Ref book-Marketing of Financial Services-VA Avdhani, Financial Services & System- Dr S Guruswamy

Intangibility
Good

rapport, willingness to understand each other, and cooperation should exist between buyers and sellers Non homogeneity since dominated by human element Immediate consumption Branding and designing in standardized manner is not possible
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1.
2. 3. 4. 5. 6.

Customer focus Capturing growth opportunities Successful differentiation Innovativeness and management ability Quality and professionalism Concept selling

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I.

II. III. IV. V. VI. VII.

VIII. IX.

Reliability-includes timely performance and dependability Responsiveness of management to needs of customers Competence and skills of personnel Courtesy and effective communication with client Consistency in approach towards clients Fully understanding requirements of customer Credibility involving trustworthiness, honesty and integrity of service providing company Timeliness and quality of service Management skills, professional approach, easy access to clients, willingness to help

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o
o o o o o o o o o

Liquidity Collateral value Marketability Transferability Maturity period Transaction cost Risk and uncertainty Provisions of options Tax status ROI Price fluctuations
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 Asset

Management Companies Liability Management Companies

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 Fund

Raising Funds deployment Specialized services Regulation Economic growth

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 Intangibility
Customer

orientation Inseparability Perishability Dynamism

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 Market

Players Instruments Specialized Institutions Regulatory Bodies

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Lack of expertise Inadequate accommodation Inadequate technology Inadequate quality service Captive organization Restricted scope of operations Limited innovation Lack of sound institutional mechanism Other problems Lack of core-competence and competitive advantage Lack of reliable benchmarking Unfair practices, unethical advice
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Financial Services Environment

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i.
ii. iii. iv. v. vi. vii. viii. ix. x.

Employment and Unemployment Inflation and deflation Trade cycles Stagflation Eco growth Exchange rate and BOP Deregulatory measures Technological changes Enhanced competition Global portfolio preferences
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 Households
Firms Governments External

Agencies

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INSURANCE

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A Financial Service for collecting the savings of the public and providing them with a risk coverage (certain and uncertain risks)

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Contract of Insurance should possess following essential characteristics. Good faith Insurable Interest Compensation Subrogation Contribution Loss Mitigation Causa Proxima

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Helps provide protection to customers from certain/uncertain risks. Provision for retirement and old age. Gives the double advantage of insurance as well as an investment option Protection against lawsuits Family is protected from monetary liability in case of death. Tax relief from IT on premiums paid. Benefits are available immediately and can be used for expenses like final illness/funeral etc.

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Life Accident Health House Liability Travel Commercial Property Auto Baggage Cattle Eng Marine

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 Financial

Planning

planning the acquisition of funds to finance planned activities

The

financial planning process is an ongoing process involving various steps. The end result is a financial plan which can, and will, change throughout time due to varying circumstances such as medical emergencies, unemployment, goal changes, and other life events. A good sound financial plan can be modified to suit changing needs
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Personal Goals Step 1 Fianacial Plan First you must determine what your financial goals are. Be as specific as possible. How much money do you want to have in 30 years, 20 years, 10 years, 5 years, 3 years, 1 year? How much money do you need to invest every month, week, day in order to reach your financial goals? Step 2 Fianacial goal Now, write down your financial plan and post it where you can see it everyday. Write down all of the things you will do when you achieve your financial plan. Include pictures of your financial dreams too. This will be your motivation. Step 3 Get a Cerified Financial Planner Put your financial plan into action. Now that you know what you want in life and you have a financial plan, contact a Certified Financial Planner to help you achieve your goals. Ask your friends and family if they know of a good one. Be sure they are a Certified Financial Planner. They are professionals and they must meet high industry standards and have years of experience before they achieve this highly respected title.

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Friday, March 09, 2012

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Insurance Regulatory and Development Authority Act of Parliament, under Section 4 of IRDA Act (1999 10 member team (1 chairman, 5 full time members and 4 part time members)

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 Regulate
Promote Ensure

orderly growth of insurance and re-insurance business.

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 Registration

Terms

Protection
Qualification Code

of conduct Efficiency Professionalism Fees Information

of business Books of accounts Funds investment Margin of solvency Adjudication Supervising Premium income Rural insurance

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MUTUAL FUNDS

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Association or Trusts of public members who wish to make investments in the financial instruments or assets of the business sector or corporate sector for the mutual benefit of the members. Set up under the Indian Trust Act.

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 Originated

in Belgium in 1882, under the name of Societe Generale de Belgiue Began in USA from the 20th century Began in Canada in 1920 Recent years in Japan, Far East, Pacific areas like Hong Kong, Korea etc, Mauritius and Netherlands MF is thus now a global phenomenon

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 Traced

to formation of UTI in 1963 Joint initiative of GOI and RBI

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Mobilizing small savings Investment avenue Professional management Diversified investment Better liquidity Reduced risks Investment protection Switching facility Tax benefits Low transaction costs Economic development Convenience Other benefits
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Always open for subscription Fund raised by public keeps varying Any time entry and exit Units can be liquidated at any time No maturity period No listing, hence not traded on stock exchange
Open Ended

Open only for a limited time Corpus of the scheme is fixed No exit till closure of scheme Units can be liquidated at end of specified period Fixed maturity period Listed on stock exchange, hence traded
Close Ended

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EQUITY FUNDS Long time horizon High risk High return TG-Young, high income group.

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Equity funds Sub classification based on investment objectives. Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

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DEBT FUNDS. Major portion invested in debt papers Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers Low risk-stable income

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DEBT FUNDS-Sub Classification

1.

2.

3.

4.

Gilt Funds-Invest their corpus in securities issued by Government, popularly known as GoI debt papers, has low risk, low returns Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. Short Term Plans (STPs): ideal for an investment horizon of 3-6 months. funds primarily invested in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs) and corporate debentures. Liquid Funds: Easy liquidity and preservation of capital, safest among all MFs, very low risk, preservation of capital, meant for short term cash management These schemes invest in short term instruments like T Bills, interbank call money market, CPs and CDs.
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BALANCED FUNDS Mix of equity and debt funds Provide investors with growth and stability

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Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly.

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GROWTH / INDEX FUNDS: Linked to a specific index of share prices. Funds invested principally in the securities of companies listed on the stock exchange

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TAX SAVING FUNDS Offer tax rebate on investments made in equity shares under section 88 of the IT Act of 1961. Subscription up to Rs 10000 in an assessment year is eligible for tax rebate.

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HYBRID FUNDS A category of mutual fund that is characterized by portfolio that is made up of a mix of stocks and bonds, which can vary proportionally over time or remain fixed

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Sponsor
Any corporate body which initiates launching of the MF, needs to have a sound track record and relevant experience for a minimum period of 5 years. The sponsor is responsible for getting the MF registered with Sebi. It creates the asset management company and the trustee company, contributes towards their capital and appoints the boards of both these companies with the approval of Sebi.

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Trustees
Persons

who hold property of the MF for the benefit of the unit holders, minimum 75% trustees should be independent of the sponsors to ensure fair dealing, they are paid a fee for their services.

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 Custodians

Agency that keeps custody of the securities bought by the MF Managers under various schemes, should not be associated with the AMC and act as sponsor and trustee to any MF

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Custodians- Functions
Safekeeping of securities Participation in clearing system on behalf of client Collecting dividend if any on the securities Ensuring delivery of scrips only on receipt of payment and vice-versa Regular reconciliation of assets with accounting records Timely resolutions of discrepancies and failures Arranging proper registration or recording of securities

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 Manages

affairs, marketing of the MF Responsible for managing all schemes of the fund and can be the AMC of only one fund/company AMCs have to have a net worth of at least Rs 10 crore. Half of the directors on the board have to be independent directors. Paid fees for its services
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Registrars and Transfer Agents Fund Accountants Lead Managers Investment Advisors Legal Advisors Auditors Underwriters INVESTMENT FUNCTIONS Creating fund Manager Research and Planning Creating Dealers/ Sales distribution channels.

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 Assignment

Find Current Market scenario of MFs in India and globally wrt: No of MFs No of MFs in private sector No of open ended schemes No of SIPs

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 Oldest

and most important intermediaries in the financial system Short term institutions-Borrow from public up to 3-5 years, lend to Government, private and corporate sectors for short term working capital, current expenditure, term loans for project finance

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Online banking Savings a/c Loans Current a/c Insurance Term deposit Commercial banking Tax saving deposits Deposits Debit Cards Trade Finance ATM Cards Loans & Financing NRI/NRO a/c Treasury Solutions Foreign remittances Payments & Cash Management Portfolio Management Services

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 Assignment

Visit a bank and determine how bank products are sold, how cross selling is done.

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 Deregulatory

reforms by Government prompts private FIIs and non FIIs to enter banking industry Multi-channel banking gained prominence , e.g. ATMs, telebanking, internet banking etc Technology forces nationalized banks to change core banking strategy IT gives customers access to lower cost channels thereby reducing operations costs
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Definition A set of all financial arrangements that are made available by Housing Finance Companies (HFCs) to meet the requirements of housing is called housing finance.

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 Town

planning schemes Development authority schemes Housing board projects Cooperative society projects Private real estate developers Public-private partnership Slum boards projects Government employees housing Government programmes
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Archaic laws Lack of clear title High stamp duty Obsolete rental laws Inadequate building codes and standards

Inadequate development and planning Inadequate infrastructure Recognition of housing as an industry Slum clearance and public housing Land supply

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1.
2. 3.

4.
5. 6.

7.
8.

Loan amount Tenure Admin and processing costs Pre-payment charges Services Value addition Sources of finance like HFCs and Banks EMI calculation methods

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 National

Housing Bank (NHB) Life Insurance Corporation Housing Finance Limited (LICHFL) Housing and Urban Development Corporation of India (HUDCO)

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VENTURE CAPITAL

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A form of equity financing designed for funding high risk and high reward projects is known as Venture Capital

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Provides finance to hi-tech projects besides helping R &D projects to turn into commercial production Fosters growth and development of enterprises. Includes financing new and rapidly growing companies that are especially knowledge based, sustainable, upscale able etc Assisting in the development of new products and services/services, adding value to company through active participation

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Rationale:
High

expectation for large gains for an entrepreneur which acts as a motivation behind taking up risky investments that carry high return profiles, Objective of gaining equity ownership in such enterprises initially, participate in growing prospects in the form of capital appreciation subsequently

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Features:
i. ii.

iii.
iv. v.

vi.
vii. viii.

New ventures Continuous involvement Mode of investment Objective Hands-on approach High risk-return ventures Nature of firms Liquidity
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 Seed

capital Startup financing Early stage financing Follow-on financing Expansion financing Replacement financing Turnaround financing

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Definition

Merchant Bank is an organization that underwrites securities for corporations, advises such clients on mergers and is involved in the ownership of commercial ventures, are sometimes banks which are not merchants, are merchants but not banks, and sometimes neither

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A set of financial institutions that are engaged in providing specialist services, which generally include the acceptance of bills of exchange, corporate finance, portfolio management and other banking services, May or may not carry above activities, May specialize one activity and take up other complementary or supportive activities
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1. 2. 3. 4. 5.

6.

7. 8.

Corporate counseling Project counseling Pre-investment studies Capital restructuring Credit syndication & project finance Issue mgmt & underwriting Portfolio mgmt Working capital finance

9. Acceptance credit & bill discounting 10. M&A, takeovers 11. VC 12. Lease financing 13. Foreign currency finance 14. Fixed deposit broking 15. MF 16. Relief to sick industries 17. Project appraisal

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CREDIT CARDS

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Origin and Genesis. Originated in USA in the 1920s Period following 2nd WW transformed US economy into service economy, thereby leading to Credit Cards First credit card issued by MOBIL in 1940

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Types of Cards. Bankcards Visa and MasterCard Electronic Cards Special purpose cards

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 Owner

identification Credit limit Wide usage Technology dependant

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 Risk

Coverage Emergency cash withdrawal 24 hours service Photocard option Travel privileges Credit line increase Service over phone

Purchase

protection Fuel facility Medical advance facility Supplementary cards Hotels discount facility New letters Joint cc and atm
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CC

Mode of credit recovery 1)Revolving credit card 2)Charge card

Status of CC 1) Standard card 2) Business card 3) Gold card

Geographical Validity 1) Domestic cards 2) International card

Franchise tie-up 1)Propriety card 2)Master card 3) Visa card

Issuer Category 1)Individual Cards 2)Corporate Cards

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 ATM

Cards Debit Cards Prepaid Cards Private Label Cards Affinity Group Cards Smart Cards Chip Card Co-branded Card

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1.
2. 3. 4. 5. 6.

Credit Purchase Credit Card processing Bill raising Payment Bill to cardholder Card payment

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Issuer bank Acquirer bank Options for Service delivery Stand-alone Co-branding Regional Associations Outside Service providers

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Shopping convenience Credit facility Safety Meticulous record Acceptability

Enhanced Sales Easy validation No risk Issuer Banks Source of income Easy validation Cross selling

Cardholders

Merchants
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Waste of money Thoughtless buying Financial problem Mental agony Costly

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