portfolio, Select Series and ELN Series in its range of offerings.
HSBC Global Asset Management comprises four specialist businesses: Halbis,
Sinopia, Multimanager and Liquidity. These four businesses manage assets of
US$397.4 billion at the end March 2008. Through its network of offices in over 20
countries and territories around the world, HSBC Global Asset Management
develops strong relationships with corporates, institutions and financial
intermediaries of all sizes and types.
✔ Audit Services:
HSBC Professional Services (India) Private Limited, provides internal audit services
to several of the HSBC Group's internal audit units worldwide. The areas in which
HPSI provides internal audit services include IT, Treasury, Asset Management,
Private Banking, Insurance, Transaction Banking, Support Functions, Branch
Banking and Operations (including the Group Service Centres).

✔ Global resourcing:
HSBC Electronic Data Processing (India) Private Limited, forms part of HSBC’s
Global Resourcing network, and has 15 Group Service Centres (GSCs) across five
countries in Asia. GR India (HDPI) provides a broad range of support services to the
Group's banking and financial businesses. A vital part of the HSBC Group's global
strategy, GR seamlessly integrates and plays a key role in delivering shareholder
value and helping HSBC remain competitive in the global financial services market.
In India, HSBC Global Resourcing employees over 16,500 professionals across its
GSCs in Hyderabad (2 centres), Bangalore (2 centres), Visakhapatnam and Kolkata
(2 centres). The GSC partner with other HSBC business areas to provide world-class
customer service to a majority of HSBC's 125 million customers; on an average
handling 462,000 calls and processing 1.64 million transactions each day.

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 HSBC Operations and Processing Enterprise (India) Private Limited, through its
offices in Mumbai, Chennai and Kolkata provides operations and processing services
(voice as well as data) for Personal Financial Services, Wealth Management,
Commercial Banking and Corporate and Institutional Banking in India.

✔ Insurance broking:
HSBC Insurance Brokers (India) Private Limited is a licensed composite insurance
broking company functioning as a direct as well as re-insurance broker. It is a part of
a worldwide network provided by HSBC Insurance Brokers, a major international
risk management, and insurance broking and employee benefits organization. The
Company provides a full range of services to assist clients in identifying, assessing
and managing insurable risks, which includes designing and delivering a suitable
insurance program to match exact needs of the clients. The Broking business offers a
different outlook, because it comes from a different direction: the only insurance
broker that is part of a global banking group. It has a unique ability to leverage
expertise across the world and across a wide range of disciplines.

✔ Investment banking and equities:

HSBC Securities and Capital Markets (India) Private Limited offers services in the
areas of Equities broking, Investment Banking (IB) and Project Export Finance. Its
institutional broking business based in Mumbai has seats on two of India’s premier
stock exchanges, the Bombay Stock Exchange and the National Stock Exchange. It
deals in Indian securities for both Indian and international institutions and for
selected retail clients and is backed by an extensive research team. The IB business,
with offices in Mumbai and New Delhi, includes mergers and acquisition advisory
service, privatization advisory services and equity and debt origination. Project and
Export Finance services are provided to governments, large corporates and top-tier
banks.

✔ Private Equity:
HSBC Private Equity Advisors (India) Private Limited is a private equity investment
advisor and a subsidiary of HSBC Private Equity Management (Mauritius) Limited
(PEIN). PEIN identifies and evaluates private equity investment opportunities for
HSBC’s Principal Investments Group, Special Opportunities Group, Specialist
Investments (Real Estate and Infrastructure) Group and HSBC’s Asia Region Private
Equity and Venture Capital Funds.

✔ Software development (GLT):

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 HSBC Software Development (India) Private Limited, the Global Technology Centre
was established in April 2002 to develop technology solutions for the HSBC Group’s
global operations. The centre in Pune is spread across four locations with another
center in Hyderabad and employs over 5,560 software professionals. GLT, India is
CMMi Level 5 certified and caters to the Group’s IT requirements worldwide
through development, maintenance and support of diverse banking applications.

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 THEORETICAL BACKGROUND
1. INTRODUCTION
The term Wealth Management, is the latest buzz in the financial sector. Many Banking
companies are engaged in the business of Wealth management. The premier insurance
industry is now booming because many bankers are also adopting and playing safe in the
business of insurance, the term used is Bancassurance.
Wealth management services area in financial sector has been witnessing more attention
during last couple of years. Capgemini Merrill Lynch Wealth Report 2008 cites number
of HNWIs1 globally to be around 10.1 million with wealth held by them totaling to
US$40.7 trillion in year 2008. Value of wealth held by HNWIs represents an increase of
around 9.4% since 2006 with average HNWI wealth surpassing US$4 million for the first
time2.
Considering long-term high value business proposition, number of banks and niche
players has started offering full range of wealth management services.
While growing volume of premium services to affluent clients becomes the key driver
for most of the service provider firms, many unique elements inherent to wealth
management services requires completely different service offering model than the
existing model for transactional services.
Greatly accustomed in offering commoditized financial services so far, demand of
unconventional form of service model poses a big challenge in charting growth path for
these wealth management firms.
India, China and Brazil had the highest HNWI population growth at the country level2.
HNWI financial wealth is projected to reach US$59.1 trillion by 2012, advancing at an
annual growth rate of 7.7%2.
____________________________________________________________________________________________________________________________________________________________________________
1
High Net Worth Individuals (HNWIs) hold at least US$1 million in financial assets, excluding collectibles, consumables, consumer
durables and primary residences.
2
Capgemini & Merill Lynch Asia-Pacific Wealth Report 2008.

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2. CONCEPT OF WEALTH MANAGEMENT
Wealth management as a concept originated in the 1990’s in the US. Essentially it is
investment advisory covering financial planning that provides individuals with private
banking/ asset management/ taxation advisory and portfolio management. Out of the
above mentioned services, portfolio management is generic and most other services are
highly customized.
Client segmentation basically includes Individual Retail, HNIs (High Net worth
Individuals) and UHNIs (Ultra High Net worth Individuals).
The services include portfolio management and rebalancing, investment management and
strategies, Financial tax Advisory and estate planning. In terms of products it includes
stock trading, equity linked and structured saving products, mutual funds and alternative
investments.
2.1 Why do people opt for wealth management solutions?
Until the early 1990’s the investment was restricted largely to real estate, bonds, fixed
income and gold. The opening up of the equity markets has caught the imagination of the
masses, while further development and transparency have created a surge in the user
base. Financial products were thus developed around equity.
Equity related products are highly volatile and react to events within and outside its
domain. The need to have a specialist to manage the wealth was felt and this created the
concept of Wealth managers.
2.2 Does technology play a part?
Wealth managers are becoming increasingly aware of the potential of the online
(platform) with the overall structure of their advisory offerings .i.e. with access to a
platform which can complement their strength of advisory. However there are as yet few
wealth management firms & platforms which are fully harnessing the inherent potential
of the internet as a medium for meeting client’s demands.

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2.3 Wealth management range
The Indian market has been segmented by Wealth Management service providers into
five major categories:
1. Ultra-High net worth or Ultra-HNW individuals hold at least US$30 million in
financial assets, excluding collectibles, consumables, consumer durables and primary
residences.
2. Super-High net worth individuals hold between US$10 million to US$30 million in
financial assets, excluding collectibles, consumables, consumer durables and primary
residences.
3. High net worth individuals hold between US$1 million to US$30 million in financial
assets, excluding collectibles, consumables, consumer durables and primary
residences.
4. Super-affluent individuals hold between US$125,000 to US$1 million in financial
assets, excluding collectibles, consumables, consumer durables and primary
residences.
5. Mass affluent hold between US$25,000 to US125,000 in financial assets, excluding
collectibles, consumables, consumer durables and primary residences.

The range of wealth management can be expressed by this exhibit chart.

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 CAREER
STUDENT START OF CAREER RETIREMENT
ESTABLISHED

* Deposit based comfort A/c *Comfort A/c with*Premium A/c *Premium A/c
credit limit *Platinum Card
* Credit cards *Platinum Card
*Gold Card
Liquidity
Management
(Cash Mgt) * Overnight money A/c * Overnight money A/c
* Money Market & Fixed Income Fund * Money Market & Fixed Income Fund
* Near Money Market Fund * Near Money Market Fund
* ZINS Plus * ZINS Plus
* Special Investments

* Top portfolio * Top portfolio * Top portfolio

Wealth * Flagship portfolio * Flagship portfolio * Flagship portfolio
Formation * Titan portfolio * Titan portfolio * Titan portfolio
(Savings Plans) * Capital formation
benefit funds

* Absolute Return Portfolio

Wealth * Holding and Private Equities
Optimization * Modular Wealth Management
(Lump sum * Individual Wealth Management
Investment) * Premium Portfolio
* Titan Portfolio

2.4 Key elements of Wealth Management Services

Wealth management services involve fiduciary responsibilities in providing professional
investment advice and investment management services to a client. Depending on the
mandate of the services given to the Wealth Manager, wealth management services could
be packaged at various levels:
✔ Advisory
✔ Investment Processing (transaction oriented)
✔ Custody, Safekeeping and Asset Servicing
✔ End-to-end Investment Lifecycle Management

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Wealth management services comprises of following key functional areas:
1. Financial planning
2. Portfolio strategy definition/asset allocation/strategy implementation.
3. Portfolio management- Administration, Performance evaluation & Analytics.
4. Strategy review & modification.

Wealth management strategy: The sum of many parts

1. WEALTH MANAGEMENT-an emerging sector

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 Wealth management services area in financial sector, hitherto used to be the preserve
of some top multinational banks and financial firms- offering exclusive services to a
select few, has been witnessing more attention during last couple of years.
A booming economy, rising stock prices and an increase in income and spending
power have brought sharp focus on this sector. With an increasing population of High
Net worth Individuals (HNWIs)1, the unsaid tagline of earlier days - “Don’t call us.
We’ll call you (if you are that wealthy!)” seems to be completed altered in recent
times. Considering long-term high value business proposition, number of banks,
financial firms and niche players has started offering full range of wealth
management services targeted to HNWIs and emerging affluent.
As per recently published Capgemini & Merrill Lynch Wealth Report 2008, number
of HNWIs around the world and value of their assets has been continuously rising.
Number of HNWIs globally is estimated to be around 10.1 million in year 2008, an
increase of over 6% over previous year. HNWI wealth totals US$40.7 trillion,
representing an increase of around 9.4% since 2006. As per report, number of
HNWIs in India is increasingly growing – at a rate higher than other region of world.
Number of HNWIs in India is estimated to be around 123,000 in year 2006 - an
increase of over 23% over previous year. Though, in absolute terms the above
number appears pretty miniscule (if we compare that with the number of retail
investors in India), however, in terms of value it really makes a really huge sum of
serviceable investment.
While growing volume of premium services to affluent clients becomes the key
driver for most of the service provider firms, many unique elements inherent to
wealth management services requires completely different service offering model
than the existing model for transactional services. To meet the client service
expectations accurately, servicing model and framework has to be deeply oriented
with high level of client satisfaction. It is not a surprise that many of successful firms
in wealth management sector draw lessons from successful service leaders from
hospitality, entertainment and retailing industries, to learn the trick of enhanced client
satisfaction.
Greatly accustomed in offering commoditized financial services so far, demand of
unconventional form of service model poses a big challenge in charting growth path
for these wealth management firms.

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EXPANDING THE WEALTH MANAGEMENT CANVAS
The spectrum of offerings is spreading and the scope of services is widening
significantly. A quick glimpse reveals:
1. Delivery Channels: anywhere and anytime through branch/call
center/online/POS/PDA.
2. Personalized Service: Advisory services, relationship managers and financial
planning experts to manage accounts and plan financial goals.
3. Investment tools for customers and their financial planners to manage wealth:
Analyze portfolio, rebalance portfolio against model portfolio, portfolio simulation
and ‘what if’ tools.
4. Product types: Traditional banking, traditional investment products and alternate
investments.
5. Straight through processing: End-to-end transaction processing for investments.
6. Tax Planning: Country-specific tax and social security.
7. One stop financial shop: Interface with market data vendors, bank, depositories,
clearing houses, custodians and brokerage houses.
8. Concierge Services: Lifestyle-related value added services.
9. Customized view and reports: Portfolio-specific or across portfolio.
10. Consolidated View: Complete financial picture in one screen.
11. Strict adherence: Financial regulation, compliance and other country-specific
mandates.
12. Secure and trusted environment: Data storage.

INCREASING FOCUS ON ADVISORY SERVICES

Private banking and wealth management customers are turning cautious with their
investments as they seek better service providers. The quality of service, reporting and
investment advice remains some of the important selection criteria for customers. ‘Know
all’ advisors, offering advice across different product types, suggesting unique product
bundling, predicting trends in the local and as well as global markets and suggesting
investment protection mechanism, are key to the success of wealth management services,
today. With the frequent highs and lows in the markets, there is an apparent disconnect
between advisors and customers. Advisors are turning towards fact-based analysis and
detailed case studies to bridge the gap. However, it would be pertinent to note that there
is also a growing trend towards ‘Do-It- Yourself’ (DIY) services, where knowledgeable
customers are not fully dependent on the advisory services provided by the bank. To

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provide such high levels of service, banks are seeking assistance from systems that offer
a holistic view of customer relationship across assets and liabilities, to tailor appropriate
investment solutions.

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 TOUGH TIMES AHEAD WITH NO ENTRY LOAD…….
It is almost certain now that government is planning to remove the entry load from 1st
august 2009. An entry load is a percentage of NAV that a customer pays when he
purchases new fund. This charge is used by the mutual fund for marketing and
distribution expenses. However the government is planning to remove this charge to
attract new investors. As far now, the bank is not charging anything from the customers
for the wealth management services being provided by them. AMCs pay bank a
distribution fee directly proportional to the amount of business generated by the bank.
This distribution fee is a part of the fund generated through entry load and exit load. So
with the removal of the entry load the bank’s earnings through wealth management
services will certainly be affected. Many banks have already started developing plans to
fight this situation but only time will tell if these strategies will be successful. One
possible strategy will be to start charging from the customer for the wealth management
advisory services.

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CORE ELEMENTS OF WEALTH MANAGEMENT services
In most basic sense, wealth management services involve fiduciary responsibilities in
providing professional investment advice and investment management services to
Institutions, funds (Pension/mutual/Hedge), corporations, trusts as well as HNWIs. In the
present context of our discussion, we would keep our focus limited to HNWIs.
Some of the analogous terms used for wealth management could be considered as
Portfolio management, Investment management and many times Fund management or
Asset management.
5.1 Packaged at various levels
Depending on the mandate of the services given to the Wealth Manager, wealth
management services could be packaged at various levels:
a) Advisory
Wealth manger’s role is limited to the extent of providing guidance on investment /
financial planning and tax advisory, based on client profile. Investment decisions are
solely taken by the client, as per his /her own judgment.
b) Investment Processing (transaction oriented)
Client engages wealth manager to execute specific transaction or set of transactions.
Investment planning, decision and further management remain vested with the client.
c) Custody, Safekeeping and Asset Servicing
Client is responsible for investment planning, decision and execution. Wealth
manager is entrusted with management, administration and oversight of investment
process.
d) End-to-end Investment Lifecycle Management
Wealth manager owns the whole gamut of investment planning, decision, execution
and management, on behalf of the client. He is mandated to make financial planning,
implement investment decisions and manage the investment throughout its life.

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5.2 Key Functional Areas
Wealth management services comprises of following key function areas:
I. Financial Planning
II. Portfolio Strategy Definition/ Asset Allocation / Strategy Implementation
III. Portfolio Management – Administration, Performance Evaluation and Analytics
IV. Strategy Review and Modification

FINANCIAL PLANNING
i. Client Profiling

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 Client profiling takes into account behavioral, demographic and investment characteristics of
a client that would determine each client’s wealth management requirements. Some of key
characteristics to be evaluated for defining client’s investment objective are:
✔ Current and future Income level
✔ Family and life events
✔ Risk appetite / tolerance
✔ Taxability status
✔ Investment horizon
✔ Asset Preference /restriction
✔ Cash flow expectations
✔ Religious belief (non investment in sin sector like - alcohol, tobacco, gambling firms, or
compliant with Sharia laws)
✔ Behavioral History (Pattern of past investment decisions)
✔ Level of client’s engagement in investment management (active / passive)
✔ Present investment holding and asset mix
i. Investment Objectives
Based on the client profile, investment expectations and financial goals of the client
could be clearly outlined. Defining investment objectives helps to identify investment
options to be considered for evaluation. Investment objective for most of the
investors could be generally considered amongst the following:
✔ Current Income
✔ Growth (Capital Appreciation)
✔ Tax Efficiency (Tax Harvesting)
✔ Capital Preservation (often preferred by elderly people to make sure they don’t
outlive their money.)

PORTFOLIO STRATEGY DEFINITION/ ASSET ALLOCATION

i. Defining portfolio strategies and Portfolio Modeling
After establishing investment objectives, a broad framework for harnessing possible
investment opportunities is formulated. This framework would factor for risk-return
trade-off of considered options, investment horizon and provide a clear blueprint for
investment direction. Investment strategy helps in forming broad level envisioning of
asset class (Securities, Forex, Commodity, Real State, Reference and Indices,
Art/Antique and Lifestyle Assets (Car, Boat, Aircraft)), market, geography, sector
and industry. Each of these asset classes is to be comprehensively evaluated for
inclusion in portfolio model, in view of defined investment objectives. While
defining the strategy, consideration of client preference or avoidance for specific

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 asset class, risk tolerance, religious beliefs is the key element, which would come into
picture. Thus, for a client with a belief of avoidance of investment in sin industries
(alcohol, tobacco, gambling etc.) is to be duly taken care of. Likewise, for a client
looking for Sharia- compliant investment, strategy formulation should consider
investment options meeting with the client expectations.
ii. Determination of Portfolio constituents and Asset Allocation
Guided with the investment strategy, constituents in portfolio model are determined,
which would directly and efficiently contribute towards client’s investment
objectives. Thus, a broad level investment guidance of – “investment in fixed income
in emerging market” would further determine classification within Fixed Income
such as Govt. or corporate bonds, fixed or variable rate bonds, Long or short maturity
bonds, Deep discounted or Par bonds, Asset backed or other debt variants. Return
profile, risk sensitivity and co-relation of constituents within portfolio model would
help to determine the size (weightage) of each individual constituent in the portfolio.
iii. Strategy Implementation
Having decided the portfolio constituents and its composition, transactions to acquire
specific instruments and identified asset class is initiated. As acquisition cost would
be having bearing on overall performance of the portfolio, many times process of
asset acquisition may be spread over a period of time to take care of market
movement and acquire the asset at favorable price range.

PORTFOLIO MANAGEMENT
i. Portfolio Administration
Portfolio Administration involves handling of investment processes and asset
servicing. This would also require tax management, portfolio accounting, fee
administration, client reporting, document management and general administration
relating with portfolio and client.
This function would involve back office administration and custodial services to
manage transaction processes (trading and settlement) - interfacing with
brokers/dealers/agents, Fund managers, Custodians, Cash Agent and many other
market intermediaries.
ii. Performance evaluation and Analytics
Performance evaluation of the portfolio is an ongoing process. Portfolio return is
continuously monitored and analyzed with respect to defined portfolio objectives.

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 Analysis dimension could be varied – simple and complex. These may include -
absolute return, relative return (in comparison to chosen benchmark), trend, pattern,
cost impact, tax impact, concentration, lost opportunity and other form of sensitivity
and what-if analysis.
Any deviation of portfolio performance observed during performance evaluation
would lead to strategy review and any possible alignment of portfolio strategy.

STRATEGY REVIEW AND ALIGNMENT

i. Recalibration of Portfolio strategy
Based on performance evaluation and future outlook of the investment, portfolio
strategy is evaluated on periodic basis. To keep it aligned with the defined investment
objectives, portfolio strategy is suitably re-calibrated from time to time. Many times,
review of portfolio strategy would be necessitated due to change in client profile or
expectations.
ii. Rebalancing, Reallocation and Divestment of Assets
Any re-calibration of strategy and consequent change in portfolio model would
require rebalancing of the assets in portfolio. This would be achieved through
rebalancing the asset (divesting over-allocated part and acquiring under allocated),
relocation (from one sector the other or from one instrument to other instrument in
the same class) or complete divestment.

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1. 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.
i. 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.
ii. 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.
iii. 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.
iv. 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.

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v. 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.
vi. 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.
vii. 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.
viii.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.

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1. SOLUTION FRAMEWORK
Generic services offering model is going to draw big blank 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.
i. 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.

ii. Universal Service Offering

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 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 inhouse, 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.
iii. 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.
iv. 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.
v. 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.
vi. Flexibility of Technical Architecture

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 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:
✔ 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.
✔ 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?
✔ 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

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 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:
✔ Considering the complexity of business processes and involved business rules,
rule based processing would be the core of processing.
✔ 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.
✔ Decision support and client oriented analytics acquire more importance.
✔ Applications should provide adequate flexibility to incorporate manual
processing interfaces.

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1. SERVICES PROVIDED BY WEALTH MANAGEMENT
INSTITUTIONS
Following are the services provided by the wealth management institutions:
A. CUSTODIAN SERVICES
i. Securities safekeeping
ii. Income collection from securities
iii. Settlement of securities trade as directed
iv. Payment of funds when directed
v. Timely settlement delivery
A. TRUST SERVICES
i. Charitable trust
ii. Revocable trust
iii. Irrevocable life insurance trust
iv. Special need trust
v. Institutional trust
A. RETIREMENT PLAN SERVICES
i. IRA’s custodian or trustee
ii. Defined benefit plan
iii. Defined contribution plan

WEALTH MANAGEMENT VALUE CHAIN

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 WEALTH MANAGEMENT PRACTISE ORIENTATION OVERVIEW

A. Transactors
✔ Product Expert: Handles high-volume transactions involving sophisticated
products or asset classes, such as foreign exchange derivatives.
✔ Investment Broker: Handles transactions involving basic asset classes, such as
equities, fixed income and options.
A. Investment Managers
✔ Investment Advisor: Offers strategic investment planning, as well as playing a
hands-on role in constructing, reviewing and rebalancing client portfolios.
✔ Relationship Manager: Establishes and nurtures client relationships,
delegating portfolio management to internal or external managers.
A. Wealth Planners

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 ✔ Wealth Planner: Offers holistic advice in accordance with client’s finances
and short/long-term goals, such as real estate, retirement and generational
wealth transfer.
✔ Personal CFO: Aspires to provide quasi family-office services, often acting in
a lead discretionary role coordinating with the client’s other trusted advisors.
The significance of these practice-model categories is that each reflects a
different advisory approach, borne of a different perspective. While some
firms claim to have a single practice orientation, many actually use multiple
models in and across regions—and often leverage different models within
their core markets to capitalize on the strengths of individual advisors. As
they move into new markets, firms can create or exacerbate friction among
the different advisory approaches they use. Importantly, practice orientations
need not be mutually exclusive, but the mix of intra-firm practice models does
need to be consciously managed.

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1. ADVANTAGES AND LIMITATIONS
Advantages: Following are the advantages of the wealth management concept.
i. Helpful In Tax Planning: The Wealth management professional always shows the
good path to the customers and provide the service of tax planning. How to minimize
the tax and save more money?
ii. Helpful In Selection of Investment Strategy: Another advantage from the customer
point of view is with the help of WM Professional the customer can easily know the
investment strategy and analyze risk and return.
iii. Helpful In Estate Management: With the help of Wealth management professional.
They can also manage their estate. Estate management is a task to provide objective
administration of their funds tailored to aim in responsible distribution and protection
of their overall estate.
iv. Helpful in forward looking: They can say planning, that recognizes as their estate
grows and changes occurs. They require some team of professionals who help us in
future planning.
v. Helpful for Indian Economy: Banks which are engaged in business of WM earning
revenues from the foreign countries i.e. outsourcing for economy
Disadvantages: Following are the disadvantages of the wealth management concept.
i. WM Reduces The Scope Of Management: Though They all know that management
has existence at all levels of life and society but the term Wealth management only
related with the higher level means rich people, and is not having any plans and
provisions for poor and lower and middle level of society.
ii. Chances of Fraud: Another demerit or limitation of the WM concept is it is not
showing the actual position. The customer doesn’t know about the things going on
with using his Wealth and there may be chances of forgery and fraud with customers.
iii. Actual Picture VS Inflation: What is the actual position of market they don’t know
because everything is done by some WM professionals. So they cannot assume their
position in the market that also results in inflation because economy is unknown
about the actual state. There may be chance that the customers are in risk but they
are showing the false return and vice-versa.

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1. CONSUMER POINT OF VIEW: Wealth Management
PORTFOLIO MANAGEMENT SYSTEM: Portfolio Management System can be
defined as hybrid service provided by portfolio managers, which includes personalized
stock and mutual fund investing. Portfolio managers can be of two kinds, discretionary or
non-discretionary. Discretionary portfolio managers manage the funds of clients
independently on their own accord, while the latter manage the funds according to their
clients’ direction. Any person who is registered with Securities and Exchange Board of
India (Sebi) as a portfolio manager is allowed to offer PMS.
PMS vs. WEALTH MANAGERS & FUND MANAGERS: PMS is completely different
from priority banking and wealth management. Priority banking or wealth management
is the umbrella of products while PMS is a product. So if priority banking and wealth
management is a grocery shop then PMS is a specific grocery. Priority banking is usually
offered to premiere customers who have a relationship manager appointed, who would
advice you on your investments across the products offered by the bank like insurance,
and investment linked products (mutual funds, bonds and unit linked insurance plan).
Mutual funds and PMS differ on the degree of customization, minimum investment and
on the fee structure. Minimum investment required for PMS is more than mutual fund.
Unlike PMS, there is no concept of profit sharing in mutual funds. Also, the level of
customization of your investments is higher in PMS.
HOW TO CHOOSE A PMS?
✔ Investment philosophy
Akhilesh Singh, business head, Emkay Wealth, says, “The most important factor is to
understand the fund manager’s investment philosophy and strategy, which must align
with the investor’s objectives.” Singh adds, “Some portfolio managers structure long-
term portfolios, while some prefer to actively churn the portfolio for higher short-
term returns, which adds to the overall cost and tax liability.” HSBC, for instance, has
a product called Strategic, which is for the long term, while Angel’s Bluechip is for
medium to long-term investors.
✔ Scheme benchmarks.
Make sure that the portfolio is benchmarked to an appropriate index. This helps
measure the performance of the scheme and the portfolio manager. Benchmarks are
important also as profit-sharing is linked to the performance of the portfolio above
the benchmark. So, an aggressive portfolio benchmarked to a low-return index will

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 mean higher over-the-benchmark returns. This means that you will have to share a
larger portion of your profit. The wrong benchmark distorts the performance of the
fund.
✔ Minimum investment.
There are many portfolio managers whose thresholds are much higher than the Sebi-
mandated minimum of Rs 5 lakh. Choose a scheme that fits the size of your portfolio.

✔ Returns.
It is difficult to judge a scheme’s performance based on returns, as it may vary from
the returns of an investor. Also, depending on the time of entry, an investor’s returns
may vary from that of others. Before signing the contract, make sure your portfolio
manager has a fair record of surpassing the returns from the benchmark index for
numerous years.
✔ Cost structure.
Portfolio managers usually have two kinds of charges—management fee, which is
fixed, and profit sharing, which is variable. You can also pay a fully fixed fee.
Further, if the portfolio is churned frequently, it adds to the cost due to higher tax and
brokerage. On each transaction you pay brokerage and short-term gains tax of 20 per
cent. Management fee ranges from scheme to scheme. You could opt for a higher
performance-linked charge as it puts pressure on the fund manager to perform better
as he has a share in the profits.
✔ Frequency of disclosure.
This varies from firm to firm, and largely depends on the agreement between the
investor and the company. Most NAVs are disclosed daily, but you can opt for a
company that also discloses portfolios daily.
✔ Broking house.
If the broker is internal, it may be possible that your portfolio is churned frequently.
Usually, asset management companies have external brokers, while some, have both
external as well as internal broking.
✔ Assets under management (AUM).

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 Though higher AUMs do not guarantee higher returns, it remains an important factor.
A low AUM could be an indicator of poor performance. It is believed that Rs 100
core AUM is a healthy floor.

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1. CONCEPT OF ASSET CLASSES
11.1 ASSET MIX
Asset mix is the allocation of a portfolio between asset classes, it balances return and
risk. Returns are a combination of the income from an investment and the price
appreciation over the period. Risk is usually proximate by the “standard deviation” of
returns, how much the return change about the long-term average.
1.2 LIST OF DIFFERENT ASSET CLASSES
i. Fixed deposit
ii. Mutual funds
iii. Equity
iv. Commodities
v. Art fund
vi. Real-estate fund
vii. Insurance product
viii.Structured product
ix. Gold
x. Currency
xi. Oil

➢ FIXED DEPOSIT
FDs are the most popular today.
With FDs you deposit a lump sum of money for a fixed period ranging from a
few weeks to a few years and earn a pre-determined rate of interest. FDs are
offered by both banks and companies though putting your money with the latter
is generally considered riskier.
Merits and Demerits: The main advantage is that FDs from reputed banks are a
very safe investment because such banks are carefully regulated by the Reserve
Bank of India, RBI, the banking regulator in India.
Note that company FDs isn’t as safe as bank FDs because if the company goes
bankrupt you may lose your money. Make sure you check the credit rating of a
company before investing in its FDs. You should be especially wary of

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 companies which offer interest rates significantly higher than the average to
attract your money.
The other advantage of FDs is that you have the option of receiving regular
income through the interest payments that are made every month or quarter.
This option is especially useful for retirees. On the flip side, a fixed deposit
won’t give you the same returns that you may get in the stock markets. For
instance a stock-portfolio may rise by 20-30 per cent in a good year whereas a
fixed deposit typically earns only 7-10 per cent.
A fixed deposit also doesn’t offer protection against inflation. If inflation rises
steeply during the maturity of the FD your inflation adjusted return will fall.
Interest rates on FDs: The rate of interest on FDs varies according to the
maturity with longer deposits generally earning a higher interest rate. Interest
paid on a fixed deposit is paid either monthly or quarterly according to the
investor’s choice. So if you invest Rs 3 lakhs in a one year fixed deposit which
pays 8 per cent you can earn Rs 2,000 of interest every month or Rs 6,000 of
interest every quarter.
Effective return: Before you invest in FDs you need to understand the concept
of effective return which is higher than the rate of interest on the FD. Effective
return is relevant if you choose to reinvest your interest every year which means
that you will be earning compound interest.
➢ MUTUAL FUNDS
A Mutual fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as
disclosed in the offer document.
Investments in securities are spread across a wide cross-section of industries
and sectors and thus the risk is reduced. Diversification reduces the risk because
all stocks may not move in the same direction in the same proportion at the
same time. Mutual fund issues units to the investors in accordance with
quantum of money invested by them. Investors of mutual funds are known as
unit holders.
The profits or losses are shared by the investors in proportion to their
investments. The mutual funds normally come out with a number of schemes
with different investment objectives which are launched from time to time. A
mutual fund is required to be registered with Securities and Exchange Board of
India (SEBI) which regulates securities markets before it can collect funds from
the public.

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 NAV (net asset value): The performance of a particular scheme of a mutual fund
is denoted by Net Asset Value (NAV) of a Scheme.
Mutual funds invest the money collected from the investors in securities
markets. In simple words, Net Asset Value is the market value of the securities
held by the scheme. Since market value of securities changes every day, NAV
of a scheme also varies on a day-to-day basis. The NAV per unit is the market
value of securities of a scheme divided by the total number of units of the
scheme on any particular date.
TYPES OF MUTUAL FUNDS
a) Schemes according to Maturity Period: A mutual fund scheme can be
classified into open-ended scheme or close-ended scheme depending on
its maturity period.
i. Open-ended Fund/ Scheme
An open-ended fund or scheme is one that is available for subscription
and repurchase on a continuous basis. These schemes do not have a fixed
maturity period. Investors can conveniently buy and sell units at Net Asset
Value (NAV) related prices after deduction of exit load, if any which are
declared on a daily basis. The key feature of open-end schemes is
liquidity.
ii. Close-ended Fund/ Scheme
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7
years. The fund is open for subscription only during a specified period at
the time of the launch of the scheme. Investors can invest in the scheme at
the time of the initial public issue In order to provide an exit route to the
investors; some close-ended funds give an option of selling back the units
to the mutual fund through periodic repurchase at NAV related prices.
These mutual funds schemes disclose NAV generally on a weekly basis.
a) Schemes according to Investment Objective: A scheme can also be
classified as growth scheme, income scheme, or balanced scheme
considering its investment objective. Such schemes may be open-ended or
close-ended schemes as described earlier. Such schemes may be classified
mainly as follows:
i. Growth / Equity Oriented Scheme
The aim of growth funds is to provide capital appreciation over the
medium to long-term. Such schemes normally invest a major part of their

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 corpus in equities. Such funds have comparatively high risks. These
schemes provide different options to the investors like Growth option,
dividend option, capital appreciation, etc. and the investors may choose an
option depending on their preferences. The investors must indicate the
option in the application form. The mutual funds also allow the investors
to change the options at a later date. Growth schemes are good for
investors having a long-term outlook seeking appreciation over a period of
time.
ii. Income / Debt Oriented Scheme
The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such
as bonds, corporate debentures, Government securities and money market
instruments. Such funds are less risky compared to equity schemes. These
funds are not affected because of fluctuations in equity markets. However,
opportunities of capital appreciation are also limited in such funds. The
NAVs of such funds are affected because of change in interest rates in the
country. If the interest rates fall, NAVs of such funds are likely to increase
in the short term and vice versa. However, long-term investors may not
bother about these fluctuations.
iii. Balanced Fund
The aim of balanced funds is to provide both growth and regular income
as such schemes invest both in equities and fixed income securities in the
proportion indicated in their offer documents. These are appropriate for
investors looking for moderate growth. They generally invest 40-60% in
equity and debt instruments. These funds are also affected because of
fluctuations in share prices in the stock markets. However, NAVs of such
funds are likely to be less volatile compared to pure equity funds.
iv. Money Market or Liquid Fund
These funds are also income funds and their aim is to provide easy
liquidity, preservation of capital and moderate income. These schemes
invest exclusively in safer short-term instruments such as treasury bills,
certificates of deposit, commercial paper and interbank call money,
government securities, etc. Returns on these schemes fluctuate much less
compared to other funds. These funds are appropriate for corporate and
individual investors as a means to park their surplus funds for short
periods.

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 v. Gilt Fund
These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate due
to change in interest rates and other economic factors as is the case with
income or debt oriented schemes.
vi. Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in
the securities in the same weightage comprising of an index. NAVs of
such schemes would rise or fall in accordance with the rise or fall in the
index, though not exactly by the same percentage due to some factors
known as "tracking error" in technical terms. Necessary disclosures in this
regard are made in the offer document of the mutual fund scheme. There
are also exchange traded index funds launched by the mutual funds which
are traded on the stock exchanges.
vii. Fund of funds
Are mutual funds which invest in other underlying mutual funds (i.e., they
are funds comprised of other funds). The funds at the underlying level are
typically funds which an investor can invest in individually. A fund of
funds will typically charge a management fee which is smaller than that of
a normal fund because it is considered a fee charged for asset allocation
services. The fees charged at the underlying fund level do not pass
through the statement of operations, but are usually disclosed in the fund’s
annual report, prospectus, or statement of additional information. The
fund should be evaluated on the combination of the fund-level expenses
and underlying fund expenses, as these both reduce the return to the
investor.
Most FoFs invest in affiliated funds (i.e., mutual funds managed by the
same advisor), although some invest in funds managed by other
(unaffiliated) advisors. The cost associated with investing in an
unaffiliated underlying fund is most often higher than investing in an
affiliated underlying because of the investment management research
involved in investing in fund advised by a different advisor. Recently,
FoFs have been classified into those that are actively managed (in which
the investment advisor reallocates frequently among the underlying funds
in order to adjust to changing market conditions) and those that are

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 passively managed (the investment advisor allocates assets on the basis of
on an allocation model which is rebalanced on a regular basis).
The design of FoFs is structured in such a way as to provide a ready mix
of mutual funds for investors who are unable to or unwilling to determine
their own asset allocation model. Fund companies such as TIAA-CREF,
American Century Investments, Vanguard, and Fidelity have also entered
this market to provide investors with these options and take the “guess
work” out of selecting funds. The allocation mixes usually vary by the
time the investor would like to retire: 2020, 2030, 2050, etc. The more
distant the target retirement date, the more aggressive the asset mix.
viii.Hedge funds
Hedge funds in the United States are pooled investment funds with loose
SEC regulation and should not be confused with mutual funds. Some
hedge fund managers are required to register with SEC as investment
advisers under the Investment Advisers Act. The Act does not require an
adviser to follow or avoid any particular investment strategies, nor does it
require or prohibit specific investments. Hedge funds typically charge a
management fee of 1% or more, plus“performance fee” of 20% of the
hedge fund’s profits. There may be a “lock-up” period, during which an
investor cannot cash in shares. A variation of the hedge strategy is the
130-30 fund for individual investors.

➢ EQUITY INVESTMENTS
Generally refers to the buying and holding of shares of stock on a stock market by
individuals and funds in anticipation of income from dividends and capital gain as
the value of the stock rises. It also sometimes refers to the acquisition of equity
(ownership) participation in a private (unlisted) company or a startup (a company
being created or newly created). When the investment is in infant companies, it is
referred to as venture capital investing and is generally understood to be higher
risk than investment in listed going-concern situations.
✔ Direct holding and pooled funds
The equities held by private individuals are often held via mutual funds or
other forms of pooled investment vehicle, many of which have quoted prices
that are listed in financial newspapers or magazines; the mutual funds are
typically managed by prominent fund management firms (e.g. Fidelity
Investments or The Vanguard Group). Such holdings allow individual

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 investors to obtain the diversification of the fund(s) and to obtain the skill of
the professional fund managers in charge of the fund(s). An alternative,
usually employed by large private investors and pension funds, is to hold
shares directly;in the institutional environment many clients that own
portfolios have what are called segregated funds as opposed to, or in addition
to, the pooled e.g. mutual fund alternative.
➢ COMMODITIES MARKET
Commodity markets are markets where raw or primary products are exchanged. These raw
commodities are traded on regulated commodities exchanges, in which they are bought and
sold in standardized contracts.
➢ ART FUND
Wealth management now includes art, real estate investments. With prices of
paintings rising 10 times in the last two years, three new financial entities have
launched ‘art advisory’ services as part of Wealth management services. While
Citibank has been providing art advisory services like art insurance, art storage and
using art as tradable collateral for some time, the recent surge in prices has driven
Yes Bank, ABN Amro and Dawnay Day to start this service.
The works of M.F. Hussain, Jatin Das or Anjolie Ela Menon are sought after by art
lovers not only for their aesthetic value but also as an asset. Art galleries are
involved in art valuations, i.e. mapping the pricing history of an artist or research
on art.
Art is now being treated as an investment and high net worth individuals are
prompting banks to look at alternative asset classes, such as art or real estate, for
investment as a part of Wealth management products.
✔ Diversified portfolio
For individuals looking at alternative investments rather than the usual
investments in equity-related products.
Investments in alternative asset classes give clients a diversified portfolio
across a variety of asset classes.
Yes Bank is expected to launch a Wealth management service that will offer
investment in real estate, art and jeWellery. It expects to kick-start the real
estate service during this fiscal.

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 The bank is planning tie-ups with real estate consultant agencies. The service
will largely cater to non-resident Indians seeking opportunities to invest in real
estate in the country.

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✔ Tie-up with galleries
In the art segment, tie-up with art galleries, “Contemporary Indian art will be at focus.
Hiring specialists in the field for advisory,” High networth individuals in India are
increasingly looking at contemporary Indian art as a good investment. With the advent
of private art funds and galleries, art is becoming an emerging asset class.
ABN Amro advises clients on investment in art. However, the execution depends on
the client in conjunction with experts in the field.
It is difficult to generalize. The majority of clients begin with an investment of around
4-5 per cent of their portfolio,” targets customers with Rs 2-2.5 crore threshold for
investment.
According to the banks, some clients also invest in these asset classes to minimize risk
because they are looking at protecting their capital. Investment in these asset classes
requires a review of client’s age, personal ability to take risk and most importantly,
client’s interest. What percentage of assets would be allocated to alternative assets
would depend on the client’s interest and ability to take risk.
➢ REAL ESTATE FUNDS
India Real Estate Fund is a significant component of the Indian realty market
flooded with Indian and foreign financial institutions. The growing increase in the
industrial, commercial and residential projects have boosted the real estate market
in India. This has thrown open unlimited scope for the incoming of the India Real
Estate Funds. The profits have encouraged financial assistance from not only
domestic funds but also lured many foreign investors to participate in the India Real
Estate Fund.
The cooperating assistance from the government has further encouraged liquidity
flow into the India real estate market sector. The foreign contributions in the India
Real Estate Fund have been witnessing a steady rise of 40%-45% per year. The
domestic financial institutions have also build up their investments like their
foreign counterparts. These combined participations from both along with
contributions of the corporate houses have accelerated the growth of India Real
Estate Fund.
✔ Leading India Real Estate Fund: Some of the leading India Real Estate Fund are :
• HDFC Property Fund- HDFC India Real Estate Fund (HI-REF), the first
scheme HDFC Property Fund, invests in all the stages of the real estate
projects.

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 • DHFL Venture Capital Fund- DHFL Venture Capital Fund, promoted by
Dewan Housing, has a focus on developing properties rather than investing in
real estate.
• Kshitij Venture Capital Fund - Kshitij Venture Capital Fund, a group venture
of Pantaloon Retail India Ltd., will be deploying funds exclusively in
developing malls especially in western and southern India.
• India Advantage Fund (ICICI)
• Kotak Mahindra Realty Fund

✔ India Real Estate Mutual Fund: The further involvement of the real estate mutual
funds has improved the quality of the construction practices. The 10th Five-Year Plan
has proposed that Securities and Exchange Board of India would regulate the India
real estate mutual funds.
✔ Real Estate Investment Trusts: The primary difference between Real Estate
Investment Trusts and a mutual fund is that investments made in the former are
traded in real estate stocks and not invested in company stocks moreover they
provides a heavier liquidity than the mutual funds.
India Real Estate Foreign Funds- The significant international investments
in the India Real Estate Fund are like:
1.Warburg Pincus
2.Blackstone Group
3.Broadstreet
4.Morgan Stanley Real Estate Fund
5.Columbia Endowment Fund
6.Hines
7.Tishman Speyer
8.Sam Zell’s Equity International
➢ INSURANCE PRODUCTS
✔ General insurance
The modern concept of insurance practices in India started during the British
rule in 1818 when Oriental Life Insurance Company was established in
Calcutta. India became independent from British rule in 1946, and by 1956 the
insurance sector was nationalized, with the Life Insurance Corporation of India
created by combining almost 245 private life insurance companies; 107 private
non-life companies combined in 1973 to form the General Insurance
Corporation. But since the very purpose of nationalizing the insurance sector
got sidelined due to the monopolistic power it enjoyed, coupled with the

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 bureaucratic mindset of LIC and GIC, insurance again was opened to private
players in 1999. During 2000-2006, almost 15 life and 13 non-life private
insurance players (mostly joint ventures between Indian and foreign players)
started operations in India, indicating the willingness of foreign institutional
investors to enter the Indian insurance sector. But through all these major
changes the actual impact was felt only in major urban areas, while the vast
majority of the rural population was excluded from the insurance sector.
Around the world, scholars and financial experts believe that in the next 5 to 10
years, India and China are going to be the targets for insurance companies. So
far, most of the insurance companies in India are not actively tapping the huge
potential of the rural markets. Unless the rural markets are given priority
consideration, all predictions about future insurance industry potential in India
are going to be distant dreams. The present insurance business is not even able
to penetrate 20% to 30% of the total population of 1.095 billion, and the
projected population figure by 2025 will be approximately 1.501 billion. The
order of the day will be to refocus on micro insurance in India to capture the
huge potential of rural customers
✔ Unit Linked Insurance plan (ULIP)
Unit Linked Insurance Plan (ULIP) provides for life insurance where the policy
value at any time varies according to the value of the underlying assets at the
time. ULIP is life insurance solution that provides for the benefits of protection
and flexibility in investment. The investment is denoted as units and is
represented by the value that it has attained called as Net Asset Value (NAV).
ULIP came into play in the 1960s and is popular in many countries in the
world. The reason that is attributed to the wide spread popularity of ULIP is
because of the transparency and the flexibility which it offers.
As times progressed the plans are also successfully mapped along with life
insurance need to retirement planning. In today’s times, ULIP provides
solutions for insurance planning, financial needs, financial planning for
children’s marriage planning also can be done with this.

➢ STRUCTURED PRODUCT
A structured product is generally a pre-packaged investment strategy which is
based on derivatives, such as a single security, a basket of securities, options,
indices, commodities, debt issuances and/or foreign currencies, and to a lesser
extent, swaps. The variety of products just described is demonstrative of the fact

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 that there is no single, uniform definition of a structured product. A feature of some
structured products is a “principal guarantee” function which offers protection of
principal if held to maturity. For example, an investor invests 100 dollars, the issuer
simply invests in a risk free bond which has sufficient interest to grow to 100 after
the 5 year period. This bond might cost 80 dollars today and after 5 years it will
grow to 100 dollars. With the leftover funds the issuer purchases the options and
swaps needed to perform whatever the investment strategy is. Theoretically an
investor can just do this themselves, but the costs and transaction volume
requirements of many options and swaps are beyond many individual investors.
As such, structured products were created to meet specific needs that cannot be met
from the standardized financial instruments available in the markets. Structured
products can be used as an alternative to a direct investment, as part of the asset
allocation process to reduce risk exposure of a portfolio, or to utilize the current
market trend.
Composition
Structured products are usually issued by investment banks or affiliates thereof.
They have a fixed maturity, and have two components: a note and a derivative. The
derivative component is often an option. The note provides for periodic interest
payments to the investor at a predetermined rate, and the derivative component
provides for the payment at maturity. Some products use the derivative component
as a put option written by the investor that gives the buyer of the put option the
right to sell to the investor the security or securities at a predetermined price. Other
products use the derivative component to provide for a call option written by the
investor that gives the buyer of the call option the right to buy the security or
securities from the investor at a predetermined price.
Risks
The risks associated with many structured products, especially those products that
present risks of loss of principal due to market movements, are similar to those
risks involved with options. The potential for serious risks involved with options
trading are well-established, and as a result of those risks customers must be
explicitly approved for options trading.
➢ GOLD
✔ Factors influencing pricing of gold
Today, like all investments and commodities, the price of gold is ultimately
driven by supply and demand, including hoarding and disposal. Unlike most
other commodities, the hoarding and disposal plays a much bigger role in

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 affecting the price, because most of the gold ever mined still exists and is
potentially able to come on to the market for the right price. Given the huge
quantity of hoarded gold, compared to the annual production, the price of gold
is mainly affected by changes in sentiment, rather than changes in annual
production.
According to the World Gold Council, annual mine production of gold over the
last few years has been close to 2,500 ton. About 3,000 ton goes into jewelry or
industrial/dental production, and around 500 ton goes to retail investors and
exchange traded gold funds. This translates to an annual demand for gold to be
1000 ton in excess over mine production which has come from central bank
sales and other disposal.
Central banks and the International Monetary Fund play an important role in the
gold price. At the end of 2004 central banks and official organizations held 19
percent of all above-ground gold as official gold reserves. The Washington
Agreement on Gold (WAG), which dates from September 1999, limits gold
sales by its members (Europe, United States, Japan, Australia, Bank for
International Settlements and the International Monetary Fund) to less than 400
ton a year. European central banks, such as the Bank of England and Swiss
National Bank, have been key sellers of gold over this period.
Although central banks do not generally announce gold purchases in advance,
some, such as Russia, have expressed interest in growing their gold reserves
again as of late 2005. In early 2006, China, which only holds 1.3% of its
reserves in gold, announced that it was looking for ways to improve the returns
on its official reserves. Many bulls hope that this signals that China might
reposition more of its holdings into gold in line with other Central Banks.
• In general, gold becomes more desirable in times of:
i. Bank failures
When dollars were fully convertible into gold, both were regarded as
money. However, most people preferred to carry around paper banknotes
rather than the somewhat heavier and less divisible gold coins. If people
feared their bank would fail, a bank run might have been the result. This is
what happened in the USA during the Great Depression of the 1930s,
leading President Roosevelt to impose a national emergency and to outlaw
the holding of gold by US citizens known as Executive Order 6102 which
has since been ended.
ii. Low or negative real interest rates

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 If the return on bonds, equities and real estate is not adequately
compensating for risk and inflation then the demand for gold and other
alternative investments such as commodities increases. An example of this
is the period of Stagflation that occurred during the 1970s and which led
to an economic bubble forming in precious metals.
iii. War, invasion, looting, crisis
In times of national crisis, people fear that their assets may be seized and
that the currency may become worthless. They see gold as a solid asset
which will always buy food or transportation. Thus in times of great
uncertainty, particularly when war is feared, the demand for gold rises.
➢ CURRENCY
The modern hedge fund manager’s liberal tongue-in-cheek definition is: “If it moves up
and down independently, then it’s an asset class.” While currencies surely do a lot of
moving up and down, they also stand out for other reasons:
✔ The global foreign-exchange (FX) market can be considered by far the
largest marketplace in the world, not only geographically but also with
reference to trading volume. The daily turnover is growing constantly and
has long ago surpassed the $1 trillion mark: forty times the size of world
trade.
✔ An important difference between currencies and other markets is that
currency prices allow us to analyze also their reciprocal values. A falling
dollar/yen is synonymous with a rising yen because the dollar can be
expressed in yen and, vice versa, the yen in dollars. By comparison, the
dollar is never measured in units, as the Dow Jones for example.
✔ For the same reason the expression ‘short sale’ – so much maligned in
equity trading – does not exist in currency trading because the short sale of
a currency is equivalent to a purchase of the other currency.
✔ For similar reasons, the currency market cannot suffer a ‘crash’ (such as the
stock market crashes of 1929 or 1987) through which the wealth of all
market participants dwindles. In the currency market eachloss is matched by
an equivalent gain of the counter-party.
✔ Another unique feature of the currency market is that it is active without
interruption ‘round-the-clock’.
Portfolio composition of currency

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 Modern portfolio theory postulates that relative risk can be reduced by
diversification into at least six or more components. This is not necessarily true
for currency portfolios. Most delivering percentage returns. The index serves as
a proxy for available currency manager portfolio returns in general and has the
added benefit of being uncorrelated to returns of other asset classes. Low
correlation, liquidity and transparency are good enough reasons for currencies
to be considered a prime candidate for inclusion in any investment portfolio.

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1. COMPANIES PROVIDING WEALTH MANAGEMENT
SERVICES
5.2 HSBC FINANCIAL PLANNING SERVICES
Introduction:
The customer’s portfolio is managed in a fully discretionary manner by a
selection of ‘Best of Breed’ third party panel of Portfolio Management
Service providers.
The main objective is to help customers preserve their wealth in line with
their investment objectives.
Inflation, falling interest rates and fluctuating market conditions requires
planning of finances carefully. Celebrate important occasions in the future by
managing your Wealth Well now. HSBC’s Financial Planning Services offer
assistance to secure the future. Their Financial Planning Services are
available for existing HSBC customers and are free of cost.
Asset classes used:
1. Traditional investments:
i. Direct equity advisory: Customized advice on direct equity portfolios
based on customer’s risk profile and specific requirements. The
proposition, backed by comprehensive in-house research, entails building
portfolios with fresh funds or restructuring legacy portfolios to provide
better risk adjusted returns.
ii. Mutual funds: HSBC’s open architecture philosophy and ‘Best of Breed’
selection of debt and equity mutual funds allows customers to buy the top
performing mutual funds available in the market.
1. Non-traditional investments:
i. Structured products: Combinations of derivatives and financial
instruments create structures that have significant risk/return features
that may not be otherwise available in the marketplace. Structured
products are designed to provide investors with highly targeted
investments tied to their specific risk profiles, return requirements and
market expectations.
ii. Real estate venture funds: To provide customers with diversification
avenues which reduce the overall portfolio risk, HSBC brings to
customers opportunities in real estate space through venture capital
funds available in the market.
Asset size:

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 Investment philosophy:
Need based approach with innovation
HSBC team works to suggest financial solutions based on customer’s risk
appetite, profile and needs. Using customer insight, HSBC have developed a
financial planning tool. It analyses and generates a comprehensive financial
plan based on the customer’s existing financial position, expected future cash
flows, inflation and identified financial objectives. Their Relationship
Managers extensively use this tool to do financial planning for customers
taking into account their long-term objectives and / or medium to short term
requirements.
For consistent and uniform delivery of financial planning as per the defined
customer need centric process, there is a dedicated, independent Sales Quality
team to conduct regular quality checks close to the point-of-sale.
White list funds
The concept of white listed funds lies in the bank’s open architecture model, which
lays emphasis on meritocracy. They carefully look at various products available in
the market and after thorough due diligence select product providers / schemes which
adequately correspond to the needs of our customers. White listed funds are selected
based on various proprietary models that are used for intense quantitative analysis.
These funds help their clients build a long-term portfolio and in achieving long-term
financial goals.

Technology is a potent weapon

For consistency in the manner in which their Relationship Managers identify
customer needs and suggest suitable solutions, HSBC extensively leverage
technology to support their sales process. HSBC’s indigenously developed
systems like Wealth Management System, Financial Planning System and
Customer Relationship Management System have been built basis customer
insights. They constantly look at evolving these systems to address sales
process requirements arising out of dynamically changing market conditions
and customer needs. HSBC therefore treat technology as a vital ally in
executing their philosophy of customer need centricity in a structured and
uniform fashion.
Sharing the knowledge
HSBC frequently organize wealth management events and investment
seminars, where the employees can interact with investment experts and fund

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 managers. This provides them a platform to know and understand the market
and economic developments and trends.

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HSBC – Factors for success
The journey from Shanghai to Mumbai
HSBC has established strong business in all key areas of commercial banking. In
Corporate Banking, HSBC has effective long-term relationships with seven of the ten
leading companies and eight of the ten multinational corporations in India, providing the
full range of corporate banking services to these customers. HSBC has leveraged upon its
global experience to innovate products and services to suite local requirements.
Maintaining long term relationships and constant product innovation have been keen
factors contributing to the success of HSBC in India.

A pioneer in computerization and product innovation

HSBC India has retained the HSBC Group’s pioneering spirits by being an active partner
in the development of the Indian banking industry. The bank launched the first ATM in
India way back in 1987. The bank was also one of the first banks in India to achieve an
electronic banking customer interface and this has helped it generate higher than market
growth rates for the Trade service business.
Cashing on the falling interest rate scenario in the country, HSBC was one of the first
banks to start the innovative product offering – floating interest rate home loans. The
home loan segment has grown at a CAGR of 32 per cent over the last 5 years. Currently,
almost 75 per cent of incremental home loans are disbursed at floating rates.
MIS, Management Information System: There is an extensive use of MIS which gives
RM an opportunity to tap potential business. RM’s get daily report like inflow-outflow
report, high value report and liability tracker. High value report displays all high value
transaction that has taken place during the day and liability tracker keeps a track on the
net liability status of the bank.
RIS, Retail Investment System: Retail investment system integrates systems like WMS,
Wealth Explorer, RIS Branch and HUB to offer a consolidated view of all the
investments with an ability to let customers drive their own investment priority through
simple purchase processes and intuitive interface. RIS is a perfect example to prove that
no one can beat HSBC in terms of the technology they use to facilitate the customers.
RIS is an attempt to bring the technology to the desk of the customer to help them make
wise decisions. It allows them to trade in a wide variety of mutual fund schemes and
monitor their performance on-line. Customer can also get regular market insights and
updates and also help them to access their risk appetite. Customers can also have detailed
information about various mutual fund schemes through mutual fund tracker.
Strong retail focus with excellent CRM processes

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Anticipating a retail banking boom in India the bank acquired the Non-Fund activities
from Gujarat Lease Financing Ltd. in 1999. In the year 2000, the bank acquired the
Chandigarh branch license from Deutsche Bank. In 2002, HSBC acquired retail banking
business from BNP Paribas and the Retail Banking Operations in Kolkata from Bank of
Tokyo-Mitsubishi. Currently HSBC has 47 branches and three more to come!

Emerging as a complete financial services solution provider

HSBC, in India has established as a complete financial service solution provider. It has
expanded its customer base by extending its product range to include a variety of
investment products. It has established a reputation in India of being a provider of
international quality investments and services.
The company launched its Asset Management Company (AMC) in December 2002 and
has been able to achieve one of the highest growths in assets under management in India.
The HSBC group has got into insurance distribution through both the corporate agency
as well as through the insurance broking channel. For life insurance, it was earlier tied up
with Tata AIG but now is tied up with HSBC Canara Oriental Bank of Commerce.
HSBC has also adopted a very effective cross selling strategy to sell insurance to its
million plus customer base of account and credit card holders. Recently HSBC was also
involved in the launch of NFO of Reliance infrastructure Mutual Fund.

International recognition & support

A premier customer receives personal recognition and local support when they travel for
work, leisure, or move overseas. Even if a customer is in abroad he can always enjoy
privileged access to all the banking services like access to their relationship manager and
India premier call center at any of the international premier centers. International premier
centers provide useful local information which includes information about local places to
eat, hotspots to visit and things to do. Even a customer can also use the premier lounge
for giving some presentation. A dedicated 24-hour hotline support is provided during
emergency services like emergency encashment services, lost/stolen card reporting and
credit card replacement on the next working day.

Around the globe!

A Premier Debit Card holder can access up to three accounts, premier saving account and
2 more additional current/saving accounts through worldwide ATM network which
consist of 1 million ATM’s and 14 million merchant establishments worldwide. The
withdrawal limit is up to Rs. 75,000/- per day. Premier Debit Card is internationally valid

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and very handy when a customer travels abroad. HSBC also provides an International
Needs Review in case a customer needs banking services overseas. The International
Banking Center can arrange to open an overseas account even before a customer leaves
for the new country. A dedicated international expert is assigned to manage the entire
process of establishing the accounts in the new country. The account number can be
generated within three working days. The bank can also arrange for the transfer of the
credit history of the customer to facilitate the access to similar levels of the credit in the
overseas country. HSBC also provides free fund transfer facility across countries via
HSBC internet banking, comprehensive international service website (this service is
subject to local regulations) under Me2Me service.

Global View: A truly global internet banking experience

This is an exclusive service provided by HSBC premier which no other bank is
providing. With the help of HSBC Premier Global View, a customer can view and
manage their accounts held in different countries conveniently from any location with
one single login. A customer can also launch personal internet banking from global view
for accounts located in other countries, once these accounts are linked on Global View.

Beyond times or thinking ahead!

HSBC is a bit conservative in its approach as there is a lot of paper work involved and
compliance is a major issue and taken very seriously. This helps the bank to maintain its
highest ethical standards for which it is known worldwide. Because of the prevalent high
ethical standards the company was able to survive the latest economy turmoil which
resulted in many banks going down just because of the use of unethical practices. The
financial planning managers have to do planning, servicing and auditing. Surprise audits
are done to keep a check on the employees and preventing them from following unethical
practices. While other banks don’t stress on much paper work thus compromising on
compliance issues. This has lead to use of malpractices in the bank like opening fake
accounts to increase the numbers so as to impress their seniors. Many bank accounts are
left without any balance. There is a high probability of such customers default on their
credit cards.

Performance through people

HSBC has been rated the best employer among banks for the year 2008 by BT Mercer
Best Employer Survey, India published in Business Today which points towards
company’s HR policy. HSBC aspires to be recognized as a world class function
operating with uncompromising integrity, confidently enabling the business to execute

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the people strategy. This vision is secured through continuous in-house events which
keeps the spirit of the staff high.
There are themes issued every year to give the work a fresh perspective and approach.
This year’s theme “DO SEIZE THE DAY” motivates the employees to take every day as
a new and end the day with a star performance. There are posters of these themes all
around the back office. The performance statistics are displayed on the performance
board so that the employees can have an idea where they stand and what is the target to
be achieved.

“A sales culture is about transferring our enthusiasm of our products

and services to the customer”
Financial planners and relationship managers assist clients in identifying their financial
needs and selecting insurance and investment products to meet these needs. The
approach of the HSBC staff is not focused on sales rather they are focused on first
finding the financial needs and requirements of the customer and suggesting accordingly.
This way they keep the interest of the customer as the first priority rather than selling
their products. The staff ensures that there is no product pushing nor there is offering of
wrong inappropriate products to the customers. Hence the customers are satisfied with
the returns they get from their investments which results in more satisfied and happy
customers.

The sales culture of HSBC:

i. Recognizing a customer’s need
ii. Agreeing on these needs with the customer
iii. Outlining alternative course of action
iv. Implementing the customer’s chosen course of action
v. Securing the deal by ensuring customer loyalty through lasting quality service

Change, the only permanent thing in business

Clients evolve with time in terms of investment objective, time horizon, risk appetite and
so on. HSBC service model provides enough flexibility to accommodate these changes.
This helps in better service of the customer and a longer time scale. This flexible
approach helps HSBC to retain customers for a longer duration. This also helps HSBC to
cross sell other bank products as the customers are aware and satisfied with the service
standards.

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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. HSBC believes in investing heavily in human
processes to groom and retain a team on competent relationship managers with cross-
functional skills. The relationship managers at HSBC are the best in the business with
excellent customer satisfaction rate.

STABLE AND COMMENDABLE

HSBC boasts of the stability that they carry with every relationship with the customers.
There is a very less rate of relationship managers leaving the job. Hence the customer is
assured of one relationship managers looking after his money. Whereas in other banks
like ABN-AMRO, Citi Bank and Standard chartered the rate of relationship managers
leaving the job is high. So when the results of the investment decisions taken are about to
show up the relationship manager has already left the job and customer is left with no
assistance. The new relationship manager issued brings up a new investment plan. The
customer hence is not satisfied.

The times are uncertain. The relationship isn’t.

HSBC actively promotes Together Further Forever concept, an initiative which brings
the idea of unity leading to progress. All the departments are encouraged to work
together in coherence by complimenting and supplementing each other by giving leads
and new prospect customers. This way HSBC has managed to increase the customer base
and also increase the customer satisfaction by referring business to other departments.
But there are few roadblocks being experienced by the employees in efficiently
implementing this concept. There are multiple layers involved in the process while
sourcing these accounts like SME, MME, LLC and each team has their own targets for
account opening, FDs etc, and they do not appear to follow any process flow for passing
leads across teams. Further, if a customer has a mutual fund investment relationship on
his corporate account the same is ignored for computation of his AQB relationship value
and he is charged every quarter. The corporate Banking team is not forthcoming in
reversing these charges as the credit for business has been enjoyed by PFS. Likewise
there are many other limitations like no dedicated tracking system but the solution is in
the hands of employees only. If they will seriously pursue this concept it will work. This
is too brilliant to fail if implemented properly.

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The MALL concept
HSBC has always looked at the business from different angle from what other banks see.
And this leads to their difference in their approach towards doing business. HSBC is
actively following what they call it as MALL concept. Instead of calling their banks as
branches they call it MALLs. This concept promotes the idea of one-stop for all financial
needs. In malls customer have a wide variety of products to choose from which includes
consumer goods, medical goods, electronics etc. When a customer goes to the mall he is
given a cart in which he can put all the items that he wishes to purchase. HSBC aims to
come up as a bank which can satisfy all the financial needs of the customer like a mall.

LEVERAGING THE INDIA ADVANTAGE

Business process outsourcing for international operations
In order to maintain its profitability levels, streamline its costs, improve productivity and
cut bureaucracy, HSBC Group has started outsourcing its back office transactions
processing and software development activities to India. It has captive BPO centers at
Hyderabad, Bangalore, Vishakhapatnam and many more.

Software development
To leverage the software expertise available in India, the banks has setup a software
development centre in Pune for developing solutions for HSBC Group’s offices
worldwide.

HSBC- Key Issues

Hello!!! Anybody home?
Unlike other stream of financial services, mostly being transactional 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. HSBC lacks in this aspect as it is overly focused
on compliance issues. HSBC Premier Customers, which are the top end customers of the
bank, are not provided with some facilities which other banks are providing like cash
pick up from home etc and this might lead to HSBC loosing on the customer service
front. HSBC tries to play a very safe game without any compromises on the compliance
issues.

Unleash the hidden power

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HSBC is not very aggressive in terms of market approach. Earlier HSBC focused only on
selling equity and also maintained their policy of entertaining high net worth clients.
HSBC always focused more on quality rather than on numbers. This approach allowed
other banks like Citi Bank and ABN AMRO to take the lead as they were aggressive
from the beginning. Now HSBC is changing its approach and is becoming more
aggressive. HSBC management is now focused more on cross selling, like term deposits,
internet signup, debit cards and credit cards. Also management is trying to increase the
number of branches; recently they have acquired three more licenses to open the
branches. This will further increase the depth of the bank in the Indian market.

Where’s the passion for passion investments?

In recent years a trend has been observed that bulk of investments by HNWI’s 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. HSBC is still not providing this
service whereas Citi Bank is aggressively pursuing this field and gaining expertise hence
creating dominance in this area.

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PRIVATE BANKING: virgin territory in the world of ultra-wealthy
The country’s biggest billionaires seemed to be engaged in a competition to outdo each
other in the Forbes list, which ranks the country’s wealthy. The fortunes of tycoons such
as Mukesh Ambani, the head of Reliance Industries, India’s biggest private sector
company, and Anil Ambani, his younger brother and rival, mushroomed to double their
previous levels.
Others made it to the list through initial public offerings that many analysts criticized as
being over-valued- the $2.5bn listing, for instance, of DLF, India’s largest real estate
company that helped Mr. K.P Singh, a property tycoon, rocketing up the list.
The bubble has since imploded with the credit crisis. The wealth of Mukesh Ambani has
more than halved to about 20.8bn while his younger brother’s fortune has fallen by
nearly two-thirds to $12.5 bn.
But that was before the wealth management industry got the point- India is the new kid
on the block when it comes to private banking, matching China for the speedy growth of
its wealthy and ultra wealthy.
Capegemini and Merill Lynch concluded in a study, Asia Pacific Wealth Report:
“Although the number of emerging high net worth individuals and Ultra-HNWIs in
China and India is still relatively small, we expect these and other emerging markets to
continue to grow at double-digit rates and, within 10 years, to surpass the mature
markets.”
The growing importance of the subcontinent for wealth managers is underlined by the
findings of the report. The Indian market was fastest growing in the terms of the wealth
and population size of rich individuals in Asia.
The study found that the number of wealthy people in India increased 23 percent to
167,000 individuals last year. The highest growth took place at the top of the ultra-
wealthy category in the ranks of those with more than $100 m in investible assets.
Both, India and China are reporting a deceleration in manufacturing and both of their
stock markets are badly hit, with India’s alone down more than 60 per cent. Small
businessmen may be affected by the slowdowns, but many believe the middle and ultra-
wealthy of the two countries are relatively insulated from the worst effects of the
economic crisis.
In India there are a few challenges-heavy regulations, particularly capital controls. The
market is just introducing some of the structured options common in developing markets,

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such as interest rate and currency futures. Even short selling is a new phenomenon. Yet,
this market, too, is promising amid a growing equity culture the most expect to survive
the current turmoil.
Indians traditionally invested most of their high levels of savings in gold and property.
But they are expected to become more aggressive in deploying it into other investments.
A doubling of the amount of the money Indians can invest overseas in any given year –
to $200,000 – will also help the industry.
HSBC: Private Banking
✔ Total customer base of 1200+ clients with assets under advice of INR 45 bn.
✔ Minimum threshold per relationship is INR 40M (USD 1M).
✔ Offers investment advisory services, wealth planning and banking services to its
clients.
• Experience in equity research and investment advisory.
• Rich domain expertise across sectors in capital markets.
• Sector specialists adopt a bottom up stock selection process to identify
potential winners.
• In-house expertise to recommend stocks based on in-depth market
understanding and analysis.
✔ Presence in seven cities in India (Mumbai, Delhi, Calcutta, Bangalore, Chennai,
Hyderabad, Pune)

PRODUCT OFFERINGS
A. BANKING SERVICES
1. Bank accounts and fixed deposits.
2. Credit and debit cards.
3. Money transfers.
4. Treasury and Foreign Exchange.
5. Corporate and investment banking facilities including access to HSBC group.
6. CREDIT:
• Commercial property.
• Residential property.
• Secured against debt products.
• Tailored personal lines of credit.
A. INVESTMENT AND WEALTH PLANNING SERVICES.

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 1. Investment Services
• Equity: Advisory
Discretionary
Mutual Funds
• Fixed Income: Debt Products
Mutual Funds
• Structured Products
• Alternative Investments
• Commodities.
1. Wealth Solutions
• Estate Planning
• Insurance
• Lending against equity/ Structured lending
• Philanthropy

RELATIONSHIP MODEL

INVESTMENT ADVISORY PROCESS

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 1. Determine investment policy
statement: HSBC Private
banking investment team
analyses the financial situation,
investment objectives, risk
tolerance and liquidity needs of
the customer to determine the
investment strategy.
2. Develop Asset Allocation:
designing an asset allocation
strategy that addresses the
overall situation outlined in the
investment strategy.
3. Construct Portfolio: Choosing
from a select group of
investment managers, mutual
funds and other products to
create a customized portfolio
for the customer.
4. Monitor Portfolio: Evaluate the investments in the portfolio and advice changes if
necessary. Periodically refine the investment strategy as the customer’s need and goal
evolve.
5. Develop reporting and review: Provide regular performance review to help customers
evaluate their performance.

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SWOT ANALYSIS

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 RECOMMENDATIONS
1. Runners should be hired for collecting documents from the customers. This will
save a lot of time of sales officers and at the same time help in bringing new
business to HSBC.
2. Seminars should be arranged for the existing customers to update them regarding
RBI guidelines related to investments, markets as there were many changes
introduced during current economic crises.
3. Introduce accounts which require lower average quarterly balance to be
maintained, otherwise HSBC would have majorly high net worth clients to cater
to.
4. Trade service charges are required to be made more competitive to attract new
customers.
5. A caller is required in each team majorly for the purpose of reverting back to the
potential customers at the desired time as this becomes difficult for the teams.
6. Required data should be provided in advance to the callers for striking a better
conversation with the potential customers.
7. E-mails/materials about HSBC services should be send to the customers who
show some promise of banking with HSBC in near future. This will keep
reminding them about the as a good alternative.
8. The Together Further concept should be implemented seriously by all the
departments. The leads which are not related to a particular team should be
forwarded to the required department.
9. Call monitoring is required for improving quality of calls made by the callers.
10. Employees should be motivated through monetary and non monetary measures
like organizing contests, giving cash prizes, issuing certificates regularly.
11. HSBC invest heavily in developing innovative products like RIS etc, the
employees should make customers aware of these products as this will improve
the popularity of the bank among the customers.

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BANK PROFITS

THREE BROAD OPPORTUNITIES ON REVENUE SIDE

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LOW INCOME/MASS CUSTOMER BANKING PRESENTS
ENORMOUS POTENTIAL

GROWING “SHARE OF WALLET”: A LARGE OPPORTUNITY

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5.2 ABN AMRO WEALTH MANAGEMENT
Introduction:
ABN AMRO has come up with the NRI Account which provides Wealth Management
Services, under the aegis of Van Gogh preferred banking.
ABN AMRO Asset Management is the separately organized investment management
division of ABN AMRO Bank. ABN AMRO Asset Management is headquartered in
London and Amsterdam with other main units in Atlanta, Chicago, Hong Kong and
Singapore. It has significant experience in managing money for over 2000 institutional
clients including central banks, pension funds, insurance companies and other
institutions. In addition to managing funds for institutional clients, ABN AMRO Asset
Management offers tailored investment management services to private clients. It
employs 2000 people worldwide in over 30 countries, with portfolio managers and
analysts located around the world. All investment products benefit from the valuable
source of local expertise, while portfolios are often managed locally. This local
knowledge is used as input for international co-ordination of the investment policy.
ABN AMRO Asset Management’s approach to full-service investment management
underlines their commitment to long-term client relationships. They believe that
excellence can only be achieved when investment performance and risk management
are combined with high-quality client servicing. Their goal is to add value by offering

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 risk-controlled outperformance in the context of specific benchmarks and investment
horizons of their investors.
Products:
I. Investment services: ABN AMRO recognize financial needs vary and there is no
“one-size-fits all” approach. ABN AMRO Investment Services brings to their
customers a blend of personalized services and an array of innovative and
exclusive products suited for each of their investment needs. Their expert
Investment Counselors ensure that the customer’s individual risk profile is drawn
so that they can cater to them specific and precise investment needs. Optimal
asset allocation among a wide range of investment products helps to create a
portfolio best suited to customers requirements and preferences, while
maintaining the best balance between risk and return
II. Insurance services: Being away from India doesn’t mean you have to compromise
the safety and security of your loved ones. In fact, your savings from your time
overseas can easily be channelized to meet your family’s needs for today and in
the future. ABN AMRO Insurance Services brings to customers an unrivalled
combination of steady returns with minimum risk. The insurance plans will
provide customer’s family the added financial security in case of an unforeseen
exigency. These investments cum protection plans can help customers create
Wealth for funding their long term needs like education and marriages of their
children and creating their retirement corpus. They offer a world of choice in
insurance that can be customized to meet the individual needs.
Asset classes used:
Expertise in all asset classes.
As a global, full-service investment manager, they offer their broad customer base
capabilities in all major asset classes, and a spectrum of products including both
fundamentally driven investment approaches and more quantitative investment
processes.
ABN AMRO Asset Management has significant experience in managing money for
consumers as well as for institutional clients including central banks, pension funds,
insurance companies and other institutions.

Investment philosophy: ABN AMRO investment philosophy takes root in the belief
that fundamental research as an investment process yields returns and hence they lay
emphasis on company specific research. The underlying principles that help them
formulate the investment process: Investments are made in ‘businesses‘? And not in
‘companies‘? ; The latter is just an avenue. Companies (within that business) that can
generate returns on capital in excess of their cost of capital over a business cycle are
preferred. Earnings growth of a company is the prime driver and over a period of time

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 the stock price of the company shall be a slave of the same. Hence, investments in
stocks are to be made at reasonable valuations. Own companies that can generate long-
term, sustainable earnings, managed by qualified professionals capable of executing a
well conceived strategic plan.
SWOT Analysis:

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5.2 STANDARD CHARTERED
Introduction:

Products:
➢ Excel banking: In today’s fast moving, technology-driven world, you need
your bank to keep pace with your banking needs. That’s why you need Excel
Banking - a much personalized Wealth management service that has been
designed to help customers make the most of your money, without taking up
most of your time.
With the services of their personal Relationship Manager, customer can
access complete Wealth management solutions, from routine banking and
transaction management to more complex investment services and insurance
advisory services. Customers also get fee waivers on premium savings and
current accounts and preferred pricing on a range of complementary banking
products and services.
Here are the unique features of Excel Banking:
✔ Access to a personal Relationship Manager.
✔ Exclusive privileges such as a free gold card, free debit cards and
discounts on lockers, demat accounts and overdraft against term deposits.
✔ Free multi-city cheque book for current account and savings account
holders
✔ Express cheque collection and national clearing speed service
✔ Free demat account
✔ Extended branch hour for easier and quick transactions
✔ Redirection of interest into any account specified by you
✔ Phone Banking and ATM facilities for 24 hour access.
➢ Parivaar account: Parivaar is a unique Wealth Management Solution from
Standard Chartered Bank that offers the customer’s family flexibility,
convenience and essential tools for Wealth accumulation and preservation.
Parivaar is much more than a regular Savings Account. It allows customers
maintain their individual identity while allowing them to tap their family’s
financial strength.
Here are some of the features of the Parivaar savings account :
✔ Customer’s family can maintain individual savings accounts with the
benefit of clubbing balances in grouped accounts.
✔ Anytime, anywhere access to accounts through ATMs, Phone Banking
and Online Banking.

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 ✔ Globally valid ATM-cum-debit card can be used at 3, 26,000 merchant
outlets in India and 14 million outlets worldwide.
Asset classes used:
• Equities
• Debt
• Mutual funds
• Commodities
• Structured products

Investment philosophy: Standard Charter has developed a different and more

focused approach to wealth management. Understanding that wealth means
different things to different people, they believe that no one is better placed to
help you acquire wealth and grow it, use and enjoy it, protect it and pass it on.
Their appreciation that every investor is complex and different and can have
complex needs, has led them to development of a highly innovative new
approach that they call their investment philosophy. They believe it radically
improves the management of private client investments.
Their investment philosophy uses sophisticated profiling and portfolio
construction techniques to aim for investments that deliver market-leading
performance in the way customers want, because while performance is the
key, it is performance that suits the customers that really matters.
Performance that reflects their attitudes and personality and gives them the
confidence and reassurance to make decisions with clarity and speed.
SWOT Analysis:

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5.2 CITI BANK
Citi Gold: Citigold is a banking proposition that seeks to provide wealth
management expertise, preferential banking services and a host of lifestyle related
benefits to a targeted base of high net-worth clientele. Citigold offering is backed
by Citi’s global expertise in wealth management and its experience of managing
wealth across 100 plus countries around the world. An experienced, well-trained
team of dedicated Relationship Managers, investment & insurance experts, Trade
and business specialists, Analysts & Researchers etc. support the client and help
them meet their various financial goals.
Personalized Financial Planning:
I. The Citigold Team: Dedicated relationship mangers and counselors to
guide you at every step of Wealth Management Process.
II. Wealth Management Process: A four step process with Citgold wealth
planner and CitiChoice to maximize your wealth potential.
III. Investments: structured financial planning backed y a team if experts and
our proprietary Citigold Wealth Planner tool. Regular interaction with
fund managers & investment experts. Invest in Equity, PMS, MFs, Bonds
and market-linked debentures. Tax and real estate advisory also available.
Business Planning:
I. Business Lending: Secured and unsecured business loans up to Rs. 10
Crores. These can be term loans or fund/non-fund based overdraft
facilities.
II. International and FX Trade: Use our rich international experience & full
range of products to assist your trade. We do document collection, a range
of foreign and local currency export credit products, LCs and BGs. Inward
& Outward Remittances across the globe of competitive rates. Exporters
& Importers can hedge business risk through forward contracts.
III. Cash Management: Manage your local & outstation receivables through
your Citibank account. CitiClear at 24 Citibank branches locations,
Citispeed for local cheques through 292 correspondent bank branches.
CitiCheck at over 1700 upcountry locations and CitiAnywhere for
cheques drawn on any location in India

Asset classes used:

✔ Insurance products
✔ Structured products

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 ✔ Art advisory services: In today’s market, art presents an attractive investment
option. To assist customers with advice on various art investments, or to help
you in buying or selling art, Citigold has tied up with a reputed art house,
Osians - Connoisseurs of Art Private Limited.
Osians is based in Mumbai and possesses the expertise, archival infrastructure
and professional capacity to systematically cohere various theories of
knowledge and provide select Citigold clients objective information on
purchasing, preserving, valuing and selling art for seasoned connoisseur and
emerging collectors.
Citigold together with Osians will now help customers strengthen their
investments in art by providing you the following services:
• Documentation and Archiving
• Authentication, Certification and Valuation
• Preservation and Restoration
• Insurance and Custodial Services.
• Publication and Design Services
• Art and Cultural Events Management
• Corporate Gifting
• Museum and Collection Building Services.
• Estate Planning
✔ Citi bank time deposit:
• Deposits held in units of Rs. 1000 for easy liquidity.
• Flexible tenures from 15 days to 5 years.
• Overdraft facility of upto 90%against your deposit to fund another
investment opportunity.
• Automatic roll over facility to renew your deposit when it matures.
• An exclusive set of structured products like market linked products.

Investment philosophy:
Citi Bank invests the customer’s portfolio according to which stage of life
they are:
• Young adult.
• Married and yet to have kids.
• Parents with young kids.
• Parents with settled kids.
And the expenses they are thinking of :
• Buying a house.
• Going on a holiday.
• Getting married.

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 • Going abroad.

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 SWOT ANALYSIS:

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 SIMPLICITY AND SAFETY ARE BACK IN FASHION
As 2008 draws to end, private bankers and wealth managers in Asia seems battered, a
little humble and cautious although not always disheartened at the outlook. The next few
months would be painful but if the focus is maintained on quality, anyone can have a
great time in the upswing.
The past few months have been especially dismal. Stock markets have plummeted.
Losing 10 per cent on a client’s portfolio is the new break-even for the wealth manager.
Investors who lost money on structured products, such as accumulators and Lehman mini
bonds, protested on Hong Kong streets, alleging banks had misled them about the risks.
In private, many wealth managers will tell you of impending law suits launched by angry
clients – but somehow it is always rivals who are being sued, and not their own
institution. Everyone seems to be reviewing procedures and they say clients are taking
fresh interest in reading the small print. As oil and commodity prices surged during the
first part of the year, private banks said clients were worried about inflation.
Six months later, deflation is the big fear. Private bankers look a little embarrassed these
days when you ask them about their hot new investment products: they do not seem to
have any. Often advice focuses on bonds and gold – especially physical gold, and not
structured products based on gold. Risk is out and capital protection is in. Bonds look
interesting. There is renewed emphasis on diversification. Simplicity is back in fashion.
So is safety. Lehman Brothers may not have had a private banking arm, but its collapse
in September disturbed private bankers and their clients alike. Even Citigroup, one of the
giants of the financial world, needed $300bn of government help and guarantees to
survive. If that were not enough, the US authorities indicted the global head of wealth
management at the Swiss bank UBS as part of their investigation into the offshore
banking activities of rich Americans. Markets will continue to be volatile and that’s
something we can’t control, we need to focus on the things we can control. Clients want
to know that we will be there for them. Clients don’t remember you as much when times
are good as when times are bad. Every private bank has a chance to differentiate itself.
When you are in a cross-country race, you make the biggest difference when you are
running uphill. The problems of the big universal banks may help the smaller, more
focused private banks that have no investment banking arms or exposure to subprime.
The private bank within a larger organization still has its appeal. A big retail branch
network and a well-known brand name are a great starting point.

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