A DISSERTATION REPORT ON THE TOPIC:

“WEALTH MANAGEMENT”

SUBMITTED BY:

Mr. KRISHIT PATEL

PGDM- FINANCE

ROLL NO: P1820045

UNDER THE GUIDANCE OF

PROFESSOR C.A.JAI KOTECHA

TIMSR

FULL TIME – BATCH – 2018-2020

SHYAMNARAYAN THAKUR MARG, THAKUR VILLAGE,

KANDIVALI (EAST), MUMBAI 400101

1
 DECLARATION

This is to certify that the project report entitled, “WEALTH MANAGEMENT” submitted to
Thakur Institute of Management Studies & Research, Mumbai, is a record of the original work done
by me under the guidance of Prof. C.A. Jai Kotecha, and this project work is submitted in fulfilment
of the requirements for the degree of Post Graduate Diploma in Management. The results embodied
in this thesis have not been submitted to any other Institute or University for the award of any other
degree or diploma.

Signature of the candidate Signature of the Project Guide

Mr. KRISHIT PATEL Prof. C.A. Jai Kotecha

PGDM – Finance (2018-20) Assistant Professor, Finance
Roll No: P1820045 TIMSR

Signature of Director
Dr. Pankaj Natu
TIMSR

2
ORGANIZATION CERTIFICATE

3
Source: Google.com

IIFL is a financial services conglomerate which was started by a group of passionate

entrepreneurs in 1995. The genesis of IIFL lies in the power of dreaming big and believing
in your dreams.

IIFL was the pioneer in the retail broking industry with its launch of 5paisa trading
platform which offered the lowest brokerage in the industry and the freedom from
traditional ways of transacting. Our strength has been to continuously innovate and
reinvent ourselves. IIFL’s evolution from an entrepreneurial start-up in 1995 to a full
range diversified financial services group is a story of steady growth by adapting to the
dynamic business environment, without losing focus on our core domain of financial
services.

Today, IIFL Holdings Limited (Bloomberg Code: IIFL IN, NSE: IIFL, BSE: 532636) is
India’s leading integrated financial services group with diverse operating businesses,
mainly, Non Banking and Housing Finance, Wealth and Asset Management, Financial
Advisory and Broking, Mutual Funds and Financial Product Distribution, Investment
Banking, Institutional Equities, Realty Broking and Advisory Services.

IIFL serves more than 4 million satisfied customers across various business segments and
is continuously building on its strengths to deliver excellent service to its expanding
customer base.

Net worth Workforce Branches Stocks under Research Customers

5953 Cr 20,000+ 1900+ 500+ 40 Lac+

($861 mn)

4
 ACKNOWLEDGEMENT

I would like to express my deep gratitude to all the people who were involved both, directly
and indirectly in the preparation of this project.

Firstly, I thank my Institute Thakur Institute of Management Studies & Research for
giving me an opportunity to undertake my summer internship project through IIFL SECURITIES
LTD.

I express my warm thanks to my team for the support and guidance at IIFL Ltd.

Finally, I would express my heartfelt gratitude to my academic CA Jai Kotecha, whose valuable
advice, suggestions and perspectives have encouraged me to incorporate a different dimension to
this project.

Sincerely,

MR. KRISHIT PATEL

5
 EXECUTIVE SUMMARY

India has maintained a commanding growth trajectory over the last few years, with 443mn
millennial (born80’s,90’s) and 393mn Gen Z teens and children (born post 2000), the sheer size of
India’s youth paves way for India’s consumer story to be one of the world’s most compelling
stories in the next 20 years.

Major macroeconomic indicators like fiscal deficit, current account deficit and inflation are on a
healthy footing and implementation of large scale structural reforms such as demonetization,
introduction of Goods and Services Tax (GST), Bankruptcy Code, Real Estate (Regulation and
Development) (RERA) Act, etc. have contributed to renewed investor sentiments. All factors
spurring financial assets to enjoy its dominant position in the economy. Moreover, Macroeconomic
Trends and booming equities space within India showcase that India is set to be top performing
wealth market within Asia Pacific region.

According to the Credit Suisse Research Institute’s Global Wealth Report 2017, for instance, there
are 178,000 millionaires in India with an estimated wealth of USD973 billion. Furthermore,
according to a recent Knight Frank Wealth Report, the pace at which the number of ultra-wealthy
Indians grew in 2017 was the sixth highest in the world. It said that the UHNI (Ultra High Net
worth Individuals) population rose 290% in the last 10 years. Over the next decade, believes the
report, about 1,000 new UHNIs will be added every year.

This exploratory research article delves into the nature of various assets being suggested by the
Wealth Managers, standard Asset Allocation Models being followed in the sector and effects of
Artificial Intelligence growing base in Wealth Management Industry.

6
 INDEX

Contents
ACKNOWLEDGEMENT .................................................................................................................5

EXECUTIVE SUMMARY................................................................................................................6

INDEX ...............................................................................................................................................7

1.1)WEALTH MANAGEMENT......................................................................................................9

1.2)IMPORTANCE OF WEALTH MANAGER ..............................................................................9

RESEARCH METHODOLOGY .....................................................................................................11

Figure 1: INDIAN COHORT – IDENTIFYING THE KEY CONSUMER ....................................17

4.1) PHYSICAL ASSETS ...............................................................................................................18

Table 1: Classification of Individual Wealth in India held in Physical Assets ............................18

4.2) FINANCIAL ASSETS .............................................................................................................19

Table 2: Classification of individual wealth in India based on financial assets ..........................19

4.2.1)FINANCIAL ASSET CLASS– BONDS............................................................................20

4.2.2) FINANCIAL ASSET CLASS – EQUITIES .....................................................................20

4.2.2)FINANCIAL ASSET CLASS - MUTUAL FUND ............................................................21

4.2.4)FINANCIAL ASSET CLASS – AIF (ALTERNATE INVESTMENT FUND) ................23

4.2.5) PRIVATE EQUITY FUND ...............................................................................................24

4.2.6) REAL ESTATE FUNDS ..................................................................................................25

4.2.7) HEDGE FUND .................................................................................................................25

4.2.8) INFRASTRUCTURE FUNDS .........................................................................................26

4.2.9) VENTURE CAPITAL FUND ..........................................................................................26

4.2.10) INTERNATIONAL ASSETS ........................................................................................27

70:30 ALLOCATION APPROACH ...............................................................................................29

7
 POWER OF 70 (Top Picks) .........................................................................................................29

OPPORTUNITY 30 (Short Term Trading Opportunities) ..........................................................29

INVESTOR RISK: MODERATE TO HIGH ..................................................................................30

Table 7: Moderate to High Risk Portfolio ...................................................................................30

INVESTOR RISK: HIGH ................................................................................................................31

Table 8: High Risk Portfolio ........................................................................................................31

TECHNOLOGY WAVE IN INDIA ................................................................................................33

Vijay Shekar Sharma CEO, PayTm, January 2018 .....................................................................34

Figure 2: Financial Assets in India ..............................................................................................35

Figure 3: Portfolio Discretionary vs Non-Discretionary..............................................................36

Figure 4: Return based on Advisory Type – Discretionary vs. Non-Discretionary.....................37

Figure 6: Breakdown of HNWI Financial Assets, Asia-Pacific Region, 2017-2018 ..................39

Figure 7: HNWI comfort Level with Fees, Q2 2018 ...................................................................40

Figure 8: Most Important fee concerns for Asia-Pacific, HNWIs, Q2 2018 ...............................41

Figure 10: Interaction Preference for Wealth Management Capabilities, Q2 2018.....................43

Figure 11: HNWI Propensity to Use BigTech Firms for Wealth Management, Q2 2018 ...........44

8
1.INTRODUCTION

1.1) WEALTH MANAGEMENT

It is a shared notion that wealth management is financial planning. Though, financial planning is
just a minor part and there’s a lot more to wealth management.

The goal of wealth management is to withstand and grow long-term wealth. From arich person's
standpoint, wealth management is a science of boosting their financial situation in a strategic
manner. It is anunceasing investment-advisory process that is a mixture of financial planning,
investment portfolio management and a number of aggregated financial services.It offers several
strategies and plans that allow individuals or businesses to attain all possible financial goals in a
systematic way.

Thesehighly educated finance professionals guide the high-net-worth individuals (HNIs), small-
medium business owners or families with care in retail banking, estate planning, real estate
services, legal resources, tax management, risk mitigation, investment management and private
investment opportunities like real estate funds & structured funds, etc.

A wealth manager offersan enities through a combination of the firm’s own platform and a network
of partnerships and alliances. At its core, though, it rests on the notion of the wealth manager as
an impartial curator and guardian.

The top 25 Wealth Management Businesses cater only to HNIs/UHNIs.A HNI is a person with
more than ₹5 crores in investible extra, while those with more than ₹25 crores investible surplus
fall in the bracket of ultra HNIs, as defined by Karvy Private Wealth.

1.2)IMPORTANCE OF WEALTH MANAGER

Wealth management is an important practice, but not all investors have satisfactory knowledge of
wealth management. Most investors perceive wealth management process to be a smooth ride.
This is very different in reality, of course. Markets do not move in a conventional direction, and
unexpected factors usually get in the way of savings. This is where the expertise of a wealth
manager can be put to habit.

9
Wealth managers take benefit of their experience and knowledge, and regularly update and
change their client’s investment profile grounded on where they are in their life cycle, with respect
to other immediate factors.

1.3)BENEFITS OF WEALTH MANAGER/MANAGEMENT

 The job of a wealth manager goes far beyond just helping clients identify potentially
profitable stocks, bonds, mutual funds, or managing investments, etc. Below mentioned
are some of the vital benefits of having a wealth manager…
 A wealth manager can be of great backing in providing the present status of your finances and
offering a detailed examination of your financial health.
 A professional wealth manager carries a set of multi-disciplinary skills to the table, and
greatly helps with allocating assets, tax optimization, savings goals, retirement, and
passing assets to the next generation.
 They help you control the allocation of investments based on life’s realities, help you
prepare for your retirement, help you with inheritance issues and transfer of assets, aid
you preserve and manage wealth, and so on.
 A professional wealth manager can simplify unclear financial markets, and help you
differentiate between good and bad investments.
 No matter what level of assets you have, a wealth manager can help you in taking decisions for
your charities and making tax benefits out of it.
 Comprehensive wealth management involves long-term strategic planning of your
financial goals. A wealth manager effectually aligns your plans and objectives, and creates
a road map based on your financial status, and sets realistic goals and strategies for the
business to achieve your targets.
 The assessment of the gaps between your goals and current financial status is necessary
to help you plan your actions precisely. A wealth manager helps you conduct the gap
analysis to assess your resources, strength and weakness. They also help you fill these
gaps to meet growth prospects.

10
2. OBJECTIVE OF RESEARCH

To explore the scope of investment vehicles used broadly as a means to tap growth opportunities.

To highlight benefits of wealth management as means of asset distribution and wealth generation.

To inform the Global Trends witnessed within Wealth Management Sector.

RESEARCH METHODOLOGY

This study is expressive in nature and it is based on secondary data drawn from the wealth reports
of consulting firm. For the determination of analysis, the evaluation is done by using Asia-Pacific
and India specific HNIWs data available. Data collected would be based on asset allocation
preference, HNIWs growth performance, and performance of wealth management firm. The
Research allows us to shed light on the role played in near period by Wealth Management Business.

3. REVIEW OF LITERATURE

11
Asia pacific wealth report 2018 conducted by Capgemini delves into activity of high net worth
individuals (HNIWs) in Asia pacific region as a whole, it highlights the role wealth management
firms play in the investment and growth activity of individuals during an especially favorable and
booming economic phase witnessed around the world as of FY2017/FY2018. Therefore highlights
a shift in possible business model disruption in the ongoing fee structure within wealth
management firms to a more Hybrid- Modular fee structure whereby the HNWIs would pay only
for the firms’ features that they use during the entire Wealth Manager – Client engagement process.
Lastly, the research highlights a possible disruption on the cards, wherein a BigTech technology
company like Alibaba, Tencent, Amazon or Google could possibly capture the market share from
incumbents due to lack of transparency in fees and a certain keen interest from the HNIWs
community as a whole especially India, Indonesia and China to allocate funds to tech titans when
they enter the Wealth Management business in future.

India wealth report 2018 by Karvy Private Wealth presents an in depth analysis of global and
domestic wealth patterns through an assiduous collection of data to study where and how Indian
individuals have placed their hard earned wealth; which are the asset classes that are gaining
investors’ confidence and which are the ones that are falling out of favor. The paper throws new
insights into the changing dynamics of investment behavior and of course some interesting trends.
Also a shift could be seen in terms of rising up to the opportunity as investors as a whole moved
away from physical assets to investment in financial assets. Overall this study showcases a holistic
view of investment story playing in India.

According to Brennan and Xia (2002) in a study on dynamic asset allocation under inflation and
Watcher (2002) the key objectives for the success in wealth management are increasing focus on
client-centricity through specified client segments, understanding of client needs, proactive effort
and individualized value propositions and exceeding client expectations. The customer centric
solution has proven to be one of the important deciding factors for wealth management
organizations, ensuring customer fidelity by providing distinguish services from other competitors
and suitably gaining competitive advantage.

Walia and Dr. Kiran (2009) in their research on analysis of investor’s risk perception have
focused on the perspective of an individual investor by understanding the expectation of the

12
investor and his risk appetite. Customers consistently expect to get innovative solutions with
higher quality in the provided services.

Walia and Dr. Kiran (2009) mentioned that maximizing returns and minimizing risk are the two
fundamental criteria gaining the focus of the wealth managers while creating their service
strategies.

Walia and Dr. Kiran (2009) opined that before designing any innovation solution for the
investors, wealth managers carefully consider the trade-off between the risk and returns; and
comprehensively evaluate different investment schemes on various risk elements to satisfy the
need of all investors to obtain maximum returns.

Walia and Dr. Kiran (2009) examined that wealth managers with their technical skill and
professional management are consistently trying to make the markets more transparent and
efficient in order to easily determine and effectively manage the risk factor.

Vincent F. Yu and Hsiu-I Ting (2011) on identifying key factors affecting consumer’s choice of
wealth management services, the three main elements that form the crucial factor in choosing a
financial institution for the wealth management are image, product and services. Sub-elements of
image are popularity, reliability, morality, professionalism and recommendation. Sub-elements
those come under products category are diversification, fee, returns and risk. Key elements of
services are convenience, confidentiality, communications and attitude.

Evensky, Horan & Robinson (2011) in financial advisors guide to managing and investing client
assets that the wealth management strategies compiled for investors focuses on trade-off between
profit and risk, wealth creation for retirement planning and safeguarding revenue income. The
wealth management, offering diverse range of services like tax planning, financial planning, cash
flow & debt management, investment management is based upon requirements of clients.
However, wealth managers assist individuals to find their goals and achieve them.

Basu and Drew (2009), the first step in viable wealth management is identifying attractive
customer segments. A firm operating the space of wealth management can achieve success by
comparing their own abilities, skill and competence with the needs and requirements of the
customers. Moreover, the annual income has a relationship with perception, for benefits of wealth
management services. To attract new clients and retain the trust and confidence of the existing
customers, a financial institution must be compassionate with the customers and proficient in their
13
skills. Human touch is one of the fundamental and essential elements for the success in the wealth
management sector. It is important for the wealth management firms extending their services to
the middle-income group of customers with fewer assets to balance the cost to service with the
profit anticipated.

Dwivedi et al. (2008) has brought the attention towards the growing Indian wealth management
industry and how has it played an important role in bringing relief to the falling Indian economy.

Cocco et al., (2005) elucidated that wealth management firms now need to review their primitive
business strategies, amend their legacy business model, improve their services and enhance their
infrastructure, revise their plans and build up a new business model which is more robust and
resilient. Building such a business model and appointing a relationship manager as a single point
of contact for clients would strengthen the association and relationship between the clients and
wealth managers. Firms must change their business models to meet the global financial investment
requirements of their clients. In recent years, the clients faith on advisors have significantly
reduced and many clients have started to probe their advisors and have also raised their
expectations from their advisors forcing them to fulfill their commitments and focus on a client
centric view to deliver amiable experience to their customers.

Dhivya and Sekar (2010) on investor’s preference towards financial investment, the clients look
for technologies from wealth managers. So the financial institutions need to use best technologies
to satisfy the needs and fulfill the expectations of client by wealth management advisors. However,
it is clear that the firms face important challenges in bringing the entire suite of brokerage, banking,
trust, investments, retirement products, banking and custody services in an integrated manner.
Moreover there is the need to invest in new platforms for handling distinctive asset classes. The
main key to success for the wealth managers lies in prudently selecting their partners, understand
the fast changing requirements of the local market and then need investigate to integrate various
factors, so that the clients see them as seamless and endless provider. The technology called open
architecture will involve many challenges for integration of data from multiple money managers;
and efficient overlay management will become a key differentiator for firms.

According to Boyd (1994) in a study on customer preferences for financial services, with the fast
changing and more complex demands of investors, it has turned out to be very significant for the
wealth managers to strenuously focus on the deciding factors of the investors which influence their

14
decisions to choose their wealth managers and advisors. It is a tough challenge for a general
customer to differentiate between two wealth managers and compare their services on various
different aspects.

According to the 5th Annual World Wealth Report generated by Merrill Lynch Global
Wealth Management and Cap Gemini (2014); the globe‟s high net worth individuals (HNWIs)
saw a rise of populace and wealth in 2010 exceeding 2007 pre-crisis marks in almost all areas.
2010 witnessed international HNWI populace and wealth advancement becoming more
established; in fact the HNWIs populace rose to 10.9 million – a rise of 8.3% and HNWI fiscal
wealth touched US$42.7 trillion – registering a growth of 9.7% (in contrast to 17.1% and 18.9%
respectively in 2009).

4. WEALTH MANAGEMENT IN INDIA

The aggregate wealth held by Indian high net worth individuals (i.e., individuals with investible
assets of $ 1 million or more) is expected to grow at CAGR of 27 percent over next five years to
15
approximately ₹400 Trillion. This, combined with the GDP estimate of 7-7.5 percent in FY2018
/FY2019 by IMF and the growing allocation of financial assets by HNIs, augurs well for the Wealth
management industry in India. The National Stock Exchange of India's Market Capitalization is
$2.18 Trillion adjusted US Dollars as of March 2018.

India houses one of the highest numbers of asset management companies. 42 large scale asset
management companies cater to almost 75% of the High Net worth Investors in the country. These
companies deal in a blend of personal and digital tools to inform, engage and transact with their
customers.

Some of the noteworthy wealth management firms within the space are as follows

KOTAK MAHINDRA BANK

SANCTUM WEALTH MANAGEMENT

PRABHUDAS LILLADHER

AVENDUS CAPITAL

MOTILAL OSWAL

HSBC BANK

ICICI BANK

*new world wealth report

16
Figure 1: INDIAN COHORT – IDENTIFYING THE KEY CONSUMER

population (in million)

> Rs 1
1.11
Crore

Rs 50
Lakh to
0.15
Rs 1
Crore

Rs 20
Lakh to
0.64
Rs 50
Lakh

Rs 5
Lakh to
6.9
Rs 20
Lakh

< Rs 5
27.2
Lakh

0 5 10 15 20 25 30
population (in million)

Source: Income Tax Data, Government of India

17
 Interpretation:

Now the Asset management industry targets about 8.8 million working class individualsand
wealthy within India who are capable of putting aside aninvestible corpus for wealth generation
purposes.

4.1) PHYSICAL ASSETS

A physical asset is an item of commercial, economic or trade value having a material existence.
Most Indians are comfortable with physical assets such as property and gold due to their tangible
kind, while financial assets make up a fairly smaller proportion of their total portfolio.

However, Growth of individual wealth in physical assets decelerated down to 5.92% in FY18 as
against 10.32% recorded in FY18.

Table 1: Classification of Individual Wealth in India held in Physical Assets

Physical Assets FY 18 FY 17 Y-O-Y proportion proportion
change % FY18 % FY18 %
Amount Amount
(₹Crore) (₹Crore)
Gold 68,45,167 65,90,575 3.86 48.86 49.83

Real Estate 60,25,206 55,47,254 8.62 43.01 41.94

Diamond 7,98,240 8,02,840 -0.57 5.70 6.07

Silver 2,28,916 2,01,169 13.79 1.63 1.52

Platinum 6,998 6,452 8.46 0.05 0.05

Other Gems 1,05,190 78,548 33.92 0.75 0.59

Total 1,40,09,717 1,32,26,838 5.92 100 100

Interpretation:

Real estate and Gold composed held 92% of wealth in physical assets and over 37% of total
individual wealth pie. Physical assets control a total of 40% of Total Individual Wealth in India.

18
4.2) FINANCIAL ASSETS

A financial asset is a tangible liquid asset that becomes its value from a contractual claim. Cash,
bank deposits, bonds, stock and the like are examples of financial assets. Unlike commodities,
land, property or other tangible physical assets; financial assets do not necessarily have intrinsic
physical worth.

Table 2: Classification of individual wealth in India based on financial assets

Financial Assets FY18 Amount FY 17 Amount Y-O-Y change proportion proportion

(₹Crore) (₹Crore) % FY18 % FY18 %

Fixed Deposits 40,14,624 36,81,658 9.04 19.69 20.70

Direct Equity 37,58,255 29,63882 26.80 18.43 16.66

Insurance 30,01,230 25,47,563 17.81 14.72 14.32

Saving Deposits 27,60,811 21,59,478 27.85 13.54 12.14

Cash 13,35,200 16,63,432 -19.73 6.55 9.35

Provident Fund 13,04,316 11,51,027 13.32 6.40 6.47

Mutual Funds 8,68,396 6,23,825 39.21 4.26 3.51

NRI Deposits 7,57,200 8,26,727 -8.41 3.71 4.65

Unlisted Equity 7,23,127 5,86,118 23.38 3.55 3.29

Small Savings 6,67,613 6,58,596 1.37 3.27 3.70

Current Deposits 6,10,931 4,37,262 39.72 3.00 2.46

Pension Funds 4,75,227 3,92,682 21.02 2.33 2.21

Alternate 92,963 77,503 19.95 0.46 0.44

Investments

International Assets 20,684 18,462 12.04 0.10 0.10

Total 2,03,90,576 1,77,88,216 14.63 100.00 100.00

19
Interpretation: Individual wealth in financial assets nurtured by 14.63% to ₹203.90 lakh crore in
FY18. Over 66% of individual wealth in financial asset was held in direct equity, fixed deposits,
insurance and saving bank deposits in FY18.

In FY18, one of the major growth drivers was mutual funds, recording a growth rate of 39.21%.
This was attributed to positive recital of equity market and increased contribution from the
individual investors. Saving deposits also posted a growth rate of 27.85% as cash inflows into the
bank accounts surged post demonetization.

Interestingly, wealth in direct equity grew by 26.80% in FY18 against a 13.84% fall in FY18.
Direct equity now holds 18% of total wealth pie of individual monetary wealth in India.

4.2.1)FINANCIAL ASSET CLASS– BONDS

Bond- a debt security, in which the official issuer owes the holders a debt, contingent on the terms
of the bond he is obliged to pay interest and repay the mainamount at a later date, termed ‘maturity’.
A bond is a formal agreement to repay borrowed money with attention at secure intervals
(semiannual, annual, and sometimes monthly).

In bonds, external funds isdelivered to the borrower to finance long-term investments, or in the
case of government bonds, they finance present expenditure.

Bonds and stocks both are securities, however the major difference between these two is that
stockholders have an equity stake in the company (i.e., they are owners), whereas bondholders
have a creditor picket in the company (i.e., they are lenders).Another difference is that bonds
usually have a maturity, after which the bond is redeemed whereas stocks may be unresolved
indefinitely.

Bond Markets accounted for 60% of commercial lending in FY2018. Corporate bonds issuances
surged with a healthy 41.48% rise to ₹31,150 crore during this period.

4.2.2) FINANCIAL ASSET CLASS – EQUITIES

Equity has been the titleholder asset class during year 2018, outshining other asset classes by a
wide margin. With individual wealth growing more than 26% in equities, Indians seemed to have

20
cashed in on every opportunity arising from the current stock market bull run. The growing wave
of equity was also reflected in the record amount of fund raising through the IPO route in 2018,
making it the best year for investors in the primary markets in recent Indian history.In FY2018,
Individual Wealth in direct equity zoomed 26.8% to a massive ₹37.58 lakh crore. Table 3: Break-
up of Individual Investments in Direct Equity

Individual Investments FY 18 (₹Crore) FY 17 (₹Crore) Y-O-Y Change (%)

Promoter Individual 25,00,993 19,14,839 30.61

Retail Individual 12,57,261 10,49,043 19.85

Total 37,58,255 29,63,882 26.80

Interpretation:

Equities continue to be pillar of individual wealth growth with as much as 30.61% Promoter raising
stake through equities purchase, a leading indicator of strong business prospects.

4.2.2)FINANCIAL ASSET CLASS - MUTUAL FUND

A mutual fund is the accumulation of various funds unruffled from several investors, and invested
in stocks, bonds, etc. This is done by an asset management company, who manages such
investment arrangements in a professional manner. Mutual funds are registered with SEBI and
they function under strict regulations, which are drafted to protect the investor’s interests.

In FY2018 alone, about 77 lakh investor accounts were added taking the total number of accounts
to ₹5.54 crore led by growing interest from both retail and HNI individuals.

For now, penetration remains relatively low in India, given the fondness persons feel for physical
assets such as real estate and gold. But the government, along with the central bank and markets
regulator, has been taking steps to channel household savings into investment vehicles such as
mutual funds and insurancethrough various tax benefit schemes.

Assets under Management of the Indian mutual fund industry at the end of January 2018 stood at
₹17.37 trillion (USD260 billion), according to the Association of Mutual Funds in India. The AUM
has more than folded in the last four years from ₹5.87 trillion, while growing at 39.21% over the
previous year.
21
The scenario is good: growing GDP numbers, stable inflation, favorable demographics, rising
income levels & an expanding middle class all provide for a favorable economic boost in the near
term and relative cash flow into the Mutual Fund sector.

Table 4: Mutual Fund Scheme Comparisons:

Scheme Crisil AUM Mutual 1 yr. 2 yr. 3 yr.
Name rank Fund
(₹crore) return return return
Type
June 18
Axis focused 25 fund 1 106.71 Focused 24.5 24.3 17.9

Invesco India tax plan 1 26.14 ELSS 21.5 19.5 14.6

Axis blue chip fund 1 99.27 Large cap 23.8 21.1 13.9

Axis mid cap fund 1 80.09 Mid cap 24 20.1 11.4

Hdfc small cap fund 1 558.49 Small cap 22.3 24.7 19.5

Tata digital India fund N.A 16.97 Sectoral 59.8 28.2 N.A
I.T.

MotilalNasdaq 100 N.A 73.27 Index 35.0 26.1 20

ETF Fund/ETF

LIC MF ETF Sensex N.A 338.74 Index 20.7 17.8 N.A

Fund/ETF

BNP Paribas Govt N.A 2.69 GILT 7.1 10.9 8.6

Sec
Fund
Kotak Corporate 1 741.91 Corporate 6.7 7.6 8.0
Bond Bond

UTI Unit linked N.A 43.17 ULIPS 11.6 11 10.4

Insurance

Focused fund: Funds limits portfolio selection to maximum 25 companies.

ELSS: Funds have a lock in period of 3 years. These funds provide tax deductions under section
80C.

22
GILT: These funds are composed of government bonds.

ULIPS: Investment cum Insurance

Interpretation:

Among the advantage allotment items that are on offer to the HNIs are a determination of high
return common assets which offer advantage of experienced reserve administration track record
and all around differentiated portfolio.

Understanding the customer's hazard profile and objectives are crucial in setting speculation
destinations. In the Indian market setting, this approves significantly more significance as
customers are at times misty about their own particular hazard profile, or how to organize targets.
For example settled wage common assets like securities offer stable yet low profits for the other
hand exceptional yields offered by sectorial/topical assets catch great upside development while
going for broke that accompanies swings in value markets.

Be that as it may, a prepared financial specialist may go for the modernity of a list subsidize ETF
which gives adjusted weightage on values. As time goes on list subsidize enable a working
proficient to add Alpha to his riches regardless of the Macroeconomic factor in play consistently.

4.2.4)FINANCIAL ASSET CLASS – AIF (ALTERNATE INVESTMENT FUND)

Asset classes which do not succeed under the traditional assets such as equities, debt or real estate
typically qualify as alternate investments. This asset class is approximately focused towards high
net worth individuals (HNIs) who are interested in diversifying their portfolio. However, most
options are less liquid and non-traditional with a high ticket size. They are, therefore, usually
invested in byHNIs/UHNIs & family offices. Under this category, assets such as hedge funds,
infrastructure funds, and venture capital funds attracted almost double the investments in FY18 as
compared to FY17. There are three categories of alternative assets.
Short-lived features of these groups are

23
Category I AIFs - AIFs which invest in early stage ventures, startups, social ventures, SMEs,
infrastructure or additional sectors or areas which the government or watchdogs consider to be
socially and economically wanted and shall include social venture funds,venture capital funds,
SME funds, infrastructure funds and such other AIF’s.

Category II AIFs - AIFs which do not fall in Category I and III and which do not undertake
leverage or borrowing other than for meeting day to day working requirements and as permitted in
the SEBI (Alternative Investment Funds) Regulations, 2012. Various types of funds such as real
estate funds, private equity funds (PE funds), funds for distressed assets, etc. are registered as
Category II AIFs.

Category III AIFs - AIFs which employ varied or complex interchange strategies and may employ
leverag0e counting through investment in listed or unlisted derivatives. Various types of funds
such as hedge funds, PIPE Funds, are registered as Category III AIFs. Total Individual wealth in
Alternative Assets was at ₹92,963 crore in FY18.

4.2.5) PRIVATE EQUITY FUND

A Private Equity fund traditionally invests in the equity of non-publicly traded companies. A
management firm is in charge of investment decisions, portfolio monitoring, reporting, and exits.

Deal flow efforts will be focused around finding prospects that meet a set of pre-defined criteria
(ticket size, minimum ebitda, sector, location, investment round, management background,
assets, minority/majority interest, etc.). Each potential investment goes through a due diligence
process and the final decision is usually made by an investment committee comprised of
Principals and Partners.

Capital can be used toexpand working capital and fund new technologies, within an owned
company, make acquisitions or to strengthen a balance sheet.

Private equity firms traditionally raise capital from institutional investors (pension plans,
foundations, endowments, sovereign wealth funds, family offices) but high net worth investors
are increasingly allocating to the asset class.

Investors are Limited Partners and the management company is the General Partner. This
protects investors against losses incurred by an underlying holding. Investors commit large
sums of money that are invested once capital call notices are received.
24
 They come with a fixed investment horizon, ranging between 4 to 7 years, at this point the
Private Equity firm hopes to exit the investment profitably. IPOs and selling business to
another private equity firm or strategic buyer are included in exit strategies.

PE funds grew by 20.03% y-o-y in FY18 with individual wealth rising to ₹16,287 crore from
₹13,569 crore in FY17. This was on the back of heightened confidence among investors, both
global and domestic. With government measures to boost growth in the economy and increased
investment attractiveness, PE fund very active are set to remain very active in the coming
years.

4.2.6) REAL ESTATE FUNDS

Real Estate funds pond assets from investors and deploy it across realty projects. These funds could
be both domestic and offshore (money raised by foreign investment funds or through overseas
investors) and are regulated by the Securities and Exchange Board of India (SEBI).

The structure: Promoted by Indian investment firms and registered with SEBI, these funds
invest in commercial property, residential property, developed or under-developed for capital
appreciation.

The benefits: Investors can get exposure to multiple projects under development in different
geographies and professional expertise to manage funds on their behalf.

The individual wealth investment in Real Estate funds has increased by 21.20% to ₹10,266
crore in FY18 from ₹8,471 crore recorded in previous fiscal.

4.2.7) HEDGE FUND

Hedge funds are category 3 of AIF as mentioned by SEBI, which heavily concentrates on advanced
strategies such as leveraging, long and short derivative positions to generate high returns. Hedge
funds in India have less than half-a-billion dollars in assets. But, a recent regulatory change may
help their case boosting asset base in coming years.

The RBI on 16th November denounced restrictions on AIF’s - of which hedge funds are a
subcategory - accepting foreign capital but based in India. This paves way for the India-based
funds to capture a bigger part of the multi-billion dollar India-dedicated hedge fund assets.

25
Unlike Category I and II AIFs (alternative investment funds) that are generally eligible for tax
pass-through, Category III AIF trusts are taxed in accordance with trust taxation principles which
are complex and could potentially lead to uncertainty in tax treatment for such AIFs and its
investors.

Lastly, Minimum investible wealth of 1 crore₹ (as per SEBI guidelines) compulsory. Funds within
Category 3 are allowed to use 1:2 leverage and deploy funds into both long and short side of the
markets.

Individual wealth held in Hedge funds was at ₹6,362 crore in FY18, a rise of 94% against
₹3,283 crore recorded in previous fiscal.

4.2.8) INFRASTRUCTURE FUNDS

Infrastructure funds have been conceptualized to accelerate and channelize long term debts into
infrastructure sector to help in the migration of project loans for operating assets from banks. This
not only addresses concerns over asset-liability mismatch of banks, but also provides a long-term
funding source to infrastructure sector. Through its innovative credit enhancement, it is expected
to provide long-term low cost debt for infrastructure projects.

Government through its various policy measures is focusing on developing new infrastructure
projects. The individual wealth in infrastructure funds almost doubled to ₹830 crore in FY18 from
about ₹457 crore in the previous fiscal.

4.2.9) VENTURE CAPITAL FUND

The major difference between venture capital and private equity funds is that the former is often
anearly stage investing outfit, while the latter focuses on investments in an existing company,
mostly unlisted, with assured cash flows that may require restructuring to increase efficiency.
Venture capital funds usually invest in start-ups and are often termed as riskier capital investments.

Venture capital funding in India has bounced back after a slowdown last year. Top venture
capitalists are of the opinion that focus of these funds are now on leaders in each sector and on
companies that are capital efficient. Individual wealth in Venture Capital Funds increased to₹727
crore in FY18, a rise of 200% over FY17.

26
 4.2.10) INTERNATIONAL ASSETS

For universal firms with riches administration tasks in India, worldwide network can wind up one
of the key components of their item recommendation. With workplaces in different parts of the
world, these associations can offer enhancement openings abroad – which is exceptionally
significant in a market tested by constrained item classes.

A few customers additionally utilize finances in India as insurance to acquire abroad. Once in a
while, they should need to take part in M&A or ink a joint wander abroad, and the Indian unit
causes them interface with their worldwide partner to do the arrangement.

Enhancement is a basic speculation guideline. It shields a portfolio from being truly influenced by
negative occasions emerging from single resource class or single market. Universal contributing,
specifically, is a technique which speculators, transcendently HNIs and UHNIs use as a method
for expansion.

The financial execution of a nation changes each year and this without a doubt influences the share
trading system. By putting resources into various markets rather than putting just in India, you can
decrease the effect of nation or district particular financial and geopolitical issues. Created markets
are by and large thought to be bigger with developed monetary markets and are seen to be less
hazardous speculations.

There has been a general increment to ₹20,684 crore, an expansion of 12% y-o-y in riches held by
people into worldwide resources in FY18.

4.2.11) PORTFOLIO MANAGEMENT SERVICE

Portfolio management is the business of making customized decisions to build a strong portfolio
based on financial objectives, investment policy, asset allocation principles, risk tolerance and time
horizon. Two of the most common structures offered for the management of portfolio include:

27
Discretionary portfolio management services:These investments are made by the wealth
manager (decision maker) on behalf of the client as required and all investments are held in client
account. All investments are based on investment plan agreed upon mutually by client and
manager.

Non-Discretionary portfolio management services:these services are offered in a consultative

method. Although you have access to the research data on the available opportunities and the
expertise of the wealth manager, the execution and maintenance of the portfolio are your choices.

FEES: Investors can choose from a range of fee options, including a fixed percentage of funds
managed or variable with profit-sharing, where the fund manager makes money only if the
portfolio generates returns or the combination of both options.

WHY ACTIVELY MANAGED PORTFOLIO SERVICES ARE ESSENTIAL?

Investments once made need to be monitored and gaps if any need to be addressed. Portfolio
manager undertakes a rigorous periodic portfolio review keeping clients financial milestones in
mind.

Furthermore, encouraging time-poor individuals to outsource their wealth management to

professionals. These clients can then focus their limited time on their work and family.

Portfolio and asset allocation decisions are made on client’s standard of living and requirement of
wealth in future. Example, children’s higher education, retirement planning, charitable causes etc.

Lastly, oftentimes wealth managers’ models might suggest hedging a client’s portfolio in case of
certain outlier events affecting a particular securities or assets class.

PORTFOLIO ALLOCATION

Portfolio is built from different kinds of instruments each with their own requirements, risks and
returns.

28
Products are grouped as an asset class, based on securities which share common characteristics,
law, regulation and behavior in the market over time. Assets are also classified by their risk and
return behavior in each market environment. To make the best of portfolio risk and return, it is
important to spread your assets across equity, debt, structured products, private equity, real estate
and other avenues.Wealth Manager has access to proprietary asset allocation model where he tries
to identify lowrisk products with optimum returns. For example in case of large cap equity-oriented
portfolios, downside is protected using hedging tools.

INVESTACTIVE– PROPREITORY ALLOCATION BY PL

A UNIQUE MEDIUM/LONG TERM EXPOSURE FOR GROWTH AND STABILITY

70:30 ALLOCATION APPROACH

POWER OF 70 (Top Picks)

Purely fundamental in nature they typically have a holding period of 1 year plus

 40% LARGE CAPS (~ 4% each stock)

 30% MID CAPS (~ 3% each stock)

OPPORTUNITY 30 (Short Term Trading Opportunities)

10% ALPHA TRADE

Alpha Trades – Short to Medium Term Holding Period
2% of portfolio for each call – Max 5 calls Open
Alpha calls are a mix of market driven trades and technical.
20% POSITIONAL TRADES
Short Term Positional Trades – Holding period from a few days to a month – No
Intraday or Derivatives
2% of portfolio for each call – Max 10 calls open
Technical Parameters followed in releasing a trade with stop losses and targets specified
upfront.

29
 INVESTOR RISK: MODERATE TO HIGH

Table 7: Moderate to High Risk Portfolio

Sr. Asset Class Product Type Suggested Expected Per
No. Allocation % In Annum Return
Investment Time
horizon 1-5 years (%)

1 Mutual Funds Equity Oriented 25% 20%

Holding> 1 Years

2 PMS Equity 25% 20%

3 INVESTACTIVE Equity 10% 15%

4 Balanced Mutual Fund Holding > Mix Of Equity & 15% 13%
1 Years Debt

5 Real Estate Structured Product 10% 16-17%

6 MIPs/Debt Funds with Equity Debt 10% 8-8.50%
Holding > 3 Years

7 Bond Funds/Company Fixed Debt 5% 7.50%

Deposit
8 Expected Portfolio Return 100% 16%

Asset Debt 27.5

Allocation Equity 72.5

Expected Portfolio 16%

Returns (%p.a.)
 INVESTOR RISK: HIGH

Table 8: High Risk Portfolio

Sr. Asset Class Product Type Suggested Expected Per
No. Allocation % In Annum Return
Investment Time
horizon 1-5 years (%)

1 Mutual Funds Equity Oriented 40% 20%

Holding> 1 Years

2 PMS Equity 40% 20%

3 INVESTACTIVE Equity 10% 15%

4 Balanced Mutual Fund Holding > 1 Mix Of Equity & 0% 13%

Years Debt

5 Real Estate Structured Product 10% 16-17%

6 MIPs/Debt Funds with Equity Debt 0% 8-8.50%
Holding > 3 Years

7 Bond Funds/Company Fixed Debt 0% 7.50%

Deposit
8 Expected Portfolio Return 100% 19%

Asset Debt 10

Allocation Equity 90

Expected Portfolio 19%

Returns (%p.a.)

31
5. FINANCIAL INNOVATION IN WEALTH MANAGEMENT

Robo-Advisory: wealth management is undergoing structural change due to digital disruption.

The new generation of investors are groomed by variety of technology innovations offered by
startups and this in turn has caused industry incumbents to come up with breakthroughs of their
own.

Clients are no longer satisfied with traditional wealth management offerings, as lot of investment
decisions and asset allocation ideas could be generated real time via artificial intelligence which
can process huge chunk of financial data and client data to narrow down appropriate asset
allocation as per clients risk and return expectations preference.

The offerings of Robo-Advisory are feasible to the mass affluent classes of the population who were
until now vary of fees charges by wealth advisory in private banks.

Globally, according to a 2015 EY report on wealth management, this is leading to the emergence
of two models for the business: one being a fully-automated digital wealth manager and the other
a hybrid, combining automated services and the human adviser. The growth of Robo-Advisory
especially in more developed markets, has in part been driven by a shortage of financial advisers.
Many experienced professionals are in their 50s, with fewer young people willing to join this
highly-competitive industry. This is the segment that is likely to feel the biggest positive impact
of technology driven services.

According to Capgemini world wealth report 2018, although widespread global entry of
BigTech(technology giants) into wealth management remains uncertain, leading firms (nearly
three-quarters of all interviewed private banking firms) are investing in innovative technologies
such as intelligent automation(back end processes) and artificial intelligence (AI) over the next 24
months, as they prepare for BigTech to play a larger role in the industry.

Furthermore, according to the same study younger HNWIs (under age 40) demand for artificial
intelligence (AI) optimized advisory for their wealth management needs.

32
TECHNOLOGY WAVE IN INDIA

India is a home to more than 462 million Internet users, the number of mobile users here is expected
to reach 1 Bn by the year 2020. Determined by the Harvard Business Review (HBR) in its latest
edition of Digital Evolution Index 2018, India has a great market potential compared to the entire
world.

With the emergence of disruptive Artificial Intelligence (AI) technology, a lot of startups in past
years namely discount brokerages like Zerodha which offers sophisticated algorithm based
investing bridge, mutual funds amongst other offerings and m-commerce app based platforms like
PayTm offers loan, insurance and mutual fund products to its 80 million active users.

Though a major challenge to the penetration of digital advice, is that Indian investors are not very
comfortable with online investing and prefer some form of personal advice, even if this is informal.
Only then participants will want to make an investment decision. In short, there seems to be a lack
of trust in pure digital investing models.

Nevertheless, it’s important to remember the bigger picture: favorable demographics, rising
affluence, and the increasing number of internet and mobile phone users. This sets the stage for
explosive growth in robo-advisory models, despite some hurdles along the way.

Lastly, digital tools have the potential to change the face of product distribution in the country as
traditional advisers and distributors have faced challenges in expanding beyond the metro cities
and tier2 towns

INDUSTRY LEADERS SPEAKING ON FINANCIAL INNOVATION

“We started as a payments platform and expanded customer offerings to deposits with Paytm
Payments Bank. With Paytm Money, India has taken the next big step in the direction of managing
wealth. Pravin and his team are on a mission to make wealth management accessible and easier
for the Indians. Our aim is to increase the size of wealth management customer base and bring
good understanding of wealth products to our consumers.”

33
Vijay Shekar Sharma CEO, PayTm, January 2018

PayTm is backed by Alibaba Inc China, which supports PayTm with Technology, Products &
Market Access, and provides it support on several issues like Algorithm improvement and
Expertise on scaling up its m-commerce business within India.

“Apple was not in the music industry, Google was not in the mobile phone industry and Amazon was
not in the groceries business — until they were,” he said.

“Tech companies are going to enter the financial services market in a very aggressive way.”

“This is a story that I do not think ends very well,” (for established western financial companies) Mr

Robert Kapito, Founder/President of BlackRock, April 20

34
6. DATA ANALYSIS AND FINDINGS

Figure 2: Financial Assets in India

FINANCIAL ASSETS IN INDIA

,743

,963

,322

,287

,266

,684
868000

,362

830

727
16
82

92

28

10

20
6
11978421

(in crores)

35
Interpretation:

Equities dominates the financial asset class with ₹1,19,78,421crore market capitalization followed by
fixed income/bonds at ₹82,743 crore.

Figure Performance of HNWI Financial Assets Invested with Wealth Management Firms, Q2 2018

Figure 3: Portfolio Discretionary vs Non-Discretionary

PORTFOLIO MANAGED DISCRETIONARY VS NON
DISCRETIONARY

,000
83
10.64

DISCRETIONARY NON DISCRETIONARY

Interpretation: According to data released by Sebi, asset management under discretionary
category rose to ₹10.64 crore by the end of September, up 10% against the same period of last
year. Similarly, in non-discretionary category, AUM increased by around 11% to ₹83,000 crore
during this period. This suggests that gigantic share of wealth creation happened in the wealth
management sector, around 11% growth aggregate.

36
Figure 4: Return based on Advisory Type – Discretionary vs. Non-Discretionary

ADVISORY TYPE

Discretionary Non Discretionary

%
38.60

%
36.40

ADVISORY TYPE

Source: Capgemini Financial Services Analysis, 2018; Capgemini Global HNW Insights Survey 2018

Interpretation: HNWIs achieved a 38.6% return on discretionary portfolios compared with 36.4%
for advisory only or non-discretionary portfolios. Discretionary Asset Management is offered to
higher segments of wealth where the exclusive Institutional Investment is a part of the reason
behind higher returns on discretionary portfolio achieving higher returns is because propositions
are available.

37
Figure 5: Performance of HNWI Financial Assets Invested with Wealth Management Firms Q2
2018
INVESTMENT PERFORMANCE
%

%
33.00

24.60

37.10

36.90

35.80

24.40

20.90

18.20
%
15.30

CHINA
JAPAN

INDIA
MALAYSIA

HONG KONG
INDONESIA

SINGAPORE
AUSTRALIA
REST OF THE WORLD
ASIA-PACIFIC (EXCL. JAPAN)

Note: Question asked: “Thinking about the financial assets you invested with thewealth
management firms, how did they perform last calendar year?”

Source: Capgemini Financial Services Analysis, 2018; Capgemini Global HNW Insights Survey 2018

Interpretation: Asia-pacific region as a whole outperformed Rest of the World. Amongst the highest
growth gains of HNWIs were seen in emerging markets rather than developed economies. With Indian
HNWIs achieving returns of 35.80%.

38
Figure 6: Breakdown of HNWI Financial Assets, Asia-Pacific Region , 2017-2018

HNWI ASSET ALLOCATION

Equities
23.30%
Cash and Cash
27.70%
Equivalents
20.60% Real Estate
Fixed Income
24.90%
Alternative
20.50% Investments

18.70%

19.00% 2018 2018

18.30%
16.60%
10.40%

Question asked: “What percentage does each of these asset classes approximately represent in your
CURRENT financial portfolio?

Alternative Investments include structured products, hedge funds, derivatives, foreign currency,
commodities, and private equity

Source: Capgemini Financial Services Analysis, 2018; Capgemini Global HNW Insights Survey 2018

39
Interpretation: Asia pacific region has witnessed a 20.8% increase in allocation to cash and cash
equivalents over the past one year while there was just an 18.8% increase in allocation to Equities.
Alternatively there was a cut down on allocation into real estate, fixed income and alternative
investments, where alternative investments plunged -6%.

Figure 7: HNWI comfort Level with Fees, Q2 2018

COMFORT LEVEL WITH FEES

Percentage of Respondents
68.50%
%

%
%

30.50
57.40

53.30

63.60

62.00

43.50
%

%
20.00

26.00

24.80

Question asked: “How comfortable were you with the fees you were charged in 2017, given the
performance of your assets and the service you received from your primary wealth management

40
firm. Indicate your response on a scale of 1-7. 1 – Not comfortable, 4 – Neither comfortable nor
uncomfortable, 7 – Extremely comfortable; Ratings of 6 and 7 have been shown in the above chart.

Source: Capgemini Financial Services Analysis, 2018; Capgemini Global HNW Insights Survey 2018.

Interpretation:

Comfort level with Fees are low in developed regions like Japan, Singapore Hongkong. While
developing economies like China, India and Indonesia show High Comfort Level with Fees.

Figure 8: Most Important fee concerns for Asia-Pacific, HNWIs, Q2 2018

Most Important
Fee Concerns

TRANSPARENCY OF FEES 24.40%

VALUE DELIVERED 19.60%
FEES RELATIVE TO PERFORMANCE 15.30%
UNEXPECTED CHARGES 14.50%
LEVEL OF FEES 13.30%
FEES RELATED TO SERVICE QUALITY 7.70%
LACK OF COMMUNICATION 5.20%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%

Percentage of Respondents

Question asked: “How concerned are you about the fees charged by your primary wealth
management firm for each of these parameters?” Respondents were asked to rate on scale of “most
concerned”/ “also concerned”/ “not concerned”; Numbers in the chart indicate responses for “most
concerned”

Source: Capgemini Financial Services Analysis, 2018; Capgemini Global HNW Insights Survey 2018

Interpretation:HNWIs expect fee models to change with their level of personalization of

investment preference i.e., “pay-as-you-go” modular fees Thus providing transparency into the
structure of management charges.

41
Currently investment performance is most used basis of payment to WM firms, used by 32%
Investors. While “pay as you go” modular fees is used by 18.0%.

42
Figure 10: Interaction Preference for Wealth Management Capabilities, Q2 2018
INTERACTION PREFERANCE FOR WEALTH MANAGEMENT
CAPABILITIES
Wealth Manager-Led Hybrid Automated/Self Service

%
%

%
59.40

38.90

43.20

53.70

49.50

38.30

52.90

53.00
%
45.00

%
26.90

%
20.10
%
8.80
%
5.60
%
3.20
%
1.70

PROFILE STAGE DEVELOP STAGE EXECUTE STAGE MANAGE STAGE REPORT

STAGE
Question asked: “How would you like to interact with your primary wealth management firm for
each of the following services?”; HNWIs were asked to choose their preferred interaction between
“Fully Wealth Manager-Led”, “Hybrid” and “Fully Automated” for 24 capabilities, and the values
represent the average of the capabilities in the 5-stages shown above; values in red and green boxes
represent the percentage point difference by which Asia-Pacific (excl Japan) HNWI preference is
Lower and Higher respectively, compared to Rest of the World HNWI preference for that
approach.

Source: Capgemini Financial Services Analysis, 2018; Capgemini Global HNW Insights Survey 2018.

Interpretation:

For Profile Stage HNWIs prefer Wealth Manager led approach while for

43
Develop/Execute/Manage/Report Stage HNWIs prefer Hybrid approach, with 53% preference for
Hybrid in Report Stage.

Figure 11: HNWI Propensity to Use BigTech Firms for Wealth Management, Q2 2018

Question asked: If technology firms such as Google, Apple, Facebook, or Amazon were to offer
Wealth Management services, would you consider becoming a client? Please indicate response as
Yes or No

44
7. RECOMMENDATIONS

 The incumbent wealth management firms should invest in propriety robo advisory for
the long term and adapt people, processes and business proposition to the new reality of
wealth management.
 Invest more into presence within digital platforms as new generation of investors will
increasingly use financial tools to make financial decisions.
 Invest into grooming finance professionals who are sharp and educated on economy,
markets and financial products to understand of clients’ needs, interests and goals as a
relationship manager.
 Banks and wealth management firms should be transparent about its advisory fees and
miscellaneous charges.
 Private Banks &Wealth management firms could differentiate themselves by offering
more customized and modular fee models to HNWI clients based on preference that
vary significantly across age and wealth levels.
 Hybrid advisory models may offer firms a means to build a new, more modular advisory
proposition namely fully automated, semi-automated and human advisory for HNWIs.
Alternatively, firms could fully automate all client processes and invest in people to take
lead in advisory role and financial planning (tax, legal, estate planning etc).

45
8. LIMITATIONS OF STUDY

 Certain asset allocation models used by top private banks were not available for studysince
such data is closely guarded.
 Lack of access to automated robo advisory platforMr.
 Limited access to Wealth Manager’s data on HNIWs financial data.

45
9. LEARNING OUTCOME

 Wealth Management will become largely automated but financially well versed and
knowledgeable Wealth Managers will still be invaluable as advisory to clients
financials needs.
 In the long run, efficiency and ingenuity of a well versed wealth manager and back
office team is indispensablefor full-service benefits of private banks wealth
management offerings.
 Hybrid Semi-Automated Portfolio Management offerings would increase productivity
and customer satisfaction level.
 Arrival of BigTechTechnology will not only lead to widening of Product
Distribution Channel but Democratization of big analytics data and investment
strategies to Massmarket affluent customers.
10. CONCLUSION

Progressively molded by utilization of web, internet based life and plenty of gadgets the up and
coming age of HNWI speculators will request money related apparatuses for dealing with their
portfolio or investigate budgetary resources and other venture roads for settling on educated
monetary choices.

For the present, the present piece of the overall industry of robo-warning firms is peripheral in
correlation with the AUM of the worldwide resource administration industry. Be that as it may,
with the worldwide interest for crossover man-made consciousness based riches administration
picking request, speculators will stop their money related resources where charge
straightforwardness is substantial but then stays aggressive in its portfolio choice ability.

The democratization of data additionally makes it substantially less demanding for financial specialists in
general to pick Wealth Managers in light of past execution and mastery.

At introduce the robo-warning model isn't relied upon to upset customary Wealth Advisory
Business totally on account of the low money related mindfulness levels of individual speculators,
who still need some type of human communication before settling on venture choices. However,
with immersion of innovation in the commercial center by new companies and BigTech, the
measurements itself will make speculators focus on the resourcefulness of Artificial Intelligence.

Without a doubt, developing advances are relied upon to change the scene – and India will be no
exemption with 1 million entering work compel each month*, the benefit administration industry
will have its plates full while technically knowledgeable youthful financial specialists will
investigate the wide cluster of computerized apparatuses to make riches for themselves.

11. REFERENCES

49
BIBLIOGRAPHY

BlackRock co-founder warns on complacency over Chinese tech

https://www.ft.com/content/c46a8952-4025-11e8-803a-295c97e6fd0b

We have set up Paytm Money to focus on Investment and Wealth Management

https://blog.paytm.com/we-have-set-up-paytm-money-to-focus-on-investment-andwealth-management-

218038c97589

World total wealth report: India 6th wealthiest country, home to 3,30,400 HNWIs; US tops chart
with $64,584 bn https://www.firstpost.com/business/world-total-wealth-report-india-6th-
wealthiestcountry-home-to-330400-hnwis-us-tops-chart-with-64584-bn-4327547.html

GOLDMAN SACHS “India Consumer Close Up 2017”

KARVY PRIVATE WEALTH “India Wealth Report 2018”

DELOITTE “10 Disruptive Trends in Wealth Management”

CAPGEMINI “Asia-Pacific Wealth Report 2018”

12. PLAGIARISM REPORT

50
51
52