A Project Report on Tapping of HNIs for Retail Deposits & Wealth Management Services in Delhi Submitted to: SBBJ Zonal Office New Delhi A comprehensive project submitted as the fulfilment of the summer internship for Two Year PGDM program. Submitted by: Vikas Sharma Institute for Integrated Learning in Management pg. 1
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A
Project Report on Tapping of HNIs for Retail Deposits
&
Wealth Management Services in Delhi
Submitted to:
SBBJ Zonal Office New Delhi
A comprehensive project submitted as the fulfilment of the summer
internship for Two Year PGDM program.
Submitted by:
Vikas Sharma
Institute for Integrated Learning in Management
Graduate School of Management
16, Knowledge Park
Greater Noida.
pg. 1
ACKNOWLEDGEMENT
This project is the outcome and result of the extensive work in the area of “Wealth
Management Services”.
I would like to thank my project guide Mr. C. R. Das for his continuous support and guidance.
He had guided me about different aspects of working methodology in banking and help me to
develop profound understanding about various aspects.
I would like to give my heartiest thanks to my project mentor Mr. Rahul K. Singh for taking me
under his guidance and giving me his precious time for the successful completion of the project.
I also express my gratitude to the Mr. J. P. Chaturvedi, HR Dept. for his incomparable support
and addressing all my concerns and ensuring that my experience at SBBJ was free of hassles.
I like to thank Mr. N. K. Sudhanshu (Credit Officer), Mr. Vipin Tyagi (Credit Officer),
Mr. P. K. Sethi (Asst. Manager) and last but not the least Mr. M. L. Meena (AGM) for their
support in completion of my project.
I would like to thank my faculty guide Prof. Ritesh Srivastava for giving me the proper
guidance and providing me with new and innovative aspects to work on.
A well combination of theory and practical helped me in compiling this project on “Tapping of
HNIs for Retail Deposits and Wealth Management Services in Delhi”.
I am also grateful to all those people who directly or indirectly helped me in accomplishing this
project.
Vikas Sharma
pg. 2
Table of Content
Sr. number Topic Page number
1. Introduction 4
2. Objective of the study 6
3. Introduction of the Bank 7
4. High Net Worth Individuals 13
5. Common financial mistakes and how to avoid them 15
6. Wealth Management 18
7. Financial Planning 22
8. Cash Flow Management 31
9. Insurance 33
10. Asset Allocation 39
11. Retirement Planning 46
12. Taxation 48
13. Estate Planning 52
14. Deposits 54
15. Loans and Advances 56
16. Conclusion 59
17. Bibliography 60
pg. 3
Introduction:
India is one of the fast growing economies in the world and hence it has a large pool of the
people whose net worth is high and very high net worth individuals. The number of the people in
these categories is increasing with a faster pace than any other country of the world. The main
stream of the growth the country is these HNIs and UHNIs (Ultra High Net Worth Individuals),
and because these have a large pool of money means they have investible money, every financial
institution try to get them as their clients so that by doing business with them financial
institutions can also get a strong base in the economy.
The financial institutions are providing various services to the HNIs and UHNIs to make their
investment decisions, such kind of services now a day are called wealth management services
and the financial planning. Today’s investors have become very sophisticated in their investment
decisions.
Such sophisticated investors (HNIs) with a heightened interest in international investments are
determined to get the best return on their wealth. Thus, the wealth management and private
banking industry must offer their wealthy clients innovative and comprehensive strategies to
effectively organize their investments.
The financial planning and the wealth management services sound similar on the surface but in
the deep they are a little bit dissimilar also. In a broad view wealth management services is a part
of the financial planning services. But now a day wealth management services are restricted to
the sophisticated customers so that the term wealth is not used for each and every customer of
the financial institutions.
Wealth doesn’t mean that it is related only with the money, wealth can be the business, house
and property, gold, bonds, stocks, jewels etc. and to maintain and take care of this and as well as
to increase the worth of all of these people need assistance.
The financial institutions provide the assistance to those people who either want to proceed with
various phases of the financial planning and the wealth management.
pg. 4
State Bank of Bikaner & Jaipur is also one of the wealth management services providers and is
doing very well in this area. Some of its services are well known and as it is associated with the
State Bank of India it has a very strong reputation among the people.
In the later part of the project we will come to know that what various kinds of the financial
planning services and the wealth management services are provided by the financial institutions.
There are some findings and recommendations are also provided, that are the result of the survey
of the HNIs and the according to the responses provided by them to the different questions of the
questionnaire.
pg. 5
OBJECTIVE OF STUDY
Financial institutions like Banks and other institutions need information on the needs and
requirements of the HNIs in the different investment objectives. In order to make sound decision
about providing best possible solution to the client’s financials needs and problems.
1. To study the various wealth management services provided by the Bank.
2. To know what are the primary investment objectives of the HNIs as no two people have
same kind of service requirements.
3. To know the existing level of satisfaction and dissatisfaction of the clients about the
services provided by the Bank.
pg. 6
Introduction of the Bank:
State Bank of Bikaner and Jaipur was established in 1963 after amalgamation of erstwhile State
Bank of Jaipur (established in 1943) with State Bank of Bikaner (established in 1944) as a
subsidiary of State Bank of India.
The Bank took over the business of the Govind Bank Pvt. Ltd. on 25.04.1966. The Bank's main
area of operation is Rajasthan, with presence at all important centers in the country. The Bank
has 860 branches consisting of 849 business branches, 8 service branches, 2 asset recovery
branches and 1 treasury branch and has sponsored 3 RRBs. The Bank follows transparent
corporate governance policies and is preparing itself for smooth migration to Basel II. On
technology front, during 2005-06, the Bank has migrated all branches to Core Banking Solution
(CBS).
The bank has been amongst the first few PSBs in the country to migrate all the branches to Core
Banking Solution (CBS). The Bank has installed 453 ATMs and all ATMs are the part of over
10,000 ATMs of State Bank Group.
Internet Banking has been extended to all our branches for retail customers and select branches
for corporate customers. The Bank has rolled out Business Process Reengineering (BPR)
initiatives to improve operational efficiency and better customer service and is committed to
offer value added services to its customers.
The Bank has been earning profit continuously since its inception and the Bank's business
crossed the level of Rs 59,427 crore with a net profit of Rs. 315.00 crore at the end of
March2008.
pg. 7
Brief History of the Bank :
YEAR EVENTS
1944 - The Bank was incorporated at Bikaner. The Bank transacts general banking business of every
description. The Bank also transacts Government Treasury work. The name of the Bank at the time of
incorporation was The Bank of Bikaner Ltd.
1960 -The Bank became a subsidiary of the State Bank of India under the State Bank of India (Subsidiary
Bank) Act, 1959. The Bank assists small scale industries and co-operatives and grants advances against
warehouse receipts.
1963 - The State Bank of Jaipur with its 49 offices was taken over by the Bank and the name of the Bank
was changed to the State Bank of Bikaner and Jaipur.
The business of the Govind Bank (Pvt.) Ltd., Mathura was taken over by the Bank with effect from 25th
April, 1966. - The issued capital was raised to Rs 80 lakhs to enable the compensation to be paid to the
shareholders of the State Bank of Jaipur upon its amalgamation with the Bank.
1968 -The Bank formulated a scheme to render direct finance to small business which covered the entire
spectrum of financial assistance to the agriculturists. Under the scheme of provision of credit to transport
operators, financial assistance was extended to operators of taxis and auto rickshaws for meeting working
capital requirements and for purchase of new or second-hand vehicles.
1984 -The Bank opened another Regional Rural Bank in Ganganagar district under the name
Ganganagar Kshetriya Gramin Bank.
1985 - A Bank named the Bikaner Kshetriya Gramin Bank was opened in Bikaner district.
1995 - 15, 60,000 right equity shares issued (prem. of Rs 300 per share) in proportion to 3:4.
1997 -The Bank offered 13, 60,000 shares at a premium of Rs 440 per share. Of which 1,38,800 shares
were offered to SBI 1,22,100 shares were offered to employees, 1,52,700 shares were offered to NRIs,
OCBs, FIIs, and the balance 9,46,400 shares were offered to public. All were accepted.
pg. 8
The State Bank of Bikaner & Jaipur (SBBJ), an associate bank of the State Bank of India (SBI), is
entering the capital market with a maiden initial public offering (IPO) to augment its capital base and its
long-term resources. The face value of the share is Rs 100. The shares will be listed at the Jaipur and
Mumbai stock exchanges, in addition to National Stock Exchange. The State Bank of Bikaner and Jaipur
is the latest public sector bank come to he primary market with a Rs 73.44 crore issue. The bank is
offering Rs 100 each for cash at a premium of Rs 440 per share.
- The equity issue of State Bank of Bikaner and Jaipur (SBB&J) has been oversubscribed by 1.5 times.
- During the year, the bank will also install an ATM at one of its branches.
1998 - The State Bank of Bikaner and Jaipur (SBBJ) had issued 12.21 lakh shares at a premium of Rs
440.
- State Bank of Travancore and State Bank of Bikaner and Jaipur shares' dematerialization is facing a
roadblock as a State Bank of India (Subsidiaries Banks) Act, 1959, clause says that no person can acquire
shares in excess of 200 units in any of the bank’s subsidiaries.
1999 -The bank is gearing itself to improve efficiency by technological up gradation, refinement of skills
and motivating employees to improve upon services and products.
2002 -State Bank of Bikaner & Jaipur has informed about that Shri S D S Minhas has taken over as
Director of the Bank in place of Shri V P Grover who has since ceased to be a Director of the bank w.e.f.
March20, 2002.
-State Bank of Bikaner and Jaipur has informed BSE that Mr. K S V Krishnama Chari has taken over as
Director of the Bank as State Bank of India nominee Mr. L N Jalani has been allowed by the Ministry of
Finance to continue w e f July 09, 2002 as workman Director on the Board of the Bank.
-State Bank of Bikaner & Jaipur has informed Mr. Ramesh Chand Bhandari was elected as Director of
the Bank for period of 3 years w e f August 09, 2002 in place of Mr. M K Patodia whose tenure of office
expired on August 04, 2002.
2003 -Appoints Mr. K R Srikantan as Managing Director.
-Mr. J. B. Bhoria takes over as the Director of the Bank as nominee in place of Mr. Karuna Sagar.
-Shri C Bhattacharya, Dy. MD &Group Executive (A & S group), SBI takes over as the Director of the
bank as SBI nominee.
pg. 9
-Shri A. R. Samajdar has since ceased to be a Director of the bank on account of his reaching
superannuation on September 30, 2003.
2004 -State Bank Of Bikaner And Jaipur has informed that Shri Yashovardhan Sinha, Dy. General
Manager (A&S), State Bank of India has taken over as Director of State Bank of Bikaner and Jaipur, in
terms of Section 25(1) (c) of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from
January 1, 2004- Further informed that, Shri. S. Ramaswami, General Manager, Reserve Bank of India,
Rural Planning & Credit Deptt. Bhopal has taken over as Director of the Bank under Clause (b) of
Subsection (1) of Section 25 of State Bank of India (Subsidiary Banks) Act, 1959 with effect from
January5, 2004 in place of Shri. J. B. Bhoria, Regional Director, RBI, Jammu.
Presently Mr. Arun Shandilya is the Managing Director of the Bank.
pg. 10
Bank’s vision and mission:
Vision:
“To be a values driven modern bank aspiring for excellence in customer service, perpetually
enhancing shareholders’ value and contributing to the economic development of society.”
Mission:
“To continue to be a premier bank of Rajasthan with all India presence, committed to empower
its personnel for providing excellent, personalized and quality customer service by adoption of
modern technology, achieving sustained and profitable growth in business thereby increasing
shareholders’ value and contributing to the welfare of the society.”
Objectives:
The main objectives are
Customer satisfaction- The Bank believes that a satisfied customer is a valuable asset of
the bank.
Building a strong base of core deposits- The Bank believes in developing a strong base of
core deposits ensuring healthy rate of growth.
Compliance of Directives- The Bank shall comply with the directives/ guidelines issued
by RBI, IBA, Government of India and/or any other statuary authority/agency.
Thrust Areas:
pg. 11
• The Bank shall continue efforts to broaden its customer base, focusing on deposits of retail
customers, and shall also give due weightage to bulk depositors.
• While mobilizing deposits, the Bank shall give emphasis on low cost deposits..
Strategy:
• The staff members posted at branches will be adequately trained to offer efficient and courteous
service to the customers and will educate them about their rights and obligations
• It will always be our endeavor to develop personalized banking relationship with the customers
• The Bank shall take care of the requirements of varied categories of depositors and shall
develop new innovative products and / or modify the existing products suitably
• The Bank shall aggressively market the various products but shall avoid mal-practices
• The Bank will provide “May I Help You” counters / desks/ Grahak Mitra at its branches to
guide the customers properly.
•The Bank shall pay special attention to senior citizens / pensioners.
• The Bank shall extend full help to handicapped and disabled persons to perform their banking
transactions.
• The Bank shall endeavor to provide services to the satisfaction of customers. However, in case
of any complaint, the Bank shall ensure its expeditious redressal.
• The Bank shall levy reasonable service charges for various services rendered to the customers
and shall inform about the same to the customers at the time of opening of the account. The
customers will also be informed of the various measures with regard to safety and use of
chequebook etc.
pg. 12
High Net worth Individual:
There is no authenticated / accepted definition for HNIs. However, universally accepted practice is as
under:
In USA they are defined as
Individuals, having financial assets over $ 1 million are treated as HNIs &
Individuals, having financial assets over $ 30 million are treated as Ultra HNIs.
But in India there is no clear definition of the HNIs, it differs from the financial advisers to the various
wealth management service providers, in nut-shells they are defined as:
Individuals, having financial assets over Rs. 25 lacs are treated as HNIs &
Individuals, providing business to the financial institutions of at least Rs. 3 lacs are treated as
HNIs
And SBBJ considers the top 200-300 customers of the particular branch as the HNI because they believe
that branch can satisfy at most this quantity of the customers per annum.
Growth potential for HNI Segment:
As per World Wealth Report 2008 published by Cap Gemini Merrill Lynch & Co.:
10.1 million People globally hold more than US$1 million in financial assets, an increase of 6%
over 2006.
HNI wealth totals US$40.7 trillion, representing an 9.4% gain since 2006
Wealth generation was driven by real GDP gains and continued market capitalization growth
India (22.7%), China (20.3%), Brazil (19.3%) and South Korea (18.9%) witnessed the highest
growth in HNI population during 2007.
pg. 13
HNI financial wealth is expected to reach US$59.1 trillion by 2012, growing at an annual rate of
7.7%.
HNI segment in India is placed:
•HNI segment in India registered a growth of 22.7% during 2007 compared to 12.2% in Asia
Pacific & 9.4% world-wide.
•India accounts for more than 123,000 HNIs and about 1,000 Ultra HNIs.
•India has accounted for 20% of Asia Growth and 10% of World Growth during 2005.
•Mumbai, Delhi & Bangalore accounts for bulk of HNIs.
•Bangalore accounts for over 10,000 Millionaires with an investible surplus of Rs. 50 lacs to
Rs.4.5 Cr.
•7% of HNIs are in the age group of 30 years or younger.
•India’s millionaires on an average hold $ 3.5 million in assets.
•India’s millionaire club largely consists of young entrepreneurs and businessmen.
Sustainability of HNI growth in India:
This growth rate is likely to be sustained because of favorable demographic factors, rising opportunities
for job as well as self-employment and graduation of middle-income group into high-income group. HNIs
are unable to optimize their return on investments due to constraint of time and lack of proper advisory
support services. The growth trend indicates immense opportunities in this particular segment.
What are all the services HNIs normally expects?
The HNI client segment is in need of the following services.
• Advisory support on Investment decision.
pg. 14
• Tax optimization.
• Wealth protection, Insurance advisory.
• Research support on different investment opportunities.
• Other requirements like succession planning, legal advisory services, etc.
The common financial mistakes and how to avoid them
There are many financial mistakes that we all make, which are quite common and perpetuated
generation after generation. `Financial mistakes', which if avoided, can result in financial
freedom and wealth creation. The most common of some of the financial mistakes are as under:
- Overspending
- Delaying or ignoring a Will
- Insurance follies
- Not creating Contingency fund
- Putting Off Financial Planning
- Not starting savings early and not realizing power of compounding
Overspending:
While we seem to think overspending is normal, it is not wise. It can be disastrous. When
we are young and start earning, we think that we will continue to earn same income and
even more - forever! Excessive spending results into lower savings and rising level of
debt. We tend to postpone investment and prepone expenses. In fact, we should be doing
exactly the reverse i.e prepone investment and postpone expenses. Most of us do not have
monthly expense budget. When we go out to shopping mall, almost everything on display
seems like a necessity to us. Whenever there is a `SALE' we tend buy irrespective of the
fact whether it is required or not, for immediate consumption. While it is not wrong to
buy from `SALE', we should realize that we end up buying something which may not be
pg. 15
required or which can be easily postponed. We also need to return to ground reality and
make the crucial decision between a necessity and a luxury. If we want to reduce our
debt, save more and achieve financial freedom, it is important to identify the root cause
of overspending.
Delaying or ignoring a Will: Updated nomination and the existence of a will is of
crucial importance whether the person is single or married. Even if a person has
nominated someone, it does not automatically mean that the concerned persons will get to
own that asset. Nomination is the right to receive, not the right to own. For example, if
the person has nominated his wife in various assets (bonds, bank deposits, shares, etc),
the wife gets the right to receive the asset. But, in case there is no will, any other family
member, for example his mother, has the right to take the matter to the court. A written
will ensures that the asset goes to the person one desires. A will need not be drafted only
with a help of a lawyer. One can draft it in own handwriting and the format / draft is
simple and can be easily accessed on the net. A handwritten will, attested by two persons,
preferably one of them the person's doctor, and would ensure that the will would not be
challenged. Most parents leave the idea of making a will after their retirement. They feel
that nomination or joint holding will serve the purpose. If a person dies intestate, then the
possibility of legal disputes and division of assets under succession acts become a reality
amongst the family members.
Insurance Follies: Risk management is ensuring that health and life insurance is in place
(and adequate too) and that there are no lapses in premium payments. Many of us take
more than one insurance policy to provide maximum safeguards against risk. Instead of
taking multiple policies, one should go for increasing life cover in the existing policy. We
often have adequate life cover, but ignore to take a medical policy, which ultimately force
us to shell out hefty sums out of our savings to cover medical expenses. We often forget
to take medical policies for the kids or parents, leaving them exposed, in the case of
eventuality. During the last couple of years, insurance products like ULIP have gained
popularity because of the rising equity markets. However, such products are expensive
and provide less life coverage. People end up buying products, which are inappropriate
for their requirement. Investment is not an expense. It is money put away for future use.
So, cutting down on investments is not a good idea.
pg. 16
Not creating contingency fund: One should keep aside contingency fund for rainy days,
part in form of cash and part in bank account. Contingency fund is required to take care
of medical emergency, loss of income due to job loss etc. This amount should be roughly
equivalent to three to five months of living expenses including funds required for
emergency. Few people keep such emergency fund.
Putting Off Financial Planning: Financial planning helps us to make provision for
financial needs that will arise in the future. Financial planning involved setting up of
financial goals and appropriate asset allocation. Without a proper plan, people often try to
maximize returns and take undue risk. There is a danger of not achieving the life goals, if
proper asset allocation is not adhered to. For example, if you set aside certain funds (and
allocate to equities!) for your daughter's marriage, which is say one year away. If there is
a crash in the equity market, the required funds cannot be made available to take care of
marriage expenses. Such funds need to be parked in safe assets for short-term needs
without taking any risk. The biggest mistake that people make is to ignore the value of
financial planning.
Not starting savings early and not realizing power of compounding: When we start
our career and earn, we want to buy whole world from it. We get married; we buy home,
have our family, expenses keep adding up. Our income increases but so does our
expenses. When we start earning we don't think about savings. We tend to forget power
of compounding. Because of the power of compounding specially over a long period of
time, the difference between starting to invest early versus starting late can have a
significant impact on your wealth. Benjamin Franklin described power of compounding
as the eight wonders of the world'. Legendary investor and wealthiest man on earth
Warren Buffet made his first investment when he was 11 years old and according to him
he started late. Warren Buffest was millionaire by the time he was around 30 years old.
pg. 17
Wealth Management:
Wealth Management is defined as the complete blend of various asset classes, tax consultancy
and risk management strategies molded into a single cast normally targeted at High Net worth
Individuals. It normally addresses certain critical issues such as asset allocation, retirement
planning, estate and trust planning, business succession planning as well as equity planning.
HNWI of today is technology-accessed global in outlook and is willing to learn from the
experience of the matured members of the club outside India. Apart from portfolio management
asset allocation techniques and retirement planning, his frightening concern is about the wealth
transfer or generational planning. Most of the wealth in the good old days was locked, mainly, in
two asset classes- property and precious articles like gold, precious stones and jewellery. The
nature of these holdings was low- income producing or rendered meaningless by the rigid
tenancy laws. A long drawn out legal battle adversely affected the gain of the assets only.
Substantial part of the asset holding today is financial in character with its inherent cash flow
feature encompassing both income and liquidity. Any prolonged legal battle today is likely to be
doubly painful in comparison. Wealth management services have been getting more attention
over the last two years. A booming economy, rising stock prices and an increase in salaries and
spending power have turned the spotlight on this sector. The wealth management space was
earlier the preserve of some foreign banks which offered these "exclusive services" to a select
few. This was not a service you could apply for. The unsaid tagline was "Don't call us. We'll call
you (if you are that wealthy!)." Today, a number of banks offer this service. Also entering this
arena and carving a niche for themselves are standalone entities that offer the full range of
services — investment advice, portfolio management, taxation advice etc.
Wealth management is just emerging in India. The growth of the economy has already been
widely showcased. Wealth and disposable income are growing substantially. For the first time
the ability to earn and save are slightly different. Earlier you just put away your money in some
guaranteed products. Today, when even the government is withdrawing from those products (it
pg. 18
recently stopped the maturity bonus on post-office savings), investors, whether they be doctors,
architects or anyone else, need professional help.
It can be represented in a time scale as under:
pg. 19
The gamut of product and services can be as under:
pg. 20
The need for financial advisory services:
In an ever changing and increasingly competitive world, one needs to navigate through a maze of
complexities to manage wealth efficiently and optimally. In today’s world of conflicting situations like
the tendency to spend vs. the need to save, ability to earn better earlier in life v/s chances of shorter
earning cycle with longer life span, complex and multitude of investment options v/s need for simple
investment solutions, planned and disciplined investing becomes a necessity. This requires attention away
from one’s profession. Assistance of experienced and committed professionals will make investment
process effective. Customers require financial planning for various below mentioned reasons as survey
reveals:
pg. 21
Financial Planning:
Financial Planning is the process of meeting your life goals through the proper management of
your finances.
It involves the process of assessing your financial situation, determining your objectives and
formulating a plan to achieve them.
The objective of financial planning is to ensure that the right amount of money is available in
the right hands at the right point in the future to achieve an individual's life goals. It also allows
you to understand how each financial decision you make affects other areas of your finances.
The findings about the awareness of the wealth management services and the financial planning
and the satisfaction are given below-
88%
13%
Awareness about wealth management services
yes no
pg. 22
Out of surveyed HNIs 87% replied affirmative regarding the awareness about the wealth
management and financial management services provided by the banks. Having a huge chunk of
investable money had enhanced their concern towards the proper investment and management of
the money and also compel them to be with the pace of the changes and improvement in this
wealth management and financial planning area. The wealth management provides the
opportunity to them to invest their money in efficient manner. The rest 13% people who are not
aware about services claimed that the level of publicity and advertisement is not the mark and the
service providers are unable to reach them some are not interested and they don’t want to invest
elsewhere other than their own business. By this kind of reply to the survey it is clear that there is
a need of sound publicity and advertisement of the different wealth management and financial
planning services provided by the banks with all specifications and proceedings.
81%
19%
Do you do financial planning?yes no
From the next question another fact comes into light that the HNIs who are aware about wealth
management and financial planning they either themselves or from financial advisors do
pg. 23
planning of their wealth. Some of them said they know about the wealth management and
financial planning but they don’t do the financial planning, because of the stereotype thinking of
that the money generated from their business they do not want it to be risked on any other
financial instrument they think that the money is safe if it remains rotating in their business. As
the wealth management and financial planning don’t mean that the money should be invested in
other instruments it can be provided to those people who wish to invest their money in their own
businesses, there are many services regarding to their businesses for example: the mortgage loan
facility, the current and recurrent deposit facilities which may become either the contingency
plans for them or the alternate objectives to invest in their respective businesses. To make aware
the people about all such kind of services the bank may take some measures so that it can
enhance the understanding level of these traditional businessmen and more people can be
entertained by the wealth management services.
81%
19%
Do you have investment plan for self/ familyyes no
The third questions clears that 81% of the respondents are cautious towards investments plans for
themselves and their family showing concerns towards security of them from any mishap. For
this type investment need people generally opt for insurance plan or any sort of fixed deposits so
that they can get security and good return. The Bank has to take steps so that it can eliminate this
pg. 24
type of thinking from the mind. As bank can also provide these type of services for instance take
SBI Life insurance (because the associate Banks of SBI also provide the SBI products to their
customers such as SBI Life and SBI Mutual Fund and many more), and the Bank also provide
fixed deposit scheme and other such schemes that can provide them a surety of the return to
them.
56%
44%
Satisfaction with present saving/investment plans?
yes no
In present scenario people are more incline towards wealth creation and wealth preservation, in
process of wealth creation and preservation nobody is satisfied with his or her saving and
investment plans. People want to live happily after their retirement so they do savings and
retirement planning; as well they also want to see their families living happily after they are gone
so they prefer most kind of the insurance plans to secure their family’s future.
HNIs specially opt for the estate planning (wills and trusts) and investments in their own
businesses. Bank may increase their services in the areas of estate planning and the consultancy
services for the particular businesses according to the needs and the requirements of the HNIs.
pg. 25
The broad areas in which Financial Planning can be undertaken:
Cash Flow Management
Insurance
Asset Allocation
Investment Planning
Retirement Planning
Taxation
Estate Planning
Who requires Financial Planning?
It is useful to everyone. Very few can consider themselves too rich to engage in Financial
Planning. There are many instances of highly paid employees who came to financial grief merely
because they did not plan for their post-career years. Similarly even people earning small
amounts of income should undertake this process, as it will help them in prioritizing their goals
so that their limited income can be used more efficiently.
Why should you make a financial plan?
Financial planning provides direction and meaning to your financial decisions. It allows you to
understand how each financial decision you make affects other areas of your finances. For
example, buying a particular investment product might help you save adequately to finance your
child's higher education or it may provide enough for a comfortable retirement. You can also
adapt more easily to life changes and feel more secure that your goals are on track.
Helping you in better understanding your present financial position:
pg. 26
The questions contained in the Financial Questionnaire require you to list down your assets,
liabilities, incomes and expenditures. This is a process of virtually drawing up your own Balance
Sheet and will help you gain a better grip on your present financial position.
Cash Flow and Debt Management
Incomes and expenditures can be better matched through the planning. It also will assist you in
identifying whether your borrowings are within prudent limits.
Risk Management
It can help you in identifying your life and property insurance requirements. Evaluating your insurance
needs is part of personal financial planning. Insurance usually takes care of your unpredictable needs and
as these needs can arise at anytime, insurance is extremely important.
Achievement of financial objectives
Various financial objectives whether it is financing your child’s education, a house of your own or your
post-retirement phase can be better met through systematic investing. A properly laid out investment plan,
prepared after considering your risk appetite, time horizons etc. go a long way in helping face the future
more confidently.
Taxation
Often investors invest with the sole objective of saving tax. We believe that this is not the most desirable
method. Investments should be in sync with your requirements, the tax angle being secondary. However,
we do not ignore the tax aspect. Optimum Post tax returns are what all investors should be concerned
about and that is what we too strive for. It is important that financial plans are tax efficient. The financial
plan should help you in minimizing your tax liability and also maximizing your after-tax returns from
your investments.
Inter-generational transfers
Estate planning is arranging for the transfer of your property to your heirs and to other beneficiaries, in a
way that will, as much as possible, achieve your objectives. The most common vehicles for this purpose
are the drafting of Wills and setting up of Trusts.
The HNIs are concerned about various aspects of the investments and the responses of the
questions asked in this context are as the following charts-
pg. 27
25%
13%
6%
56%
Aspect considered before investmenttax relaxation wealth creation risk and return all
Before investment not only HNIs but a layman also thinks about the various aspects such as tax
relaxation, wealth creation, risk & return etc. out of the surveyed HNIs more than 50% have
chosen all these aspect to be considered before selecting any investment plan. The Bank may
provide services which can fulfill their preferences in these areas, SBI products are good
examples of such kind of services such as Magnum Tax gain (Magnum Tax-saver) and Magnum
equity’s diversified schemes.
pg. 28
63%
25%
13%
Most importment in investmentreturn safety of principal diversification
As it is already clear from the previous question analysis people are opting for tax-relaxation,
risk & returns, wealth creation or all. From the response to this question we can figure out that
most of the responded (more than 62%) have chosen returns as the most preferred reason for
investments. During the economic slowdown and financial crisis in the market overall globe
investors prefer that at least they can recover their invested amount as well as some profit along
with. This is the effect of the financial crisis that 25% respondents have chosen safety of invested
principal amount. Bank may provide such services that give surety of return as well as safety of
principal invested by investors in order to fetch new segment of the market and to retain existing
customer base.
Economic growth of any industry depends on many factors and one major factor is political
influence on the financial structure, as a new government comes in power and it seems that this
will be a stable government in the years to come and it will give surety to the investments. After
this type of scenarios it is observed that HNI segment sensing this opportunity start shifting their
investment preference from secure instruments such as bank deposits and debentures, towards
pg. 29
equities, mutual fund sector and some new volatile instruments like futures and options. Bank
should consider these instruments also, in mutual fund area SBBJ and associate banks of SBI are
already active in figuring out new investment opportunities for their investors, like all of
associate Banks are providing SBI Mutual Fund schemes in various names and forms, but in
sector of equity market the bank is lagging somewhere behind. It had recently introduced SBBJ
Demat Accounts to its customers, in equity market a larger portion has been grabbed by private
sector players and it is the most challenging area where the bank has to give its full concentration
and have to figure out some new avenues to make a remarkable and unbeatable position in equity
trading market.
6% of the investors have chosen other investments like investing in their own businesses to
extend it.
Cash Flow Management:
We hardly take time out to find out what are our sources of income and our expenses? Cash flow
planning refers to our inflows (income) and outflows (expenses) of money as mentioned below.