HNWI (high net worth individuals) SECTOR GAINS IN 2007
10.1 million individuals worldwide held at least US$1 million in financial assets, an increase of 6.0% over 2006. Global HNWI wealth totaled US $ 40.7 trillion, a 9.4% gain from 2006, with average HNWI wealth surpassing US $ 4 million for the first time The Ultra-HNWI wealth band experienced the strongest growth, gaining8.8% in population size and 14.5% in accumulated wealth Emerging markets, especially those in the Middle East and Latin America, scored the greatest regional HNWI population gains HNWI financial wealth is projected to reach US $ 59.1 trillion by 2012,advancing at an annual growth rate of 7.7%For t he gl obal economy, 2007 was a t r ans i t i onal year t hat began and ended wi t h sharply opposing macroeconomic environments: Momentum that was carried over f r o m 2 0 0 6 s u s t a i n e d u n a b a t e d g r o wt h i n t h e e a r l y mo n t h s .
B y t h e l a t t e r e n d , heightened uncertainty and instability marked the deep change that was underway. Overall, market performances were solid in 2007. However, closer analysis of the key drivers and inhibitors of wealth reveals how the many fundamental changes that took place over the course of the year led to deteriorating economic conditions in key markets, including the United States and several mature European nations. Evenly split, the two halves of the year tell very different stories: steady global growth in the first six months, followed by sharply diverging paths between mature and emerging economies in the second half. I n ear l y 2007, s t r ong economi c gai ns s pur r ed i mpr es s i ve per f or mances i n equi t y ma r k e t s a n d v a r i o u s i n v e s t me n t p r o d u c t s , r e f l e c t i n g h i g h l e v e l s o f i n v e s t o r confidence. Robust growth in emerging markets, driven by high commodity prices and r i s i ng domes t i c demands , s uppor t ed s ol i d gr owt h i n mat ur e economi es . St ock ma r k e t s wo r l d wi d e p e r f o r me d we l l i n t o t h e s u mme r , l e d b y L a t i n A me r i c a a n d Emer gi ng As i a, whi ch s aw r oughl y 25% and 17% gr owt h, r es pect i vel y, t hr oughJuly.1 A variety of investment products performed well during the first half of the year; for instance, total announced private equity deals worldwide were on pace to shatter their 2006 record.
T h e s e c o n d h a l f o f 2 0 0 7 , h o we v e r , r e v e a l e d a d i s t i n c t a n d g r o wi n g d i v e r g e n c e between mature and emerging economieswith the advantage going to emerging n a t i o n s . Wh e t h e r h o b b l e d b y t h e d o wn t u r n t a k i n g h o l d i n t h e Un i t e d S t a t e s o r challenged by the slowed growth of a major trading partner, with few exceptions, the performances of mature economies weakened significantly in the closing months of the year. In the European Union, for example, growth was dampened by a confluence of key market forces: slowing domestic consumer spending, a result of high levels of personal debt amid tightening credit conditions; a drop-off in exports brought on by easing demand in the United States, which received nearly 24% of E.U. goods and services shipped abroad; and an appreciating euro. Growth slowed among other global powers as well: In Japanthe worlds second-largest economy a decline in housing investment and low levels of consumer confidence took their toll.4 In essence, a l ong per i od of eas y money i n mat ur e economi es was r out ed by f i nanci al and credit market turmoil. By contrast, emerging markets proved resilient and posted robust gains in the second hal f of 2007, even as uncer t ai nt y gr ew i n mat ur e mar ket s . Bui l di ng on t hei r cor e compet ency, expor t - dr i ven gr owt h, many emer gi ng economi es conver t ed s har p i ncr eas es i n ener gy and commodi t y pr i ces i nt o s our ces of hi gh pr of i t abi l i t y and significant growth. Both GDP and market capitalization gains, particularly in Brazil, Russia, India and Chinathe BRIC nationswere strong, capping another impressive year for HNWI growth and investment opportunity. Given these nations mo r e s t a b l e c o n s u mp t i o n h a b i t s , r i s i n g d o me s t i c d e ma n d a n d h e a l t h y b u s i n e s s environments, the slowing United States economy, which accounts for 21% of global GDP, did not appear to significantly compromise their economic growth
ADVANTAGES
Banks offer stability for the money put on investment. The degree of vulnerabilitya n d r i s k i s mi n i mu m i n c a s e o f b a n k s t h a n i n o t h e r i n s t r u me n t s o f we a l t h management.
Free from market adversity.
Banks i n I ndi a have a wi der net wor k cover i ng t he r ur al ar eas al s o whi ch has a potential for wealth augmentation. DRAWBACKS
Interest rate offered by banks is less in comparison to other asset augmentationinstruments
Dubai Bank, UA
Bonanza i s a l eadi ng Fi nanci al Ser vi ces & Br oker age Hous e wi t h acknowl edgedi n d u s t r y L e a d e r s h i p i n e x e c u t i o n a n d c l e a r i n g s e r v i c e s o n E x c h a n g e T r a d e d Derivatives and cash market products.Key elements that place Bonanza amongst the leading Brokerage Houses and make itthe preferred service provider for value based financial services are:
A Client-driven foundation and strategy committed to client -specific investmentneeds and objectives.
I nt egr at ed and i nnovat i ve us e of Technol ogy enabl i ng cl i e nt s t o t r ade of f l i ne, online and Strategic tie-ups with latest technology partners to facilitate tradingaccess and direct processing across 400 outlets in 160 cities.
Client-focused philosophy backed by memberships of all principal Indian Stock and Commodi t y Exchanges makes Bonanza a pr ef er r ed s er vi ce pr ovi der i n t he Industry for value based services. Minimum portfolio size: R s . 1 0 l a k h s . Y o u c a n a l s o o p e n a P MS a c c o u n t b y transferring your existing portfolio of stocks or mutual funds. PMS Fees: 15% of profits plus government taxes. Charged quarterly -due only if the portfolio has made profits in that quarter. Brokerage : 0. 50% pl us al l appl i cabl e r egul at or y char ges and gover nment t axes . Bonanza portfolio Ltd. And Bonanza Stock Broker Ltd. will be appointed as brokersLtd. Will be appointed as brokers to the scheme. Other charges: Depository and other charges, expenses and taxes will be on actuals.The I ndi an weal t h management mar ket i s r i pe f or de vel opment . St r ong economi c growth has created wealth that needs somewhere to go and consolidated the positionof t hos e wi t h ol d money. Des pi t e t he count r y' s r api d devel opment t he mar ket i s immature; investment propositions have traditionally centred on deposit accounts andcurrency controls limit access to the international capital markets. But change is in theai r and bot h domes t i c banks and i nt er nat i onal pl ayer s al i ke ar e now gear i ng up t omeet t he needs of t he weal t hy. The nat ur al evol ut i on of t he weal t h management market can only be helped along by continued economic growth that will do much tostimulate demand. Raj Parmar, head of Global South Asian Diaspora at HSBC PrivateBank says: "Sustained GDP growth in the last few years has created wealth in manysectors of the Indian economy, both old, such as gems and jewellery, and new, such asoutsourcing, have benefited and growth is now considered sustainable." The money bei ng made i n t he new i ndus t r i es ; r et ai l i ng, f i nanci al and BPO ( bus i nes s pr oces s outsourcing) seems to be limited to urban areas. A recent report from Datamonitor found GDP highly concentrated in three regions: Maharastra, Uttar Pradesh and WestBengal . Thos e t hr ee r egi ons , accor di ng t o t he r epor t , account ed f or 29. 7% of t ot al GDP i n 2006 / 7. Depos i t ar y hol di ngs i n t hos e r egi ons ar e cor r es pondi ngl y hi gh
Mu mb a i , a p a r t o f Ma h a r a s t r a h o l d s 4 9 . 2 % o f d e p o s i t s h e l d b y f o r e i g n b a n k s accor di ng t o Dat amoni t or . Ol d money, meanwhi l e, s houl d not be under es t i mat ed. Regional market leader at Barclays Private Bank explains that historic wealth stems b a c k t o I n d i a ' s i n d e p e n d e n c e wh e n p e r h a p s 3 0 o r 4 0 f a mi l i e s c o n t r o l l e d wh o l e industries. "Today they form the ultra high net worth population and in addition each pr ovi nce has i t s weal t hy l andowner s and r egi onal power s , es peci al l y i n t he Sout h. Meanwhile, in Delhi there is a lot of political wealth and a large cash economy for luxury goods exists. In Mumbai there is a lot of entrepreneurial wealth, most of whichis tied up in companies," he says.S o wi t h s u c h a n a b u n d a n c e o f we a l t h t h e n h o w c a n b a n k s , b o t h d o me s t i c a n d i nt er nat i onal , bes t meet demand? The weal t h management i ndus t r y at pr es ent i s immature compared with offerings by private banks and wealth managers in the West.T h e r e i s n o d o u b t h o w e v e r t h a n t h e I n d i a n m a r k e t i s i n t h e e a r l y s t a g e s o f development. Indeed Indian banks have traditionally placed most emphasis on broadas s et gat her i ng r at her t han cat er i ng t o any one s peci f i c gr oup. Ther e i s pl ent y of evidence the majority of wealth management propositions are, in fact, more focussedon the mass affluent as it is they who are driving economic growth and thus have most power of influence over how the investment industry evolves alongside that. Placingmoney offshore is not a particular growth area either. Although historically wealthyI ndi ans may have hel d as s et s of f s hor e i n t he f ace of t he l ong - t er m decl i ne of t heRupee, cur r ency s t r engt h now means t hey ar e bet t er of f at home. I n addi t i on, t heterrorist attacks of September 11 and subsequent tightening of international regulatorystandards have contributed to a steady and significant flow of money back into thecountry. Where company owners may have floated and issued ADRs as recently ast he ear l y 1990s , t he cur r ent t endency i s t o pl o ugh money back i nt o t he company, according to Gulam: "Lower interest rates and a stronger Rupee - not even offset byh i g h o i l p r i c e s , me a n s t h a t p e o p l e c a n g e t g o o d r e t u r n s i n t h e h o me c u r r e n c y . Confidence is at an all time high." All this points to rich pickings for those wanting tog e t i n v o l v e d wi t h t h e we a l t h ma n a g e me n t ma r k e t . C e r t a i n l y a l l t h e r e q u i s i t e ingredients are there; the wealth itself, the confidence in the domestic economy, thereadiness to get involved in a variety of different asset classes and widen geographical l ocat i on of as s et s . Why t hen i s t he mar ket s o under devel oped? Why ar e 85% of assets, according to Datamonitior, still in deposit accounts? Relationship manager says "To all intents and purposes the HNW market has yet to be created. Offeringstend to be the same for all those with money to invest. Sophisticated products such asderivatives and hedge funds are barely legislated for and in the context of the middlec l a s s e s d r i v i n g t h e d e v e l o p me n t o f t h e i n v e s t me n t l a n d s c a p e , t h e y a r e n o t h i g h priority either. One area where HNWs do tend to invest is in property - reflective of the undeveloped nature of the market."The ans wer al s o l i es i n t he r egul at or y envi r onment . Sami r Sayeed, gl obal mar ket manager for the India business at Citigroup Private Bank, adds: "As wealth has grownand people have excess liquidity they have become more demanding in their financialneeds. The gradually easing regulatory environment is helping meet some of thoseneeds . Cur r ent l y por t f ol i o management , mut ual f unds , i ns ur anc e pr oduct s , equi t y brokerage and mortgage lending are all allowed but the market remains untapped."Without a doubt the biggest reason for this is currency control . Initially introduced asa means to keep currency outflows at a manageable level, the controls are now actingas a barrier to the country's retail investment industry at all levels. The good news isthat all this is set to change."Since 2003, within a set of criteria laid down by the Reserve Bank of I ndia (RBI),investments can be made in overseas instruments without any quantitative restrictions.More recently, the RBI has introduced a liberalised remittance scheme under whichr es i dent I ndi ans can i nves t up t o US$25, 000 per annum i n any over s eas s ecur i t y, " Parmar says. Pressure on the government from the entrepreneurial generation that isyoung, highly educated and mobile is likely to intensify. In addition India's domestic pension funds are also complaining that they are unable to diversify sufficiently intointernational capital markets. Sayeed adds: "This time last year the annual $25,000allowance for Indians to maintain overseas accounts did not exist so liberalisation isclearly ongoing. In addition companies that export have slightly different rules for holding foreign currency and we see that as positive." Irritating it may be but currencycontrol has not stopped international players from trying to reach this segment of themar ket and f r om t her e es t abl i s h a pr es ence i n t he mar ket . Wi t hi n what i s al l owedmoves are already afoot by players such as Barclays, Citibank, HSBC, Deutsche Bank and BNP Paribas who are all involved to a greater or lesser extent in the market. Andthe way to play it is seems to be to gain a toehold in one area, such as structuring debti n the case of Barclays, and then extend the range of activities, products and serviceson of f er as s oon as r egul at i on and i nves t or appet i t e al l ows . Ser vi ci ng t he ons hor emar ket wi l l s oon mean t he pr ovi s i on of bot h advi s or y and di s cr et i onar y " weal t hmanagement " s ol ut i ons f or t he HNW mar ket . Even l ocal banks s uch as I CI CI andHDFC Bank ar e pour i ng i n r es our ces t o t ap t hi s r api dl y gr owi ng bus i nes s . Sayeedsays: "We are aiming not just to play a part in the wealth management market but weal s o want t o have a hand i n cr eat i ng i t i n t he f i r s t pl ace. " Gul am t hi nks domes t i c banks should not be underestimated, adding: "A huge mutual fund complex is in the process of being built. In addition, a series of tax amnesties over the last few years hasalso meant that the paral lel economy is diminishing." Ultimately the Indian wealthmanagement market is about patience while waiting for the regulatory breadth andd e p t h t o b e c o me e s t a b l i s h e d . " I n f i v e y e a r s ' t i me we e x p e c t t o s e e c o n t i n u e d liberalisation and an end to currency controls. But it's important to understand that ama j o r d y n a m i c o f t h e I n d i a n m a r k e t i s i n t e r n a l d e ma n d , n o t j u s t a c c e s s t o international currencies," Sayeed says. Wealth there were an estimated 70,000 highnet worth individuals (defined as those with financial assets of at least $1m excludingtheir residential property) in India at the end of 2004, according to the 2005 WorldWealth Report published in June by Merrill Lynch and Capgemini. The number of HNWI's in India was up 14.6% from with the previous year, registering faster growththan the world average. Raj Sehgal, Merrill Lynch Global Private Clients' countryhead for India, says: "India continued to be one of the high growth areas in 2004 as around 9,000 more people joined the elite list of HNWIs in 2004.'' The high growth inthe wealthy arose despite a strong slump in stock prices in May 2004 following theelection in which India's pro-market BJP government unexpectedly lost power to acoal i t i on l ed by t he Congr es s Par t y. The mar ket however r ecover ed s ome of i t s gr ound as t he s t ock mar ket r ecor ded a s har p upwar d r al l y i n t he s econd hal f . Thereport acknowledged that among developing countries Brazil, Russia, India and Chinahave emer ged as an economi c f or ce t oget her account i ng f or 41% of t he wor l d' s popul at i on and 8% of i t s GDP gr owt h. The r epor t s ays : " Al t hough t he combi nedoutput of these economies is a small fraction of world GDP today, the BRIC countriesar e s i gni f i cant becaus e of t hei r s i ze and f as t - paced economi c gr owt h. " The r epor t added however t hat , over - i nves t ment and exces s capaci t y ar e expect ed t o r educe
China's growth in 2005, which will also impact many of its neighbours. But it citedI ndi a as an except i on as i t s f or t unes ar e l es s dependent on Chi na and t he over al l economy of East and South Asia. The world's high net worth wealth grew strongly in2004 for a second consecutive year, increasing by 8.2% to $30.8 trillion, according tothe report. Globally, the number of HNWIs grew 7.3% to 8.3 million, a net increase of 600,000 worldwide. 33 saving costs, according to the high commissioner of India, Ronen Sen. Depending ont he par t i cul ar oper at i on s ought t o be out s our ced, and t he s cal e of t he pr oj ect , cos t s avi ngs r ange f r om 30 per cent t o as muc h as 70 per cent . Ci t i gr oup, ABNA MR O H o l d i n g , S t a n d a r d C h a r t e r e d a n d I C I C I B a n k a l r e a d y o f f e r w e a l t h management services in the nation. About 70,000 Indians had financial assets of morethan $1 million each in 2004, according to a study by the management consultantsCap Gemi ni and Mer r i l l Lynch. DSP Mer r i l l Lynch es t i mat es t hat weal t h under management i n I ndi a t ot al s about $10 bi l l i on. I CI CI Bank, I ndi a' s s econd- bi gges t lender, believes that amount could double every two years, said Arpit Agarwal, thelender's head of private banking. Now government-controlled banks, including StateBank, are seeking wealth management business as economic growth, forecast by thegover nment at an annual aver age pace of 7 per cent , r ai s es i ncomes and as I ndi ans seek more ways to earn higher returns on their wealth. "In the current interest rate,taxation and macroeconomic environment, with a positive corporate performance andGDP gr owt h, mor e and mor e i ndi vi dual s ar e s eeki ng pr of es s i onal management of their finances," said Sharad Mohan, a marketing director of wealth management atCitigroup's India unit. Canara Bank, the third-biggest lender in India, plans to open branches catering specifically to affluent individuals, said B. Sukumaran, a deputygeneral manager. Canara Bank initially would offer financial advice, mutual fundsand insurance products, he said. Bank of India, which started an online stock-tradingsystem in July, also said it was studying plans to offer wealth management services.Union Bank of India, the seventh- biggest lender by assets, has also started an onlinestock trading service for customers, in addition to offering mutual funds and insurance products. ICICI has 500 financial advisers for its clients, having expanded the number f our f ol d i n t he pas t t hr ee year s . I t has 260 bi l l i on r upees , or $5. 9 bi l l i on, of as s et s unde r management . Ci t i bank has a wel l - or gani zed s ys t em of Weal t h Management services in India that give you unparalleled advantage and opens up the opportunity tomaxi mi z e weal t h. For exampl e, Ci t i gol d Weal t h Management Scheme. Ci t i Gol dWealth Management offers exclusive privileges to its customers that comprises of:
Tax and estate advisory services through a leading tax advisory firm in India.
Free for life Citibank International Gold Credit Card.
Updated information on treasury, currency markets.
Invites to seminars on capital markets, mutual funds, budget and taxation.
Fr ee i ns ur ance benef i t s - upt o Rs 30 l akh per s onal acci dent , and baggage andhouseholder insurance.
Free access to airport lounges at Domestic and International airports in India.DB S B a n k o f f e r s p o we r p a c k e d S a v i n g s A c c o u n t wi t h c o n v e n i e n t f e a t u r e s a n d charge-free banking options. So now you can bank and transact without the stress of fees levied on trasnsactions. No Frills account i s made to order, working to providevital banking services with nominal average quarterly balance requirements. SavingPower Plus Account is tailored especially for individuals with an investibl e surplus of Rs. 5 to 25 lacs. In other words, the account is suited for individuals who are lookingfor exclusive banking services. Saving Power Plus operates in INR currency with ahigh balance and zero charge structur e. With its features and benefits, the accounts isa unique offering. The minimum balance per month is Rs. 100,000. Account holdersreceive free monthly and quarterly statements as well as personalised cheque books.Saving Power Plus offers all Banking Services without service charges. The DepositPlus account is for individuals looking for a medium term investment option with aninvestibl e surplus of 15 lacs or more. This is a pure deposit relationship and is offeredin INR currency. The difference with this account is the bundle of banking servicesand competitive interest rates.Private banking is emerging as an important segment of business for some banks andnon-banking financial companies (NBFCs) in India. Banks and NBFCs say there has been an increase in the number of private banking or wealth management clients theya r e d e a l i n g wi t h t o d a y . F o r e i g n b a n k s , wh i c h mo s t l y c a t e r t o h i g h n e t wo r t h individuals, with financial surplus or investible incomes of over Rs 2 crore per year,say that this segment is expected to grow by almost 20 per cent over the next coupleof years. About the potential for wealth management, Mr. Sharad Mohan, MarketingDirector, CitiGold Wealth Management, CitiBank, said, "Wealth management is af as t evol vi ng domai n wi t h t r emendous gr owt h oppor t uni t y i n I ndi a. I n t he cur r ent i nt er es t r at e and t ax at i on envi r onment , mor e i ndi vi dual s ar e s eeki ng pr of es s i onal management of their finances."
ADVANTAGES AND RISK IN MUTUAL FUND INVESTMENT:
Mutual fund investment, particularly mid cap investment in India is very volatilein nature. There may be high returns and high risk.
ADVANTAGES:
1.Diversification of Funds: - Di v e r s i f i c a t i o n o f F u n d s c a n r e d u c e t h e o v e r a l l investment risks by spreading the risk across different assets. When some assetsar e f al l i ng i n pr i ce ot her s ar e l i kel y t o be r i si ng. Thus, di ver si f i cat i on of f unds lowers the risk than investment in just one or two funds.
2.Choice: -Mut ual f unds come i n a wi de var i et y of t ypes . Some mut ual f unds i n v e s t e x c l u s i v e l y i n a p a r t i c u l a r s e c t o r , wh i l e o t h e r s mi g h t t a r g e t g r o wt h oppor t uni t i es i n gener al . Ther e ar e t housands of f unds , and each has i t s own objectives and focus. The key for an investor is to find the mutual funds whichclosely match his investment objectives.
3.Liquidity: -This refers to the ease at which one can convert his assets into cash.In the case of mutual funds, it is as easy to sell a share of a mutual fund as it is tosell a share of stock.
4.Low Investment Minimums:- An investor need not be very wealthy in order toinvest in a mutual fund. Most mutual funds allows an investor to buy into the fundwith as little as $ 1000 or $ 2000 or even allows a no minimum investment but onthe terms of payment of regular monthly contributions.
5.Convenience:- Purchasing and selling of mutual fund is very easy. Secondly, aninvestor of mutual funds need not to worry about tracking the various securities inwhich the funds invest rather all he needs to keep track of the funds performance.
6.Low Transaction Costs:-Mut ual ar e abl e t o keep t he t r ans act i on cos t s at t heminimum because they benefit from reduced brokerage commissions for buyingand selling large quantities of investments at a single time
Regulation: - Mu t u a l f u n d s a r e r e g u l a t e d b y t h e g o v e r n me n t t h r o u g h t h e Securities and Exchange Board of India ( SEBI). It regulates the way the mutualfunds approach the investors the way they conduct their internal operations. This provides some level of safety to the investors.
8 Professional Management and other additional services provided by themutual funds.
9. If the fund house has very strong research and is able to really spot strongoppor t uni t i es i n a di s ci pl i ned manner , t he f und s houl d be a gr eat l ong- t er minvestment.
1 0 . Th e b e s t r e t u r n s a r e a l wa y s d e r i v e d f r o m s p o t t i n g t h e o p p o r t u n i t y e a r l y a n d h o l d i n g o n f o r 7 - 1 0 y e a r s o r mo r e . Th e s e f u n d s t e s t t h e f u n d ma n a g e r s conviction.
11. The f und gi ves an oppor t uni t y t o di ver si f y acr os s mi d- caps as wel l as us e s omescientific method to identify mid-cap stories, rather than the next hot tip fromyour neighbour. If you are planning to pick mid-caps anyway, this is probablythe safest avenue.
RISKS: -
1 . N o I n s u r a n c e : - Mutual funds, although regulated by the government, are notinsured against losses. Mutual fund returns are subject to market risks. Despitethe risk reducing diversification benefits provided by the mutual funds, lossescan occur, and it is possible that one may even lose the entire investment.
2 . D i l u t i o n : - Although diversification reduces the amount of risks involved ini n v e s t i n g i n m u t u a l f u n d s , i t m a y l e a d t o d i l u t i o n w h i c h c a n b e di s advant ageous t o t he i nvest or . I f a s i ngl e s ecur i t y hel d by a mut ual f unddoubles in value, the mutual fund itself will not double in value because that security is only one small part of the funds holdings.
3 . F e e s a n d E x p e n s e s : - Most mutual funds charge management and operatingf ees t hat pay f or t he f und s management expens es . Some mut ual f unds al so
charge high sales commissions. And some buy and trade shares so often thatthe transaction costs add up significantly. Some of the fees and expenses arealso recurring. 4 . P o o r P e r f o r m a n c e ; - Returns on a mutual fund are by no means guaranteed.On an average, around 75% of all mutual funds fail to beat the major market i ndexes . Cr i t i cs have al s o quest i oned whet her or not pr of es s i onal moneymanagers have better stock picking capabilities than the average investor.
5 . L o s s o f C o n t r o l : - The managers of mutual funds make all the decisions aboutwhich securities to buy and sell and when to do so. This makes difficult on the p a r t o f t h e i n v e s t o r i n ma n a g i n g h i s p o r t f o l i o . F o r e x a mp l e , t h e t a x consequences of a decision by the manager to buy or sell an asset at a certaintime might not be optimal for the investor.
6 . T r a d i n g L i m i t a t i o n s : - Although mutual funds are highly liquid in general, most mutual funds i.e. open ended mutual funds can not be bought or sold inthe middle of the trading day. One can only buy and sell them at the end of theday, after the current value of their holdings have been calculated.
7 . S i z e : - Some mutual funds are too big to find any investment i.e. the funds that focus on small companies given that where are strict rules about how much of a s i ngl e company a f und may own. As a r esul t , t he f und mi ght be f or ced t o lower its standards when selecting companies to invest in. However, mid capinvestment is not suffering from this type of problem.
8 . I n e f f i c i e n c y o f C a s h R e s e r v e s : - Mut ual f unds us ual l y mai nt ai n l ar ge cas h r eser ves as pr ot ect i on agai ns t a l ar ge number of s i mul t aneous wi t hdr awal s . Al t hough t hi s pr ovi des i nves t or s wi t h l i qui di t y, i t means t hat s ome of t he funds money is invested in cash instead of assets, which tends to lower the investors potential return
CONCLUSION
Wealth managers are beginning to investigate innovative segmentation methods to manage the changing client profile. Over the next 20 years wealth managers will hone their segmentation methods. Wealth managers will develop segmentation as a service ef f i ci ency i ni t i at i ve. Segment at i on model s wi l l appl y hol i s t i c cr i t er i a t o weal t h management. The most important segments globally will be entrepreneurs and SMES/CEOs. Financial advisers will become an important separate client segment for wealth managers The organization of direct client ownership will also change Availability a n d f l e x i b i l i t y wi l l b e c o me v i t a l c o mp o n e n t s o f t h e b u s i n e s s mo d e l I n t e r n a l r es t r uct ur i ng wi l l ai m t o i nt egr at e cl i ent s er vi ces . The r i s e of t he mas s af f l uent re presents an opportunity for wealth managers in the medium term Wealth managers will capture the higher value mass affluent market by offering a scaled down wealth management s er vi ce. The mas s af f l uent pr opos i t i on wi l l r un al ong t he l i nes of t he current wealth management service. Liability management is currently not part of the wealth management agenda but has proven potential. Clients in developed markets are seeking more holistic wealth management services Liability management is clearly a profitable area with a proven existing client base. The incorporation of lending into wealth management will shift the focus of the service. Specialist forms of lending will also become common additions to the offerings of many wealth managers. Some will f a i l d u e t o a p e r s i s t e n c e o f t h e a s s e t f o c u s e d s e r v i c e mo d e l a n d a l a c k o f commitment. There are significant benefits in the area of liability management for the w e a l t h y , a n d t h a t t h e i mp o r t a n c e o f l i a b i l i t y ma n a g e me n t a s p a r t o f w e a l t h management wi l l i nevi t abl y gr ow over t he next 20 year s , unt i l i t becomes a key s e r v i c e a r e a . R i s i n g i n c o m e a n d w e a l t h i n e q u a l i t i e s , i f n o t m a t c h e d b y a corresponding rise of incomes across the nation, can lead to social unrest. An area of great concern is the level of ostentatious expenditure on weddings and other family events. Such vulgarity insults the poverty of the less privileged, it is socially wasteful and it plants the seeds of resentment in the minds of the have-nots