WEALTH MANAGEMENT

What is Wealth Management?

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

CLIENT Wealth Manager
•Provides comprehensive financial and goal planning

Private Banker
•Coordinates your personal and banking needs

Portfolio Manager
•Develops your overall investment strategy •Responsible for day-to-day investment management of your assets

Trust Administrator
•Ensures terms and provisions of the client’s trust are properly Implemented •Collects and distributes income •Coordinates tax preparation

Other Specialists
•Tax consultants •Real estate management specialists •Personal care coordinators •Mortgage specialists
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Alternative Investment s
Hedge Funds Private Equity Real Estate

Asset Management
Individualized Portfolios Concentrated Stock Strategies Multi Manager Accounts

Trust & Estate Planning
Estate Plan Development Trust and Will consultation Fiduciary Management Personal Care services

Private Banking
Credit Cash Mgmnt Checking & Savings Accts

C L IE N T

Tax Preparation & Planning
Portfolio Tax Mgmnt Stock Option Exercise

Financial planning
Asset Allocation Cash Flow Analysis Retirement Education Planning

Risk Management
Life Insurance Long term care Annuities

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Private Banking

Wealth Management Customers Net Savings and Deposits above 100k$
50M$ UHNWI

VHNWI

5M$

HNWI

500k$

Wealth Management

100k$

Mass Affluent Customer
50k$

Mass Customer Wealth Management Customer Segments
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Retail Banking

Affluent Customer

Self Service

Wealth management customers Affluent and HNWI above 35 years Universal Bank Business C u sto m e r Credit Volume Savings Volume Deposit Volume Age Less than 15% 35 years Between 60% 35 and 55 years than 25% More 55 years 20% 30% 50% 5% 30% 65%

Universal Bank Business volumes
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Slide 18

The Role of Banks…

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Source : IBM Institute for Business Value Analysis

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

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Fu n d B a se d

Transition

Fee Based

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

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

The Role of the Private Banker

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What does the HNWI client expect?

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

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

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

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

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The Wealth Management Process

Savings cycle
Wealth Accumulation Wealth Consumption

EARNING CAPACITY RISK TAKING CAPACITY

SURPLUS MANAGEMENT

LIQUIDITY MANAGEMENT

AGE

Retirement

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COMPLEXITY OF INVESTMENTS

ACCUMULATED

WEALTH

WEALTH MANAGEMENT

Wealth creation cycle
VEHICLE
WEALTH MANAGEMENT •Business Investments A/c •Trust Accounts •Alternate Investment Vehicles

INVESTMENTS
•Additional Fixed Assets •Alternative Investments •Investments in securities •Promoter Holdings

COMPLEXITY OF INVESTMENTS

ACCUMULATED

WEALTH

SURPLUS MANAGEMENT

•Business Current Account •Family Members’ Accounts •HUF Account

•Basic Assets like Car , House , Consumer Durables , jewellery •Investments in securities

LIQUIDITY MANAGEMENT

•Individual Savings A/c •Deposits •Cards

•Forced Small Savings Relating to Tax Exemptions

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Client Segmentation
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Mass Affluent and HNI
l Require

brand confidence l Require SUPERIOR service and quality l Require a VISIBLE benefit to switch l Require convenience
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Super HNI
l Require

comprehensive and Unbiased Wealth Advisory Services l Require qualified and trained advisors l Require confidentiality
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T h e ro a d to p ro fita b ility
Assets Earnings from a Private Banking customer Solutions to meet customer needs

-Transaction Banking -Liabilities

- Liabilities - Investments -Liabilities -Investments -Assets -Insurance -Estate Planning

Multi – Product Relationship

Segment Model

Research Segment Model

Product Development

Launch Enhancement

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

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Criteria for selection of Private Banker
Strong Investment Performance Low Fees/ Commissions High Service Quality Long History/ Tradition Product Features Technology Prestige
0% 20.2% 17.6% 16.1% 15% 30% 45% 60% 24.1% 36.3% 30.5% 49.6%

Source: Survey of 45 top global private bankers,.

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Superior product proposition
Dedicated Wealth
Any Where Banking Mutual Funds Primary Market Secondary Debt & Equity Markets Cards Property Services

Manager – A Single Point Contact Single A / C Asset Statement Products
Pure Gold

Multiple Delivery Channels Investment Advisory

Depository Direct

( On - line Platform For execution )

Insurance

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The Road to Success…
l l l l l l

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

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The Road Ahead…

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Sophistication & needs of HNWIs to rise
B a n k in g A sse t M anagem ent A lte rn a tiv e In v e stm e n ts O th e r
Deposit s Loans Credit Cards Trade Finance Now 2011

Mutual Funds

Equitie s Structure d Products Insuran ce

Bonds

Private Equity Tax Plannin g

Hedge Funds

Real Estate

Commodities

Art

Pension

Family Office

Trust Admin

Charity

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Private Banking: Future

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Wealth Management: 2011 and beyond
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There will be further growth in the number and type of wealth management players in India
l To

provide distinct and structured services l To augment revenues as WM is less risky and not overly competitive l FIs, independent financial advisors and Investment banks

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Wealth Management: 2011 and beyond
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There will be a significant increase in the number of wealthy individuals in India
l BRIC

Report – India to be the third largest economy in the world after China and US in the next 30 years l Rising number of entrepreneurs and professionals leading to “new” money and mass affluent segments l Wealth Managers to service this segment in terms of reach, technology, products and knowledgeable staff
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Wealth Management: 2011 and beyond
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Increasing deregulation will enable customers to diversify their wealth locally and globally
l Full

capital account convertibility l Wider choices for investment, savings and protection needs l Designing new schemes/ products and services
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Wealth Management: 2011 and beyond
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Increased client sophistication and competition for client business will require wealth managers to deploy segment specific customer satisfaction and retention strategies
l Wealth

Managers to be trained in marketing, relationship management, regulation and compliance, and product knowledge l Competition for scarce, competent, specialist Wealth management personnel will increase

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Wealth Management: 2011 and beyond
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Increased customer demand for sophisticated products will result in Wealth Managers offering a wide array of more complex products and services
l Encompassing

gold, real estate, commodities, art, hedge funds, structured products (eg., inverse floater notes, principal protected notes etc.,), insurance and pension. l Wealth managers will need to innovate and offer appropriate products and services to meet the needs of wealthy individuals in times of economic boom as well as depression
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Wealth Management: 2011 and beyond
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Wealth managers will introduce profitability models and tools to measure and enhance their performance
l Wealthy

clients generate more fees, but also incur higher costs due to higher levels of service required

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Wealth Management: 2011 and beyond
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Technology tools will be critical for both enabling revenue generation as well as achieving operational effectiveness
l Technology

tools covering areas of financial planning, straight through processing product and account aggregation, and performance monitoring l To help Wealth Managers as well as clients who prefer self-directed learning

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