CHAPTER - 1

INTRODUCTION

Wealth usually refers to money and property or something which has economic value attached to it. It is the abundance of objects of value and also the state of having accumulated these objects. The use of the word itself assumes some socially-accepted means of identifying objects, land, or money as "belonging to" someone, i.e. a broadly accepted notion of property and a means of protection of that property that can be invoked with minimal (or, ideally, no) effort and expense on the part of the owner. Concepts of wealth vary among societies. Anthropology characterizes societies, in part, based on a society's concept of wealth, and the institutional structures and power used to protect this wealth. Several types are defined below. They can be viewed as an evolutionary progression. Industrialization emphasized the role of technology. Many jobs were automated. Machines replaced some workers while other workers became more specialized. Labour specialization became critical to economic success. However, physical capital, as it came to be known, consisting of both the natural capital (raw materials from nature) and the infrastructural capital (facilitating technology), became the focus of the analysis of wealth. ECONOMIC AND PHILOSOPHICAL ASPECTS OF WEALTH Adam Smith saw wealth creation as the combination of materials, labour, land, and technology in such a way as to capture a profit. The theories of David Ricardo, John Locke, John Stuart Mill, and later, Karl Marx, in the 18th century and 19th century built on these views of wealth that we now call classical economics and Marxist economics. Michel Foucault commented that the concept of Man as an aggregate did not exist before the 18th century. The shift from the analysis of an individual's wealth to the concept of an aggregation of all men is implied in the concepts of political economy and then economics. This transition took place as a result of a cultural bias inherent in the Enlightenment. Wealth was seen as an objective fact of living as a human being in a society. Some people believe wealth is a zero-sum game, where there is a limited amount of wealth and some must lose in order for others to gain. As a result they are concerned primarily with issues of wealth distribution rather than wealth creation.

Others believe that wealth can be readily created. They feel that wealth is not a fixed amount to be distributed. To most of these people, organizing a society so as to optimize the growth of wealth is more important than distribution issues. Many of these people believe in some version of the trickle-down theory in which newly created wealth "trickles down" to all strata of society, thereby making the question ofdistribution.

SOURCES OF WEALTH Wealth is created through several means. Natural resources can be harvested and sold to those who want them. Material can be changed into something more valuable through proper application of labor and equipment. Better methods also create wealth by allowing faster creation of wealth. Ideas create wealth by allowing it to be created faster or with new methods.

THE CONCEPT OF WEALTH MANAGEMENT The concept of wealth management refers to management of both the sources and the facets of various forms of both tangible and non-tangible wealth. India has become a highly potential market for wealth management because wealth managers, both domestic and international, are able to establish the beginnings of a market with few obstacles, relative to the other emerging markets. Where there are regulatory restrictions, these are less problematic than those in China or the Middle East.

STATE OF WEALTH MANAGEMENT INDUSTRY IN INDIA Wealth management is just emerging in India. The growth of the economy has already been widely showcased. Wealth management services have been getting more

attention over the last two years. A booming economy, rising stock prices and an increase in salaries and spending power have turned the spotlight on this sector. The wealth management space was earlier the preserve of some foreign banks which offered these "exclusive services" to a select few. This was not a service you could apply for. The unsaid tagline was "Don't call us. We'll call you (if you are that wealthy!)." Today, a number of private banks offer this service. Also entering this arena and carving a niche for themselves are standalone entities that offer the full range of services investment advice, portfolio management, taxation advice et al.

A new report from independent market analyst Datamonitor (DTM.L) reveals the Indian wealth market is offering competitors enormous opportunities. In the last five years, affluent wealth in India has grown at a rate of 17.6% with affluent individuals totalling 618,000 at the end of 2012. Indias large skilled population and robust domestic stock market will ensure that this wealth continues to grow to almost one million individuals, with a collective wealth of over US $ 200bn by 2012. "India has its own merits as one of the developing BRIC economies (Brazil, Russia, India and China). Competitors are realising this fact and are beginning to bring their propositions to the table. Today, India is attracting both foreign wealth managers and domestic banks to set up wealth management businesses. Going forward this is a trend that is likely to continue," says Alan Shields, Datamonitor financial services analyst and author of the study. The number of mass affluent individuals in India has more than doubled since 1998. India is becoming an increasingly attractive market in many industries, and wealth management is no exception. Driving the attractiveness of the market has been the countrys exceptional economic performance over the last decade. The economy has grown at an average of 7.6% since 1994, due to the continued development of the service industry and strong growth in the technology sector. The opportunities that have been created by a booming economy have in turn driven individual wealth growth. The wealth of Indias residents has grown from US$79bn in 1998 to US$177bn at the end of 2008. This amounts to an increase of 123% in just five years. Of Indias 1.1 billion population, wealth is concentrated among a 618,000 individuals.

Of the total individual wealth in India, more than 65% or US $ 116bn is owned by both mass affluent and high net worth individuals. Combined, this amount of wealth in the hands of just 618,000 individuals. Those with more than US$3m in liquid wealth represented the most valuable sub-segment of the wealth market in India at year-end 2008, owning USD17bn. The band accounted for over 9% of total savings and investments despite only accounting for only a tiny percentage of the adult population.

OPPORTUNITIES FOR LOCAL AND FOREIGN PLAYERS The fact that affluent wealth is growing at a rate of 17.6% compounded annually is attracting both foreign wealth managers to set up business and domestic banks to set up wealth management businesses. "There are certainly opportunities to be had in the Indian wealth market" says Alan Shields head of Asia-Pacific wealth management analysis at Datamonitor. "Whilst on the world stage, the Indian wealth market is underdeveloped, there are still a large number of affluent individuals who are not being served by the current competitors and the pool of potential clients created each year is huge." Datamonitor forecasts that affluent wealth in India will grow rapidly .

India is still at a stage where the wealth manager is not necessarily a certified entity and the term itself is used rather loosely. With banks and distribution houses, insurance agents, mutual fund distributors and chartered accountants liberally calling themselves 'wealth managers', there is a mind boggling array of people to choose from. So, it becomes imperative to first identify the type of people you can sign on as your wealth managers. There are wealth managers in banks who will eagerly do your financial planning if you fall in the HNI (high net worth individual) block. The banks assign a relationship manager (RM) to you, who is expected to manage the relationship with you by proactively using his knowledge to tailor unique and innovative financial solutions that will create value. However, he is restricted by the number of distribution tie-ups he has -- not all of them can sell all products. Besides, as banks and distribution houses increasingly compete with each other with a similar

set of products, an RM may end up just pushing his own brands instead of delivering long-term advice. The high churn among RMs in banks often leads to sudden breaks in "relationship" building and a whole lot of miscommunication between the customer and the bank ensues. Then there is everyone else keen on getting a slice of your pie with assurances to make you richer than you are today. Your friendly neighbours who sell insurance and mutual funds may not always be the right source. After all, their interests in selling you a particular product is the commission that they earn through selling you a financial product. Besides, your accountant or stockbroker may not adopt a holistic approach to all your financial planning needs. If you strictly go by the book and look for a qualification that befits a wealth manager, then you should go to the 150-odd certified financial planners (CFPs) who have been certified by the Financial Planning Standards Board (FPSB), India. Remember that a true wealth manager uses the financial planning process to help you figure out how to meet your life goals through the proper management of your financial resources. Once you have identified the category of your wealth manager, it boils down to choosing one. Here are nine questions to ask before you hand over that cheque. And remember to keep asking as you go along.

Wealth management requires hands-on experience and a strong technical understanding of topics such as personal tax planning, insurance, investments, retirement planning and estate planning and, how a recommendation in one area can affect the others. Ask the planner what his qualifications are to offer financial advice and if, in fact, he is a qualified planner. Ask what training he has successfully completed. Ask what steps he takes to keep up with changes and developments in the financial planning field. Ask whether he holds any professional credentials including the Certified Financial Planner certification, which is recognised internationally as the mark of a competent, ethical, professional financial planner. Find out how long the planner has been in practice and the number and types of companies with which he has been associated. Ask about work experience and its relation to current practice. Choose a financial planner who has experience counselling individuals on their financial needs.

MAJOR WEALTH MANAGEMENT AGENCIES IN INDIA: Association of Mutual Funds in India. ABN-AMRO Bank, India Lotus India Asset Management. Reliance Capital Asset Management. Dawnay Day AV Financial Services. ASK Raymond James, India Emerging Portfolio Fund Research, USA Jeetay Investments, India SBI Funds Management, India Amas Bank, Switzerland Max New York Insurance, India Kotak Mahindra Old Mutual Life, India Centurion Bank of Punjab, India Naissance Capital, Switzerland Everest Capital Goldman Sachs, UK FMG Fund Managers, USA The Synergy Partnership, Malaysia BaseTen Capital Management, India ICICI Bank, India Birla Sun Life Insurance, India Standard Chartered Asset Management, India Prudential ICICI Asset Management, India ICICI Prudential Life Insurance, India Parag Parikh Financial Services, India Sandstone Capital, USA Canonbury Group, UK

Corporate Finance India, India Financial Planning Standards Board, India Credit Suisse Asset Management, UK Pioneer Client Associates, India General Life Insurance Council, India Dubai International Finance Centre, UAE HSBC Asset Management, India EM Capital Management, USA SBI Funds Management, India Financial Planning Standards Board, India BNP Paribas, India Pension Fund Regulatory & Development Authority, India Blue River Capital, India ABN Amro Bank, India Birla Sun Life Asset Management, India Securities and Exchange Board of India, India Geojit Financial Services, India IL& FS, India Gandhi & Associates, India Dubai Bank, UAE

Bonanza is a leading Financial Services & Brokerage House with acknowledged industry Leadership in execution and clearing services on Exchange Traded Derivatives and cash market products. Key elements that place Bonanza amongst the leading Brokerage Houses and make it the preferred service provider for value based financial services are: A Client-driven foundation and strategy committed to client-specific investment needs and objectives. Integrated and innovative use of Technology enabling clients to trade offline, online and Strategic tie-ups with latest technology partners to facilitate trading access and direct processing across 400 outlets in 160 cities. Client-focused philosophy backed by memberships of all principal Indian Stock and Commodity Exchanges makes Bonanza a preferred service provider in the Industry for value based services. Minimum portfolio size: Rs.10 lakhs. You can also open a PMS account by 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% plus all applicable regulatory charges and government taxes. Bonanza portfolio Ltd. And Bonanza Stock Broker Ltd. will be appointed as brokers Ltd. Will be appointed as brokers to the scheme. Other charges: Depository and other charges, expenses and taxes will be on actuals. The Indian wealth management market is ripe for development. Strong economic growth has created wealth that needs somewhere to go and consolidated the position of those with old money. Despite the country's rapid development the market is immature; investment propositions have traditionally centred on deposit accounts and currency controls limit access to the international capital markets. But change is in the air and both domestic banks and international players alike are now gearing up to meet the needs of the wealthy. The natural evolution of the wealth management market can only be helped along by continued economic growth that will do much to stimulate demand. Raj Parmar, head of Global South Asian Diaspora at HSBC Private Bank says: "Sustained GDP growth in the last few years has created wealth in many sectors of the Indian economy, both old, such as gems and jewellery, and new, such as outsourcing, have benefited and growth is now considered sustainable."

The money being made in the new industries; retailing, financial and BPO (business process outsourcing) seems to be limited to urban areas. A recent report from Datamonitor found GDP highly concentrated in three regions: Maharastra, Uttar Pradesh and West Bengal. Those three regions, according to the report, accounted for 29.7% of total GDP in 2011/7. Depositary holdings in those regions are correspondingly high: Mumbai, a part of Maharastra holds 49.2% of deposits held by foreign banks according to Datamonitor. Old money, meanwhile, should not be underestimated. Regional market leader at Barclays Private Bank explains that historic wealth stems back to India's independence when perhaps 30 or 40 families controlled whole industries. "Today they form the ultra high net worth population and in addition each province has its wealthy landowners and regional powers, especially in the South. 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 which is tied up in companies," he says.

So with such an abundance of wealth then how can banks, both domestic and international, best meet demand? The wealth management industry at present is immature compared with offerings by private banks and wealth managers in the West. There is no doubt however than the Indian market is in the early stages of development. Indeed Indian banks have traditionally placed most emphasis on broad asset gathering rather than catering to any one specific group. There is plenty of evidence the majority of wealth management propositions are, in fact, more focussed on 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. Placing money offshore is not a particular growth area either. Although historically wealthy Indians may have held assets offshore in the face of the long-term decline of the Rupee, currency strength now means they are better off at home. In addition, the terrorist attacks of September 11 and subsequent tightening of international regulatory standards have contributed to a steady and significant flow of money back into the country. Where company owners may have floated and issued ADRs as recently as the early 1990s, the current tendency is to plough money back into the company, according to Gulam: "Lower interest rates and a stronger Rupee - not even offset by high oil prices, means that people can get good returns in the home currency. Confidence is at an all time high." All this points to rich pickings for those wanting to get involved with the wealth management market.

Certainly all the requisite ingredients are there; the wealth itself, the confidence in the domestic economy, the readiness to get involved in a variety of different asset classes and widen geographic allocation of assets. Why then is the market so underdeveloped? Why are 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. Offerings tend to be the same for all those with money to invest. Sophisticated products such as derivatives and hedge funds are barely legislated for and in the context of the middle classes driving the development of the investment landscape, they are not high priority either. One area where HNWs do tend to invest is in property - reflective of the undeveloped nature of the market." The answer also lies in the regulatory environment. Samir Sayeed, global market manager for the India business at Citigroup Private Bank, adds: "As wealth has grown and people have excess liquidity they have become more demanding in their financial needs. The gradually easing regulatory environment is helping meet some of those needs. Currently portfolio management, mutual funds, insurance products, equity 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 as a means to keep currency outflows at a manageable level, the controls are now acting as a barrier to the country's retail investment industry at all levels. The good news is that all this is set to change. "Since 2008, within a set of criteria laid down by the Reserve Bank of India (RBI), investments can be made in overseas instruments without any quantitative restrictions. More recently, the RBI has introduced a liberalised remittance scheme under which resident Indians can invest up to US$25,000 per annum in any overseas security," Parmar says. Pressure on the government from the entrepreneurial generation that is young, 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 into international capital markets. Sayeed adds: "This time last year the annual $25,000 allowance for Indians to maintain overseas accounts did not exist so liberalisation is clearly 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 currency control has not stopped international players from trying to reach this segment of the market and from there establish a presence in the market. Within what is allowed moves 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.

And the way to play it is seems to be to gain a toehold in one area, such as structuring debt in the case of Barclays, and then extend the range of activities, products and services on offer as soon as regulation and investor appetite allows. Servicing the onshore market will soon mean the provision of both advisory and discretionary "wealth management" solutions for the HNW market. Even local banks such as ICICI and HDFC Bank are pouring in resources to tap this rapidly growing business. Sayeed says: "We are aiming not just to play a part in the wealth management market but we also want to have a hand in creating it in the first place." Gulam thinks domestic 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 has also meant that the parallel economy is diminishing." Ultimately the Indian wealth management market is about

patience while waiting for the regulatory breadth and depth to become established. "In five years' time we expect to see continued liberalisation and an end to currency controls. But it's important to understand that a major dynamic of the Indian market is internal demand, not just access to international currencies," Sayeed says. Wealth there were an estimated 70,000 high net worth individuals (defined as those with financial assets of at least $1m excluding their residential property) in India at the end of 2009, according to the 2010 World Wealth 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 growth than the world average. Raj Sehgal, Merrill Lynch Global Private Clients' country head for India, says: "India continued to be one of the high growth areas in 2009 as around 9,000 more people joined the elite list of HNWIs in 2009.'' The high growth in the wealthy arose despite a strong slump in stock prices in May 2009 following the election in which India's pro-market BJP government unexpectedly lost power to a coalition led by the Congress Party. The market however recovered some of its ground as the stock market recorded a sharp upward rally in the second half. The report acknowledged that among developing countries Brazil, Russia, India and China have emerged as an

economic force together accounting for 41% of the world's population and 8% of its GDP growth. The report says: "Although the combined output of these economies is a small fraction of world GDP today, the BRIC countries are significant because of their size and fast-paced economic growth." The report added however that, over-

investment and excess capacity are expected to reduce China's growth in 2010, which will also impact many of its neighbours.

But it cited India as an exception as its fortunes are less dependent on China and the overall economy of East and South Asia. The world's high net worth wealth grew strongly in 2009 for a second consecutive year, increasing by 8.2% to $30.8 trillion, according to the report. Globally, the number of HNWIs grew 7.3% to 8.3 million, a net increase of 600,000 worldwide.

INSTRUMENTS OF WEALTH MANAGEMENT Indian weddings have always been grand and festive affairs, as reflected in films like Monsoon Wedding and Bride and Prejudice. But India's burgeoning middle class - now 300 million strong - are turning weddings into showcases of their growing

disposable incomes and newfound appetites for the goodies of the global marketplace. The minimum budget for a wedding ceremony is $34,000, say wedding planners, while the upper-middle and rich classes are known to spend upward of $2 million. (The average American wedding costs $26,327.) This doesn't include cash and valuables given as part of a dowry. According to the National Council for Applied Economic Research (NCAER), the middle class are those making $4,545 to $23,000 a year. NCAER projects that the market for all categories of products, from daily consumables to consumer durables, will double in annual sales by 2010. With the economy expected to maintain steady 6 percent annual growth, India is widely seen as one of the world's 10 largest emerging markets. When it comes to the instruments of wealth management in India, instruments like the banking sector, stock market, mutual funds can be considered in this category. BANK DEPOSITS Independent research shows that customers prefer to deal with a local operator for management of his assets. The wealth management industry has begun to follow the trend set by the likes of shoe brand Nike and fashion retailer Gap in moving parts of its operations to cheaper environments. As ever, the back and middle offices are the bits that wealth managers want to offload. In India it is both the public sector and the private sector banks who have demonstrated themselves in the assets management market to tap the growing potentiality of this sector. State Bank of India, the nation's largest lender, plans to offer wealth management services to affluent clients, seeking a share of a fast-growing market that is now worth $10 billion, and that may double every two years. "Wealth management has tremendous growth potential," said Indrajit Gupta, managing director of SBI Capital Markets, State Bank's investment banking unit. Foreign banks with Indian collaborations are not also far from others. For example, Fidelity and Citibank have some operations in India, including call centres, processing and systems development. Outsourcing to India is about more than simply Saving costs, according to the high commissioner of India, Ronen Sen. Depending on the particular operation sought to be outsourced, and the scale of the project, cost

savings range from 30 per cent to as much as 70 per cent. Citigroup, ABN AMRO Holding, Standard Chartered and ICICI Bank already offer wealth management services in the nation. About 70,000 Indians had financial assets of more than $1 million each in 2009, according to a study by the management consultants Cap Gemini and Merrill Lynch. DSP Merrill Lynch estimates that wealth under management in India

totals about $10 billion. ICICI Bank, India's second-biggest lender, believes that amount could double every two years, said Arpit Agarwal, the lender's head of private banking. Now government-controlled banks, including State Bank, are seeking wealth management business as economic growth, forecast by the government at an annual average pace of 7 percent, raises incomes and as Indians seek more ways to earn higher returns on their wealth. "In the current interest rate, taxation and macroeconomic environment, with a positive corporate performance and GDP growth, more and more individuals are seeking professional management of their finances," said Sharad Mohan, a marketing director of wealth management at Citigroup's India unit. Canara Bank, the third-biggest lender in India, plans to open branches catering specifically to affluent individuals, said B. Sukumaran, a deputy general manager. Canara Bank initially would offer financial advice, mutual funds and insurance products, he said. Bank of India, which started an online stock-trading system 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 online stock 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 fourfold in the past three years. It has 260 billion rupees, or $5.9 billion, of assets under management. Citibank has a well-organized system of Wealth Management services in India that give you unparalleled advantage and opens up the opportunity to maximize wealth. For example, Citigold Wealth Management Scheme. CitiGold Wealth Management offers exclusive privileges to its customers that comprise 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. Free insurance benefits - upto Rs 30 lakh personal accident, and baggage and householder insurance.

Free access to airport lounges at Domestic and International airports in India. DBS Bank offers power packed Savings Account with convenient features and charge-free banking options. So now you can bank and transact without the stress of fees levied on trasnsactions. No Frills account is made to order, working to provide vital banking services with nominal average quarterly balance requirements. Saving Power Plus Account is tailored especially for individuals with an investible surplus of Rs. 5 to 25 lacs. In other words, the account is suited for individuals who are looking for exclusive banking services. Saving Power Plus operates in INR currency with a high balance and zero charge structure. With its features and benefits, the accounts is a unique offering. The minimum balance per month is Rs. 100,000. Account holders receive free monthly and quarterly statements as well as personalised cheque books. Saving Power Plus offers all Banking Services without service charges. The Deposit Plus account is for individuals looking for a medium term investment option with an investible surplus of 15 lacs or more. This is a pure deposit relationship and is offered in INR currency. The difference with this account is the bundle of banking services and competitive interest rates. Private banking is emerging as an important segment of business for some banks and non-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 they are dealing with today. Foreign banks, which mostly cater to high net worth 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 couple of years. About the potential for wealth management, Mr. Sharad Mohan, Marketing Director, CitiGold Wealth Management, CitiBank, said, "Wealth management is a fast evolving domain with tremendous growth opportunity in India. In the current interest rate and taxation environment, more individuals are seeking professional management of their finances."

ADVANTAGES Banks offer stability for the money put on investment. The degree of vulnerability and risk is minimum in case of banks than in other instruments of wealth management. Free from market adversity. Banks in India have a wider network covering the rural areas also which has a potential for wealth augmentation. DRAWBACKS Interest rate offered by banks is less in comparison to other asset augmentation instruments.

MUTUAL FUNDS A Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with any surplus money that can be invested, even as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. The team undertakes this in the most professional manner.

Markets for equity shares, debentures, bonds and other fixed income instruments; real estate, derivatives and other assets have reached their maturity and are driven by latest up-to-date information. A mutual fund is thus the ideal investment vehicle for todays complex and modern financial scenario. Price changes in these assets are driven by global events occurring every day, in-fact every minute in faraway places. It will be very difficult, in-fact next to impossible for an ordinary individual to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc. A mutual fund is the answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. The costs of hiring these professionals per investor are very low, as the pool of money invested is large. In effect, the mutual fund vehicle exploits economies of scale in all three areas research, investments and transaction processing. Diversification of investments in mutual funds reduces the overall investment risks by spreading the risks across different assets. The investment of the mutual fund

company depends on the objectives the company peruses. Some mutual funds invest exclusively in a particular sector while others might target growth opportunities in general. Although mutual funds have been around for a long time, dating back to the early 19th century, the first modern American mutual fund opened in 1924 and it was only in the 1990s that mutual funds became a part of the mainstream investment. Today mutual funds collectively manage almost as such as or more money as compared to banks. The advantages of mutual funds include; high liquidity, choice of investment, low investment minimums, low transaction costs, government regulation, which assures safety of the fund and professional management of the fund, etc. Mutual fund investment has also its own drawbacks like lack of insurance of the fund against

losses, dilution of investment value and profit thereof, high management and operating fees and sales commissions, lack of control of the investor over own investment portfolio and inefficiency of cash reserves which reduces the investors potential return. The types of mutual funds are subject to large scale variation subject to investment objective, size strategy and style. ADVANTAGES AND RISK IN MUTUAL FUND INVESTMENT: Mutual fund investment, particularly mid cap investment in India is very volatile in nature. There may be high returns and high risk. ADVANTAGES: 1. Diversification of Funds: - Diversification of Funds can reduce the overall investment risks by spreading the risk across different assets. When some assets are falling in price others are likely to be rising. Thus, diversification of funds lowers the risk than investment in just one or two funds. 2. Choice: - Mutual funds come in a wide variety of types. Some mutual funds invest exclusively in a particular sector, while others might target growth opportunities in general. There are thousands of funds, and each has its own objectives and focus. The key for an investor is to find the mutual funds which closely 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 to sell a share of stock. 4. Low Investment Minimums: - An investor need not be very wealthy in order to invest in a mutual fund. Most mutual funds allows an investor to buy into the fund with as little as $ 1000 or $ 2000 or even allows a no minimum investment but on the terms of payment of regular monthly contributions. 5. Convenience: - Purchasing and selling of mutual fund is very easy. Secondly, an investor of mutual funds need not to worry about tracking the various securities in which the funds invest rather all he needs to keep track of the funds performance.

6.

Low Transaction Costs:- Mutual are able to keep the transaction costs at

the minimum because they benefit from reduced brokerage commissions for buying and selling large quantities of investments at a single time. RISKS: 1. No Insurance: - Mutual funds, although regulated by the government, are not insured against losses. Mutual fund returns are subject to market risks. Despite the risk reducing diversification benefits provided by the mutual funds, losses can occur, and it is possible that one may even lose the entire investment.

2.

Dilution: - Although diversification reduces the amount of risks involved in investing in mutual funds, it may lead to dilution which can be disadvantageous to the investor. If a single security held by a mutual fund doubles in value, the mutual fund itself will not double in value because that security is only one small part of the funds holdings.

3. Fees and Expenses: - Most mutual funds charge management and operating fees that pay for the funds management expenses. Some mutual funds also charge high sales commissions. And some buy and trade shares so often that the transaction costs add up significantly. Some of the fees and expenses are also recurring.

4.

Poor Performance;- 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 indexes. Critics have also questioned whether or not professional money managers have better stock picking capabilities than the average investor.

5.

Loss of Control: - The managers of mutual funds make all the decisions about which securities to buy and sell and when to do so. This makes difficult on the part of the investor in managing his portfolio. For example, the tax consequences of a decision by the manager to buy or sell an asset at a certain time might not be optimal for the investor.

6.

Trading Limitations: - Although mutual funds are highly liquid in general,

most mutual funds i.e. open ended mutual funds can not be bought or sold in the middle of the trading day. One can only buy and sell them at the end of the day, after the current value of their holdings have been calculated.

7.

Size: - 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 single company a fund may own. As a result, the fund might be forced to lower its standards when selecting companies to invest in. However, mid cap investment is not suffering from this type of problem.

8.

Inefficiency of Cash Reserves:- Mutual funds usually maintain large cash reserves as protection against a large number of simultaneous withdrawals. Although this provides investors with liquidity, it means that some of the funds money is invested in cash instead of assets, which tends to lower the investors potential return.

CHAPTER 2

REVIEW OF LITERATURE

REVIEW OF LITERATURE According to the report, India is slated to become a US$1 trillion market (in assets under management) for wealth management providers by 2012, with a target market size of 42 million households In the annual survey done by Cap Gemini, SA and Merrill Lynch it was found that ranks of millionaires grew 6% in the previous year, because the number of richer people grew in India & China where India is competing China. India & China posted the biggest gain in millionaires advancing by 23% & 20% respectively. When They are watching the world wide increase in number of millionaires the facts collected by Cap Gemini, S.A. and Merrill Lynch survey report. India has 23% growth in the year (2011-12). The biggest Asian economy China stands on second position with 20%, west Asia 16%, United States 4% and United Kingdom (UK) 2%. So They can understand that there is more opportunities in the Wealth management business in Asia specially in India. SOURCE: INDIA is now home to a new breed of billionaires: Those created by an almost inexplicable rise in the values of the stocks they hold.

Forbes List of Top 10 Richest People in India Rank 7 8 34 59 83 86 98 124 183 210 Name MUKESH AMBANI LAKSHMI MITTAL ANIL AMBANI SUNIL MITTAL AZIZ PREMJI SHASHI& RAVI RUJA KUSHAL PAL SINGH KUMAR BIRLA ADI GODREJ & FAMILY DILIP SHANGHVI Net Worth ($ in

Billion) 19.5 19.3 10.1 7.7 5.7 5.6 5.0 4.2 3.3 3.0

The combined wealth of the 20-million strong non-resident Indians community is estimated to be over $1 trillion dollars -- more than the country's entire economy. Overseas Indians are estimated to hold financial wealth, apart from real estate, gold and art, of over $500 billion. The total wealth would be over $1 trillion, according to the report by High-Powered Expert Committee appointed by the Centre to suggest ways to make Mumbai an international financial centre. These NRIs were a natural beachhead as a customer base where an Indian Personal Wealth Management industry can get started. Their wealth management services were presently being sourced almost exclusively from abroad, the report said. The report listed 11 activities typically provided by an international financial centre (IFC) and referred to PWM as one of the most important activities undertaken at an IFC. According to the report, PWM for high-net worth

individuals is estimated to involve management of personal assets of $8-10 trillion globally.

The acceleration in growth during 2011-12 is driven by continued momentum in the services and manufacturing sectors, growth of which are expected to be in doubledigit figures.India is both attracting foreign wealth managers to set up business and domestic banks to set up wealth management businesses. Going forward this is a trend that is likely to continue, with Indias key advantages attracting more and more competitors.The attractiveness of Mumbai as a location for banks is backed up by the figures on deposits held by foreign banks in India. Of the total value of deposits held by foreign banks USD16bn 49.2% is in Maharashtra and all of this is in urban/metropolitan areas of which Mumbai is a large part.

In the view of many in the industry there is a challenge of client education that must be addressed going forward. The primary area of concern is in equity investment and the need to invest long-term rather than short-term. This is not aproblem that is confined to India; many other countries around the globe have similar problems.

In view of the above stated conditions, it is highly likely that over the next 20 years, wealth management will witness significant developments in the way that clients are segmented. Following from this, client service will change to complement the shift in emphasis, as factors other than the level of the client's wealth are taken into consideration.

Datamonitor research indicates that there are significant benefits in the area of liability management for the wealthy, and that the importance of liability management as part of wealth management will inevitably grow over the next 20 years, until it becomes a key service area.

CHAPTER - 3

DATABASE AND METHODOLOGY

DATABASE AND METHODOLOGY

The present study is purely an exploratory study, dependent on both the primary and the Secondary sources of data. The primary sources of data constitutes the interaction (both formal and informal) of the researcher with the managers and other officials who are directly associated with the wealth management industry in India. The officials were selected on the method of simple random sampling. The Annual Reports of the concerned agencies and the relevant literature and facts and figures available on the problem of the study in various books, journals and magazines constitutes the Secondary sources of data. Macroeconomic and savings and investment data collected directly from governmental sources such as the Reserve Bank of India. Insight into the Indian financial services market .

Objectives of Research ??????????

SIGNIFICANCE OF THE STUDY: Allows wealth managers to monitor threats and opportunities posed by their main competition. Helps plan products and services by giving key information on customers financial services preferences. Looks at the onshore liquid wealth of mass affluent and high net worth individuals in India and in India's largest and most affluent states. Offers access to key statistics providing a clear picture of the scale, composition and direction of the developing landscape on a regional basis. Find out why India is an attractive market and its advantages over other emerging economies.

DATA COLLECTION:
Data has been collected both from primary as well as secondary sources as described below:

Primary Sources:
Primary data has been obtained through questionnaires .

Secondary Sources:
The secondary sources of data has been taken from the various websites, articles, books and etc.

Sampling Unit:

Sample Size:

CHAPTER - 4

DATA ANALYSIS AND INTERPRETATION

1. ARE YOU AWARE ABOUT WEALTH MANAGEMENT?

Response Yes No Not sure

Respondent(%) 87 9 4

Yes

No

15%

85%

Interpretation -

2. WHAT DO YOU YHINK ARE THE MOTIVES BEHIND WEALTH MANAGEMENT? Response Expansion of Business Financial planning Individual requirements Respondent (%) 23 71 6

Yes

No

15%

85%

Interpretation -

3. ARE YOU AWARE ABOUT THE COMPANIES? Response Yes No Respondent (%) 88 12

Yes

No

15%

85%

Interpretation -

4. HOW YOU COME TO KNOW ABOUT THE COMPANIES? Response Advertisement Newspaper Friend/Relative Company Agent Phone call from company Respondent (%) 20 12 8 35 23

Yes

No

15%

85%

Interpretation -

5. WHICH SERVICES OF THE COMPANY ARE YOU AWAILING? Response Stock options ULIPS Endowment plans Mutual Funds Respondent (%) 59 10 7 24

Yes

No

15%

85%

Interpretation -

6. FACTORS AFFECT YOUR CHOICE REGARDING COMPANY? Response Returns Goodwill Services Respondent (%) 56 30 14

Yes

No

15%

85%

Interpretation -

7. FACTORS AFFECT YOUR CHOICE REGARDING SERVICES? Response Reminder calls Feedback forms Others Respondent (%) 55 38 7

Yes

No

15%

85%

Interpretation -

8. WILL YOU REFER COMPANY TO TOUR KNOWN FOR INVESTMENT ? Response Respondent (%) Yes No 82 18

Yes

No

15%

85%

Interpretation -

9 . ARE YOU SATISFIED WITH THE RETURNS? Response Yes No Respondent (%) 85 15

Yes

No

15%

85%

Interpretation -

FINDINGS

LIMITATIONS

CHAPTER - 5

CONCLUSION

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 efficiency initiative. Segmentation models will apply holistic criteria to wealth 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 and flexibility will become vital components of the business model Internal restructuring will aim to integrate client services. The rise of the mass affluent represents 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 service. The mass affluent proposition will run along the lines of the 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 fail due to a persistence of the asset focused service model and a lack of commitment. There are significant benefits in the area of liability management for the wealthy, and that the importance of liability management as part of wealth management will inevitably grow over the next 20 years, until it becomes a key service area. Rising

income and wealth inequalities, if not matched by 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 havenots.

Bibliography

BIBLIOGRAPHY:
WEBSITES

www.google .com

www.wikipedia.com www.managementstudy.com www.citehr.com

BOOKS AND JOURNALS Economic & Political Weekly - July-August, 2012 2. Finance India, July-2011 3. How Mutual Funds Work - Fredman and Wiles 4. Mutual Funds in India - H. Sadhak 5. Kotler, Philip, Marketing Management, Delhi: Pearson Education, 2011 6. Beri, G.C., Marketing Research, New Delhi: Tata McGraw Hill, 2011 7. Marketing Research Naresh Malhotra 8. Marketing Management- Kotler 9. Consumer Behaviour- Schiffman & Kanuk

Annexure

ANNXURE
1. Are you aware about wealth management? a) Yes b) No c) Not sure

2. What do you think are the motives behind wealth a)Expansion of Business b)Financial planning c) individual requirements 3. Are you aware about the companies? a) Yes b) No 4. How you come to know about the companies? a) Advertisement b) Newspaper c) Friend/Relative d) Company Agent e) Phone call from company 5. Which services of the company are you availing? a) Stock option b) ULIP c) Endowment plans d) Mutual funds 6. Factors affect your choice regarding company? a) Returns b) Goodwill c) Services

management?

7. Factors affect your choice regarding services? a) Reminder calls b) Feedback forms c) Others 8. Will you refer company to tour known for investment?

a) Yes b) No 9. Are you satisfied with the returns?

a) Yes b) No