WEALTH MANAGEMENT

What is Wealth Management?



l Investment management is the process

of managing financial assets like,
stocks, bonds, cash and mutual
funds in order to achieve a specific
goal like retirement or college
funding.
l Wealth management expands the focus
considerably by looking at virtually
everything that impacts an
individual’s net worth: a privately
held business, personal residence,
vacation property, insurance, loans,
art, gold, taxes, the needs of
beneficiaries and so on.
l A coordinated team of financial
2
 Wealth manager with the help of a team of legal and financial
experts create solutions tailored to the clients unique needs
CLIENT

Wealth Manager Private Banker

•Provides comprehensive •Coordinates your personal
financial and goal planning and banking needs

Portfolio Manager Trust Administrator

•Develops your overall investment strategy
•Responsible for day-to-day investment
management of your assets
•Ensures terms and provisions of the
client’s
trust are properly Implemented
•Collects and distributes income
•Coordinates tax preparation

Other Specialists
•Tax consultants
•Real estate management
specialists
•Personal care coordinators
•Mortgage specialists
3
 Asset
Alternative Management
Investment
s
Individualized Portfolios Trust &
Concentrated Stock Strategies Estate Planning
Hedge Funds Multi Manager Accounts
Estate Plan Development
Private Equity
Trust and Will
Real Estate
consultation
Fiduciary Management
Personal Care services

Private C L IE N
Banking T Tax Preparation &
Planning
Credit
Cash Mgmnt
Portfolio Tax Mgmnt
Checking &
Stock Option Exercise
Savings
Accts Financial Risk
planning Management
Asset Allocation Life Insurance
Cash Flow Analysis Long term care
Retirement Annuities
Education Planning

4
 Wealth Management Customers
Net Savings and Deposits above 100k$

Private Banking

Wealth Management
50M$
UHNWI

VHNWI 5M$

HNWI 500k$

Self Service
Affluent

Retail Banking
Customer
100k$

Mass Affluent
Customer
50k$
Mass Customer

Wealth Management Customer

Segments

5
 Wealth management customers
Affluent and HNWI above 35 years

Universal Bank Business

C u sto m e r Credit Volume Savings Volume Deposit

Age Volume
Less than 15% 20% 5%
35 years
Between 60% 30% 30%
35 and 55
years
More than 25% 50% 65%
55 years

Universal Bank Business volumes

6
Slide 18
 The Role of Banks…

7 Source : IBM Institute for Business Value Analysis

 The Role of Banks…
l Retail Banking
l Corporate Banking
l Treasury Services
l Investment Banking
l
l Private Banking & Asset Management
l

Fu n d Fee
Transition
B a se d Based

8
 Importance of Wealth Advisory
Services
l Diversifies Product Line-Up
l Value Proposition to other businesses
l Increases Fee Based Revenue
l Increases Profitability
l Enhances Brand Value

9
 Private Banking
l Private banking is a term which refers to major
institutional banks which offer financial
services to private individuals. These banks
would normally have two distinct divisions -
private banking, and corporate banking.
l Historically private banking has been viewed as
very exclusive, only catering for
high net worth individuals with liquidity over $1
million, although it is now possible to open
some private bank accounts with no more than
$50,000. An institution's private banking
division will provide various services such as
wealth management, savings, inheritance and
tax planning for their clients.
l The word "private" also alludes to bank secrecy
and minimizing taxes via careful allocation of
assets. An offshore bank account may be used
10
for this purpose.
 The Role of the Private
Banker

11
 What does the HNWI client
expect?

12
 Drivers of Wealth
GDP Growth
•World GDP is growing very fast in last in 20 years
•Interest rates were low and stable around the world
•BRIC countries had and average real GDP growth of 7.2%

Increase in Market Capitalization

•Emerging markets showed strong market returns
•US and European small and mid cap companies performed
well

13
 Drivers of Wealth
Financial Liberalisation and
Deregulation
•Improvement in market Access and cross border supply in
financial services

Corporate Re-structuring
•Encashment of business by entrepreneurs through stake
sell outs

14
The Wealth Management
Process
 Savings cycle
Wealth Accumulation Wealth Consumption

WEALTH

COMPLEXITY OF INVESTMENTS
MANAGEMENT
WEALTH
ACCUMULATED

EARNING SURPLUS
CAPACITY MANAGEMENT

RISK TAKING
CAPACITY LIQUIDITY
MANAGEMENT

AGE
Retirement

16
 Wealth creation cycle
VEHICLE INVESTMENTS

•Additional Fixed Assets

•Business Investments A/c •Alternative Investments
WEALTH •Investments in securities
MANAGEMENT •Trust Accounts
•Alternate Investment Vehicles •Promoter Holdings

COMPLEXITY OF INVESTMENTS
WEALTH
ACCUMULATED

•Basic Assets like Car ,

SURPLUS •Business Current Account House , Consumer
MANAGEMENT •Family Members’ Accounts Durables , jewellery
•HUF Account •Investments in securities

•Forced Small
LIQUIDITY •Individual Savings A/c Savings Relating
MANAGEMENT •Deposits to Tax Exemptions
•Cards

17
 Client Segmentation
l Mass Affluent and HNI
l Require brand confidence
l Require SUPERIOR service and quality
l Require a VISIBLE benefit to switch
l Require convenience
l

l Super HNI
l Require comprehensive and Unbiased
Wealth Advisory Services
l Require qualified and trained advisors
l Require confidentiality
l

18
 T h e ro a d to p ro fita b ility

Earnings from a Private Banking customer

Assets

Solutions to meet customer needs

-Transaction - Liabilities
- Investments -Liabilities
Banking
-Investments
-Liabilities
-Assets
-Insurance
-Estate
Planning

Multi – Product
Relationship

Research Product
Segment Segment Launch Enhancement
Model Model Development

19
 Critical Issues…
l Defining the Market
l Re-Visiting the Organisational Strategy
l Regulatory Environment
l World standard talent
l Client Centric Orientation
l Compliance & KYC
l The Advisor Client Relationship
l Customer Retention
l Effective use of Technology
l Adapt to the Changing Environment
l There is no QUICK FIX SOLUTION

20
 Criteria for selection of Private
Banker
Strong Investment Performance 49.6%

Low Fees/ Commissions 36.3%

High Service Quality 30.5%

Long History/ Tradition 24.1%

Product Features 20.2%

Technology 17.6%

Prestige 16.1%

0% 15% 30% 45% 60%

Source: Survey of 45 top global private bankers,.

21
 Superior product proposition
Dedicated Wealth Manager – A Single Point
Contact
Any Where Single A / C Asset
Banking Statement Products

Mutual Funds Pure Gold

Multiple Delivery
Primary Channels Depository
Market
Investment Advisory
Secondary Direct
Debt & Equity ( On - line
Platform
Markets For execution )

Cards Property Services Insurance

22 22
 The Road to Success…
l Client & Product Profitability Assessment
l Resources, Training & Rewards to
Perform
l Robust Support Processes
l Defined Product Mix and Delivery
Channels
l Strong Technology Backbone
l Branding & Strategy

23
 The Road Ahead…

24
 Sophistication & needs of HNWIs
to rise
Now
Deposit Credit Trade
B a n k in g s Loans Cards Finance
2011

A sse t
Mutual Equitie
M anagem Funds s Bonds
ent
A lte rn a tiv
e Structure
Private Hedge Real
d Commodities Art
In v e stm e n Equity Funds Estate
Products
ts
Tax Insuran Family Trust
O th e r Plannin ce Pension Office Admin Charity
g

25
 Private Banking: Future

26
 Wealth Management: 2011 and
beyond
l There will be further growth in the
number and type of wealth
management players in India
l To provide distinct and structured
services
l To augment revenues as WM is less
risky and not overly competitive
l FIs, independent financial advisors and
Investment banks

27
 Wealth Management: 2011 and
beyond
l There will be a significant increase in the
number of wealthy individuals in India
l BRIC Report – India to be the third
largest economy in the world after
China and US in the next 30 years
l Rising number of entrepreneurs and
professionals leading to “new” money
and mass affluent segments
l Wealth Managers to service this
segment in terms of reach,
technology, products and
knowledgeable staff
l

28
 Wealth Management: 2011 and
beyond
l Increasing deregulation will enable
customers to diversify their wealth
locally and globally
l Fullcapital account convertibility
l Wider choices for investment, savings
and protection needs
l Designing new schemes/ products and
services
l

29
 Wealth Management: 2011 and
beyond
l Increased client sophistication and
competition for client business will
require wealth managers to deploy
segment specific customer satisfaction
and retention strategies
l Wealth Managers to be trained in
marketing, relationship management,
regulation and compliance, and
product knowledge
l Competition for scarce, competent,
specialist Wealth management
personnel will increase


30
 Wealth Management: 2011 and
beyond
l Increased customer demand for
sophisticated products will result in
Wealth Managers offering a wide array
of more complex products and services
l Encompassing gold, real estate,
commodities, art, hedge funds,
structured products (eg., inverse
floater notes, principal protected
notes etc.,), insurance and pension.
l Wealth managers will need to innovate
and offer appropriate products and
services to meet the needs of wealthy
individuals in times of economic boom
as well as depression

31
 Wealth Management: 2011 and
beyond
l Wealth managers will introduce
profitability models and tools to
measure and enhance their
performance
l Wealthy clients generate more fees, but
also incur higher costs due to higher
levels of service required

32
 Wealth Management: 2011 and
beyond
l Technology tools will be critical for both
enabling revenue generation as well as
achieving operational effectiveness
l Technology tools covering areas of
financial planning, straight through
processing product and account
aggregation, and performance
monitoring
l To help Wealth Managers as well as
clients who prefer self-directed
learning

33