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Objectives:
The main objective of this project is concerned with getting the opinion of people regarding mutual funds and what they feel about availing the services of financial advisors. I have tried to explore the general opinion about mutual funds. It also covers why investors are not investing in mutual fund. Along with it a brief introduction to Indias financial intermediary, KR CHOKSEY has been given and it is shown that how they operate in mutual fund department.
Scope of study:
Study of KRChoksey Private Ltd. its origin & history. Also understanding about mutual funds, types of mutual funds, role of financial advisors and whether there is a need for financial advisor is also researched. This study is helpful to anyone who wants to know functions of stock broking firm and type of products and services provided by KRChoksey and its procedures.
Limitation: Managers were sometime not ready to give answers raised by me due to
time limit, work load.
Tolani Institute of Management Studies Page 1
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Need of financial advisors for mutual fund investors CONCEPT OF MUTUAL FUNDS
Many investors with common financial objectives pool their money. Investors on a proportionate basis get the mutual fund units on the sum contributed to the pool. The money collected from investors is invested into shares, debentures and other securities by the fund managers. The fund manager realizes gains or losses and gets dividend or interest income. Any capital gain or losses collected are passed on to the investors in proportion to the sum invested. When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.
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Need of financial advisors for mutual fund investors facility of repurchase through mutual funds at NAV related prices which some closeended and interval schemes offer you periodically. Transparency: You get regular information on the value of your investment in addition to disclosure of specific investments made by your scheme, the proportion invested in each class of assets and the fund managers investment strategy and outlook. Flexibility: Through features such as Systematic Investment Plans(SIP) , Systematic Withdrawal Plan(SWP) and Dividend reinvestment Plans, you can systematically invest or withdraw funds according to your needs and convenience. Choice of schemes: Mutual funds offer a variety of schemes to suit your varying needs over a lifetime.
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1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores.
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Need of financial advisors for mutual fund investors Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds. Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of
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Need of financial advisors for mutual fund investors assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.
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FIG: 1.0
Open-ended funds: Investors can buy and sell the units from the
Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of closeended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity. BASED ON THEIR INVESTMENT OBJECTIVE: Equity funds: These funds invest in equities and equity related
instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as: i. Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weight ages.
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Need of financial advisors for mutual fund investors ii. Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks. iii Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields. iv. Thematic funds- Invest 100% of the assets in sectors which are related through some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc. v. Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks. vi.ELSS- Equity Linked Saving Scheme provides tax benefit to the investors. Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes: i. Debt-oriented funds -Investment below 65% in equities. ii. Equity-oriented funds -Invest at least 65% in equities, remaining in debt. Debt fund: They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP)
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Need of financial advisors for mutual fund investors and call money. Put your money into any of these debt funds depending on your investment horizon and needs. i. Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market. ii. Gilt funds Short Term- They invest 100% of their portfolio in government securities of and T-bills. iii. Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate. iv. Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities. v. Gilt funds Long Term- They invest 100% of their portfolio in longterm government securities. vi. Income funds Long Term- Typically; such funds invest a major portion of the portfolio in long-term debt papers. vii. MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities. viii. FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.
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INVESTMENT STRATEGIES
1. Systematic Investment Plan: Under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan: Under this an investor invest in debt
oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan: If someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.
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RANK 1 2 3 4 5 6 7 8 9 10
AMC RELIANCE MUTUAL FUND HDFC MUTUAL FUND ICICI PRUDENTIAL MUTUAL FUND UTI MUTUAL FUND BIRLA MUTUAL FUND SBI MUTUAL FUND FRANKLIN TEMPLETON MUTUAL FUND DSP BLACK ROCK MUTUAL FUND KOTAK MAHINDRA MUTUAL FUND TATA MUTUAL FUND
AUM(In LAKH) 10206621.91 8788309.11 6584087.84 6538724.42 57688946.91 4149785.56 3944260.39 2766779.46 2756536.86 2085484.83
Source: AMFI
TABLE: 1.0
AUM GROWTH
Source: AMFI
FIG: 1.1
The Indian Mutual fund industry has witnessed considerable growth since its inception in 1963. The assets under management (AUM) have surged to Rs 4,173 billion in Mar-09 from just Rs 250 million in Mar-65. In a span of 10 years (from 1999 to 2009), the industry has registered a CAGR of 22.3%, albeit encompassing some shortfalls in AUM due to business cycles
MARKET
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ICICI Bank Reliance Industries Infosys Technologies State Bank of India Tata Consultancy Services Oil and Natural gas Corporation Bharti Airtel HDFC Bank ITC Larsen and Toubro TABLE: 1.1
8715.49 7933.87 7639.46 7059.40 5172.82 4905.47 4411.65 4377.05 3755.63 3579.46
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Need of financial advisors for mutual fund investors yourself. If your Rs 10,000 investment turning into Rs 6,000 upsets you--even though it could subsequently bounce backan aggressive equity fund is not for you. Reality check: What are your goals? If you need to turn Rs 10,000 into Rs 50,000 in two years, a medium term bond fund may not be the right answer. Work on setting realistic expectations for both your goals and your funds. Know what you are buying: Once you discovered yourself, spend some time for a close understanding of the funds. The stated objective of a fund as given in a prospectus is often incomplete and does not reveal much. Based on the readily available portfolio and fund manager's commentary, you can broadly understand the style and strategy followed by a fund. This will help you meaningfully diversify your portfolio. This will also help you assess potential risks. In general, large-cap value funds are less risky than small-cap growth funds. Examine sector weightings: You must know that funds with large stakes in just one or two sectors will likely be more volatile than the more evenly diversified funds. Looking at a fund's sectoral history will help you gain a good perspective. Does the manager move in and out of sectors frequently and dramatically? If so, the fund might get hurt, if the manager is ever caught on the wrong foot.
Check out the fund's concentration: A portfolio with just 20 or 30 stocks or one that puts most of its assets in just a few stocks will likely be more volatile than a fund that's spread among hundreds of stocks. But there could be rewards of concentration. A concentrated portfolio will also get more bangs for its buck if its stocks work out. You may want to add a concentrated fund, one that owns fewer stocks or puts most of its assets in the top 10 or 20 stocks to your portfolio.
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Need of financial advisors for mutual fund investors But largely, your core funds should probably be well a diversified and more predictable. Though a small allocation to a sector-oriented fund, more-flexible fund, or a moreconcentrated fund could boost your returns. Assess performance appropriately: Past performance is no indicator of future results. Investors should commit this statutory quote from mutual fund prospectus, advertisements and any other literature to memory. It should be recalled more readily than your bank account number. It should be repeated anytime you consider sending money to any fund with a 100 per cent three-month gain. Know your portfolio: Look for areas that are over-represented and for those that are lacking. For example, will your portfolio be overly concentrated in the large-cap equities or too much in highly rewarding but wildly volatile InfoTech stocks? Will you be missing investments in small cap stocks? Be a disciplined investor: After you've chosen some funds, stick with them. Don't be afraid to go aga.
Need of financial advisors for mutual fund investors Laundering (PMLA) Rules, the latest guidelines issued in December 2008, as part of the risk Management practices and procedure is expected to gain further momentum. The current Anti Money Laundering (AML) and Combating Financing of Terrorism (CFT) measures cover two main aspects of Know Your Customer (KYC) and suspicious transaction monitoring and reporting. The regulatory and compliance ambit seeks to dwell on a range of issues including the financial capability of the players to ensure resilience and sustainability through increase in minimum net worth and capital adequacy, investor protection and education through disclosure norms for more information to investors, distribution related regulations aimed at introducing more transparency in the distribution system by reducing the information gap between investors and distributors, and by improving the mechanism for distributor remuneration. The success of the relatively nascent mutual fund industry in India, in its march forward will be contingent on further evolving a robust regulatory and compliance framework that in supporting the growth needs of the Industry ensures that only the fittest and the most prudent players survive.
WHY
IT
HAS
BECOME
ONE
OF
THE
LARGEST
INTERMEDIARY?
If we take a look at the recent scenario in the Indian financial market then we can find the market flooded with a variety of investment options which includes mutual funds, equities, fixed income bonds, corporate debentures, company fixed deposits, bank deposits, PPF, life insurance, gold, real estate etc. All these investment options could be
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Need of financial advisors for mutual fund investors judged on the basis of various parameters such as- return, safety convenience, volatility and liquidity. Return Equity Bonds Co. Debentures Co. FDs Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds TABLE: 1.2 We can very well see that mutual funds outperform every other investment option. On four parameters it scores high whereas its moderate at one comparing it with the other options, we find that equities gives us high returns with high liquidity but its volatility too is high with low safety which doesnt makes it favorite among persons who have low risk- appetite. Even the convenience involved with investing in equities is just moderate. Now looking at bank deposits, it scores better than equities at all fronts but lags badly in the parameter of utmost important i.e.; it scores low on return , so its not an happening option for person who can afford to take risks for higher return. The other option offering high return is real estate but that even comes with high volatility and moderate safety level, even the liquidity and convenience involved are too low. Gold have always been a
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Safety Low High Moderate Low High High High High Moderate High
Volatility High Moderate Moderate Low Low Low Low Moderate High Moderate
Liquidity High Moderate Low Low High Moderate Low Moderate Low High
Convenience Moderate High Low Moderate High High Moderate Gold Low High
High Moderate Moderate Moderate Low Moderate Low Moderate High High
Need of financial advisors for mutual fund investors favorite among Indians but when we look at it as an investment option then it definitely doesnt gives a very bright picture. Although it ensures high safety but the returns generated and liquidity are moderate. Similarly the other investment options are not at par with mutual funds and serve the needs of only a specific customer group. Straightforward, we can say that mutual fund emerges as a clear winner among all the options available. The reasons for this being: i) Mutual funds combine the advantage of each of the investment products: Mutual fund is one such option which can invest in all other investment options. Its principle of diversification allows the investors to taste all the fruits in one plate just by investing in it; the investor can enjoy the best investment option as per the investment objective. ii) Dispense the shortcomings of the other options: Every other investment option has more or less some shortcomings. Such as if some are good at return then they are not safe, if some are safe then either they have low liquidity or low safety or both likewise, there exists no single option which can fit to the need of everybody. But mutual funds have definitely sorted out this problem. Now everybody can choose their fund according to their investment objectives.
iii) Returns get adjusted for the market movements: As the mutual funds are managed by experts so they are ready to switch to the profitable option along with the market movement. Suppose they predict that market is going to fall then they can sell some of their shares and book profit and can reinvest the amount again in money market instruments. iv)Flexibility of invested amount: Other than the above mentioned reasons; there exists one more reason which has established mutual funds as one of the largest financial Intermediary and that is the flexibility that mutual funds offer regarding the investment
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Need of financial advisors for mutual fund investors amount. One can start investing in mutual funds with amount as low as Rs. 500 through SIPs and even Rs. 100 in some cases.
FINANCIAL ADVISOR
The reason for consulting a financial advisor is investors time is valuable. In areas where you do not know what you are doing, it is going to take you much longer to make decisions. Again, things change quickly in the financial world. If youre not on top of your game, you may sell too late or too early, or feel unsettled with your decisions, because you lack 100% knowledge of the industry. Instead of spending every spare minute to try to make sense of these funds and research, learn the big picture, and hire a financial advisor you can trust. He or she can spend their time finding the best deals for
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Need of financial advisors for mutual fund investors you with the highest dividends, and you can go about your businessseeing to the other important parts of your life. Good financial advisors typically have a financial education in business and finance, and each of them must be certified to practice in the industry. They study the financial trends on a daily basis. They research the various funds out there and options for retirement, budgets, financial planning, etc. Financial Advisors often possess a wealth of knowledge in this area and they educate / advise people on a regular basis, concerning financial matters. If financial advisors require primarily a percentage of the gains, they theoretically put investors interests first, because without your success, they receive no pay. Just be careful to find out exactly how they are paid and try to avoid any conflicts of interest. If youre struggling to know which option is the best for you and your familys retirement, and you have already started educating yourself about the industry (your number one priority), consider consulting a financial advisor. The benefits are numerous. An advisors advice can greatly improve the outlook of your future and keep you on track.
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Need of financial advisors for mutual fund investors else - where is his allegiance? Fee based is usually a better option and as always the price needs to be commensurate with expertise/value provided. A financial advisor should provide a holistic perspective of your financial life. Financial life is not limited to investing some money in the stock market. Financial life should encompass your cash flow, saving goals, retirement goals, education objectives, pre/post tax investment strategies, diversification across asset classes, insurance, taxes, mortgage management and time horizons. What is the advisor doing with your money, why is he doing it and when is he making those decisions should also be visible to you. Visibility comes via regular reporting at a detailed level that makes sense to you. A monthly or quarterly meeting may be merited to review and assess progress of your portfolio. It should be in writing. Expectations, roles, reporting and the scope of the services provided should be documented and formalized. Even a plumber who fixes your faucet gives you a written estimate of services proposed - you should expect more from a mutual fund advisor.
Need of financial advisors for mutual fund investors companys success has been its customer centric approach and capital growth through structured counseling and focus.
AREAS OF EXPERTISE:
KRC is one of the few broking houses in India which offer full services to cross-section of investors, serving: Domestic financial institutions (DFIs) Domestic mutual funds (DMFs) Foreign institutional investors (FIIs) Non Resident Indians (NRIs) Private client groups (PCG) including High net worth individuals (HNIs) and corporate families.
PERFORMANCE:
CNBC has rated KRChoksey as one of the top broking houses in Asia. As per the opinion poll conducted 80-90% of the viewers follow the recommendations made by KRC. Asia Money (Singapore) selected KRC as the best broking house in Asia. Thomson Financial, Bloomberg, Multex and Fascet distribute KRC research reports to more than 8000 clients all across the world.
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Need of financial advisors for mutual fund investors Birla Sun life Insurance awarded KRC with the regional sales championship for the best corporate agent in Western India. Among ten broking houses in India-Asia Money Poll.
CORE STRENGHTS
Customers interest ahead of own Successfully leveraging products with advisory services by use of technology platforms Enhanced competiveness due to distinguished productized approach catering to all client classes; increasing investor reach Proven wealth creation track record backed by ability to identify winning investment ideas at nascent stage. Professionally managed; family owned setup
OWNERSHIP STRUCTURE
PROMOTERS
KRChoksey and Co
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KRChoksey commodity
KRChoksey Insurance
FIG: 1.2
BUSINESS MODEL:
BUSINESS MODEL
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ADVISORY PRODUCTS
COMMISSION PRODUCTS
Equity Advisory
Managed Funds
Equity
Advisory Portfolio
Financial Planning
Mutual Funds
Bonds/ debt
FIG: 1.3
Financial Planning
WEALTH Portfolio MGMT Management service
Mutual Funds
Tolani Institute of Management Studies
Equity IPOs
NRI Services
FIG: 1.4
1. CAPITAL MARKET
i. BROKERAGE SERVICES: KRC provides Trading as well as clearing services to its clients in both the Equity & Derivatives segments on BSE & NSE. KRChoksey's presence is in more than 70 cities & 150 locations all around India, through structured stock-selection, entry-pricing, margin of safety and the timing of exit.
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Need of financial advisors for mutual fund investors ii. DEPOSITORY SERVICES: KRChoksey was the first brokerage house to offer Demat Trading as early as 1999. KRC Share Bank Division provides the benefits and expertise of an experienced depository and the convenience of availing the composite services provided by the organization as a full service Broking House; a one stop-Shop offering customized solutions for all your financial needs. KRC Share Bank Division functions as a single window facility that enables Dayto-day execution of instructions slips expediting client transactions. The divisions web-enabled process also helps the client to check his account online. Registered with Central Depository Service (India) Ltd. (CDSL), the depository arm of KRC would provide convenience and value added services to all our customers. iii. ONLINE TRADING: KRC fast, flexible and real time trading is facilitated by KRCtrades.com mart Trader online trading interface. The company provides a typical stock Exchange terminal with streaming quotes, real time charting, options trading and much more. The Smart Trader offers customizable display with integrated trading across BSE and NSE for both Cash and F&O on a single terminal. A variety of Decisionmaking tools are built in to optimize on your trading strategy and maximize your returns. Clients using krctrades.com will be in a position to log in and directly place their trades which would be settled directly by the bank and shares transferred to our account directly through the KRC DP accounts. Real time prices for NSE & BSE Cash and F&O Live market watch with customizable overviews Live tic by tic charting facilities
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Need of financial advisors for mutual fund investors More than 30 Technical Indicators Pre-defined as well as customizable market alert tools Integrated trading window for lightning fast order entry
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Need of financial advisors for mutual fund investors KRC Non Life Insurance section offers a multitude of Health Plans to cover and meet your family's health needs. KRC representatives would help you to identify a suitable health plan and execute the necessary requirements and obligations. iii. NON-LIFE INSURANCE KRC Insurance would provide you with customized insurance solutions for your clients and take care of all formalities needed for policy issuance, underwriting and monitoring of insurance plans. KRC covers a wide range of insurance solutions general insurance such as property, health etc General Insurance Bajaj Allianz TataAIG Reliance National ICICI Lombard India Assurance IFFCO Tokio
Mutual Fund Desk offers following services to the clients. Mutual Fund NFO (New Fund Offer) Reports. Mutual Fund Investment Planning and regular monitoring of portfolio. Mutual Funds Existing Portfolio Restructuring and Recommendation. Monthly Statement on Mutual Fund Portfolio Performance
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Need of financial advisors for mutual fund investors To give you the most comprehensive coverage on mutual fund investing the company site offers many tools and value added information viz. Analyze Funds Fund Activity Report Portfolio Updates Dividend Announcements
v. EQUITY IPOS
Team does rigorous analysis on the quality of new issue, the companys track record and its business plans. More importantly, it critically evaluates the pricing of the issue and its friendliness. Given the background and experience of KRC RESEARCH TEAM they are able to identify the Quality issues out of a series of new issues that hit the market. As a syndicate member they offer bidding and collection of IPO forms at Mumbai and several other locations in India through their franchisees. Research Report on IPO.
vi.NRI SERVICES:
KRChoksey provides a Non Resident Indian (NRI) client with a package of services designed to create a constructive, creative and hassle free investment experience in India. The company provides consultancy, execution and operational services to its NRI clients with special attention to the administrative and legal obligations they are required to meet.
Portfolio Investment Scheme KRChoksey helps to execute the Portfolio Investment Schemes (PIS), which provides an NRI client, avenues to invest in shares/ debentures of Indian companies through a recognized stock exchange on a repatriablebasis. The capital and profits are freely repatriableafter deduction of applicable taxes to the NRI.
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Process for an NRI who wants to register for the PIS opens the following accounts NRE Savings Account (any recognized bank) PIS Savings Account (any recognized bank) Trading account (with KRC) Demat account (with KRC) POA to a representative of KRC.
3. WEALTH MANAGEMENT: i. FINANCIAL PLANNING KRC provides complete financial planning services to its customers which involve complete understanding of clients risk profile, review of present investments, investment objectives, working out investment strategies to achieve the objectives, monitoring and review of investments made. Financial Planning is your road-map to wealth creation and provides answer to many questions like. Where to invest? How much should I invest? What should be my return on investments? Reinvestments or Fresh Investments? Risk Evaluation & Management? Monitoring Investment? Thats what they exactly do in KRChoksey Financial Planning, creating a process for you to meet your financial objectives considering your assets, liabilities, income, expenses & inflation & your other financial commitments. Financial Planning includes Investment planning, Risk Management & Insurance Planning, Retirement Planning, Tax Planning & Estate Planning.
ii. PORTFOLIO MANAGEMENT SERVICE: KRChoksey offers comprehensive Portfolio Management Services for HNI and PCG in India and abroad. Over the decades, KRC Research has earned a distinguished name in
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Need of financial advisors for mutual fund investors delivering superior ideas for its clientele on a consistent basis, given its conservative approach. KRC Portfolio Management Services would include: Review and Restructuring of the existing portfolio Fresh Investments in Equity and Mutual Funds Review and Monitoring of Portfolio Reporting and Administrative Support on Portfolio KRC would provide portfolio reports to the clients for their easy monitoring of portfolios on a monthly basis and would carry out a quarterly review of the portfolio along with the customer. It offers PMS, with following plans to suit the needs of different types of investments: Diversified Large Cap Emerging Cap Service Sector Short Term Growth Scheme
iii. NETWORK PARTNERS: PARTNERING GROWTH KRC Network Partners an integral part of the KRChoksey value system, a significant member of the KRChoksey family and its strong tradition of Safe Secure Growth. Experience has led to a rising growth graph in their services, and their clientele and it is this growth that we seek to share with our network partners.
Their Network Partners can benefit of our expertise and the services that span the spectrum of investments from Equity investments, Portfolio Management, Insurance to Fixed Income Planning and Servicing. KRChoksey's back office infrastructure and value added services provide a cost benefit advantage, which
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Need of financial advisors for mutual fund investors results in higher business and lower costs of running the financial services operations. This gives their network partners the freedom of concentrating on enhancing customer satisfaction and ensuring business expansion. The Network Partner's are key drivers for Business Growth; therefore there are some predefined Major Thrust Area (MTA) for them. KRChoksey also offers a unique advantage through its multi-product marketing, multi-purpose solutions, and expertise -an advantage that can be utilized by our clientele and converted into monetary gain. KRChoksey would pro-actively support the various initiatives of NP as a part of this relationship. We would provide you cutting edge services and support to build a successful symbiotic relationship between us. The following section describes the key responsibilities of KRChoksey.
4. ONLINE RESEARCH:
i. EQUITY KRC Decision Drivers furnish a rich portfolio of immediate research and analytical reports for their Investor Clients --earning ideas that help drive investment decisions. Time tested packages that combine savvy investing with smart trading strategies.
Reports you can avail: Short term reports KRC Blasters Instant information and informed ideas provided to you on the move-SMS alerts with
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Need of financial advisors for mutual fund investors daily Market Outlook Short-term term reports Cherry Picks Long term reports Between the lines KRC ideas to medium Good Evening KRC 2-4 intraday/intraweek
calls. Technical analysis and powerful insights. Post market analysis with calls for tomorrow. KRCs dealing desks expertise for its investor clients. A daily corporate analysis report.
investment Gives a basic knowledge to the clients about the stock market and complete outlook of the stocks.
Derivatives reports
market Derivative strategy on Daily guide for taking right F&O KRC technical trends position in F&O A trend analysis report which provides the daily intraday trading range for future and options market.
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To give you the most comprehensive coverage on mutual fund investing our site offers many tools and value added information viz. Analyze Funds Fund Activity Report Portfolio Updates Dividend Announcements
ADVANTAGE: KR CHOKSEY
LEGACY Built by the Choksey family whose association with the Capital Market dates back 87 years.
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Need of financial advisors for mutual fund investors Culture that nurtures continually imparting knowledge and updating skills across stakeholders STABILITY Professionally Managed , Family Owned, just the right personal touch to the professional services 3 decades, 8 strategic business units, 150 locations, over 65,000 clients ABILITY trends Skill to interpret Market Intelligence Incisive investment knowledge AWARDS AND ACHIEVEMENT: Impeccable Reputation 87 Years Experience in Indian Capital Market Pioneers in Equity Research & Personalized wealth creation Rated among top ten Brokerage house in India Asia Money Poll 2003 CNBC poll shows that 80-90% of their viewers follow KRChoksey recommendations KRC Research worldwide Awarded as the best corporate agent in Western India , by BirlaSunlifeInsurance Awarded as the best performer in Western India by Tata-AIG General Insurance is globally referred to by Reuters, Thomson First call,MoneylineTelatrade,ISI Emerging Markets for their over 10,000 clients Insight -Skill in perceiving market
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SECONDARY DATA: Internal data -provided by officer at the company External data websites
CONCLUSIVE DESIGN
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LONGTIDUNAL METHOD
DESCRIPTIVE DESIGN
OMNIBUS PANEL
FIG: 1.5
CONCLUSIVE REEARCH DESIGN: At the end of whole research I will come out with a proper conclusion whether there is a need for financial advisors for mutual fund investors and what all improvements needs to be taken by AMCs /Financial advisors. DESCRIPTIVE RESEARCH DESIGN: I have collected my data by filling up questionnaire from investors of KRChoksey and also by interviewing employees of the company. I have also described the data in detail and structured form. LONGTITUNAL METHOD: I have collected the data from visitors of KRChoksey and also by personal visits to offices whether they being investors or not.
SECONDARY DATA:
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Need of financial advisors for mutual fund investors At KRChoksey Shares and Securities Pvt Ltd, I had interacted with officers for understanding about mutual funds, types of mutual fund and how does it work. Also I had accessed AMFI and other websites and journals to get deeper insight about the topic.
CONVINIECE SAMPLING
FIG: 1.6
Purpose behind following the above path was just convenience of customers because when you are demanding time of someone then at that time you need to see their convenience. Here I distributed questionnaire on one day and collected the other day. It was not task of one day.
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FIG: 1.7
Interpretation: Out of the above pie chart, It can be concluded that out of 60 surveyed 63 % of them have invested in mutual fund and 37 % have not invested in mutual funds till now. Still there is enough scope for AMCs /financial advisors to target the 37 %.
2. Reason for not investing in Mutual Fund Option Lack of knowledge about Mutual Funds Insufficient funds to invest Not advised by financial advisors Complicated product features
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No of investors 13 2 2 0
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Need of financial advisors for mutual fund investors Other attractive avenues TABLE: 1.6 5
FIG: 1.8 Interpretation: From the above chart, it can be concluded that out of the 22 who have not invested in Mutual Funds ,59 % are having lack of knowledge about mutual funds, next 23 % have claimed to have invested in other attractive avenues, and 9% of them have given the reasons as having insufficient funds to invest and not advised by financial advisors and no one gave the reason as complicated product features.
FIG: 1.9 Interpretation: From the above chart it can be said that out of the 60 surveyed, 36 of them ie. 60 % of them prefer to invest in products with flexibility of liquidity with them and 24 of them ie. 40 % do not want to invest in such investment products.
No of investors 20 11 1
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Need of financial advisors for mutual fund investors Occasionally Never 8 20 TABLE: 1.8
FIG: 2.0 Interpretation: From the above chart it can be concluded that 34% of them always compare other return on capital with Mutual Funds before investing, 18 % frequently compare the return on capital , 2 % of them seldom do the comparison, 13 % of them do it occasionally while the next highest being 33% who never do the comparison.
FIG: 2.1
Interpretation: From the above chart, it can be concluded that 57 % of the investors surveyed avail the services of financial advisors while 43% of them do not prefer financial advisors.
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FIG: 2.2 Interpretation: From the above chart, it can be made out that mere 3 investors ie. 5 % of them surveyed were betrayed or miss-sold by financial advisors while 57 of them ie. 95 % of investors were not miss-sold.
7. Stage preferred to seek Financial Advisors: Age group Less than 25 years 25-34 years 35-44 years No of investors 19 20 6
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Need of financial advisors for mutual fund investors 45-54 years 55 years and above TABLE: 2.1 1 0
FIG: 2.3 Interpretation: From the above chart, it can be concluded that maximum number of investors prefer to invest in the age group of 25-34 years with 44% followed by less than 25 years with 41 % , while 13 % preferred to invest in the age group of 35-44 years and least with 2 % at 4554 years and no investors for 55 years and above.
Need of financial advisors for mutual fund investors 31-40 years 41 years and above 14 8
TABLE: 2.2
FIG: 2.4 Interpretation: Out of the total investors surveyed, 64 % belong to the age group of 21-30 years, 23% come in the age group of 31-40 years while 13 % are above 41 years and above while no investors were found below 20 years.
Need of financial advisors for mutual fund investors Post graduate 22 TABLE: 2.3
FIG: 2.5 Interpretation: From the above chart, we can make out that 56 % of the investors were graduate, 37% of them are post graduate while remaining 7 % are only under graduate.
Need of financial advisors for mutual fund investors Student Others 2 6 TABLE: 2.4
FIG: 2.6 Interpretation: From the above chart, it can be made out that 77 % of the investors surveyed were into service, 10 % belong to others which include retired and housewife, 8 % are into profession and 2% and 3 % are into business and are students respectively.
CHAPTER 4: FINDINGS/INFERENCES
Research findings:
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the remaining 22 have not yet invested in mutual funds. So there is enough scope for the advisors to convert those 22 participants into investors through their convincing power and great communication skills.
Now, when those 22 people were asked about the reason for not investing in
mutual funds, then 13 of them held their ignorance responsible for that. They lacked knowledge and information about the mutual funds. Whereas just 5 people enjoyed investing in other option like LIC/Gold. For 4 of them it was financial constraints which restricted them from investing and not being advised by financial advisors. Again the financial advisors can tap upon these people by educating them about mutual funds. They should not only sell those products in which they have higher commission but think for the benefit of the investor too.
When asked about the most alluring feature of MFs, most of them opted for diversification, followed by reduction in risk, helps in achieving long term goals and helps in achieving long term goals respectively.
When asked whether they will prefer other investments products with flexibility
The survey also bought out that 20 of the investors said they always compare the
return on capital when investing while the other 20 said they never compared the returns. The point to be highlighted is that people are not yet financially educated. The awareness among the masses about the benefits of investing in mutual funds is quiet low.
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When asked whether they are availing the services of financial advisors, only 26
out of 60 are using the services. The financial advisors needs to be more knowledgeable in order to advice the investors. At times the financial advisors are not themselves updated with the current market changes which may not benefit the investors.
Next when asked whether they were betrayed or miss-sold by financial advisors, 3
of them agreed to it out of those who availed the services. This may result into loss of trust in the financial advisors for those who blindly follow their recommendations.
When asked to mention few remarks about financial advisors, the survey revealed
the following and what investors expect from financial advisors. Following are mentioned below:
A common theme found among the investors surveyed is that using
professional financial advice provides them with a level of expertise that enhances their investment decisions.
Most investors who are availing the services of advisors want help
understanding their financial picture and allocating their assets across various types of investments. Many also want financial professional to explain various investment options to them and assess whether they are saving enough for retirement.
Also the other point which came out is that maximum of them believed
that financial advisors should be thorough with all the current market updates, the news of the scrips investors hold and what all new products are being launched by AMCs suiting to the investors.
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which is very essential when it comes to handling investors money. Quality and trust becomes an essential factor because most of them come from non-financial background. So they tend to believe whatever his/her advisors recommend them to do.
Financial advisor has been called a misnomer people who try to sell
products are hardly concerned about the suitability of the products to the end user. Their sole motive is to only generate higher commission.
Also investors have pointed out that most of the financial advisors do not
carry out proper research on the companies which has resulted in poor performance of the funds. Out of those who were satisfied with their financial advisors mentioned that their advisors explained to them about the various mutual funds by comparing it with that of other AMCs mutual fund products.
Lastly when asked at what stage of their life would they prefer to seek financial
advisors maximum number of them mentioned to be in the age group of 25-34 years with 20 followed by 19 in the age group less than 25 years. The reason for those seeking during mid twenties is often a particular event which prompted them to seek professional investment advice. Also the change in the makeup of their households such as getting married, having a child trigger them to seek financial advice. Those in the mid thirties often seek professional investment advice to address specific financial goal rather than in response to a trigger event.
In Mumbai the maximum numbers of investors were in the age group of 21-30 years, the second most were in the age group of 31-40 years while least was seen in the age group below 20 years and above 41 years.
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In occupation, the maximum investors belong to service class followed by others which included retired persons and housewife.
Most of the investors surveyed were graduate followed by post graduates. Financial awareness needs to be spread among the young investors because they tend to be more eager and willing to take risk.
CHAPTER 5: SUGGESTIONS/RECOMMENDATIONS
Given that customer awareness is the prerequisite for the achievement of the industry growth potential, there is a need for planning, financing and executing initiatives aimed at increasing financial literacy and enhancing investor education across the entire country through a sustained collaborative effort across all stakeholders. The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. AMCs in collaboration with AMFI and NISM should roll out customer awareness campaigns and provide infrastructure, content and speakers for running the campaigns on India-basis over a sustained period of time. Social marketing firms and media companies should design effective and massmedia campaigns in multiple languages using televisions, horadings, flyers, street plays and other techniques to reach the masses. Product innovations by AMCs should be driven by need to introduce simple products in order to attract and retain risk averse and first time investors to start investing in mutual funds.
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Need of financial advisors for mutual fund investors Focus on design of products around women and children related needs, given the growing dominance of women in influencing investment decisions in households across the country. Focus on product appeal for the low income group by keeping ease of investment and minimum thresholds within affordable limits. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing.
Mutual funds offer a lot of benefit which no other single option could offer. But
most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time.
The advisors may try to highlight some of the value added benefits of MFs such
as tax benefit, rupee cost averaging, and systematic transfer plan, rebalancing etc. These benefits are not offered by other options singlehandedly. So these are enough to drive the investors towards mutual funds. Investors could also try to increase the spectrum of services offered.
AMCs should focus on growing the financial advisors channel and encourage
them to reach out and engage with customers on their mutual funds needs on an ongoing basis pre and post completion of their investment. The advisors should try to charge a nominal fee at the beginning. But if not possible then they could go for offering more services and benefits at the existing rate.
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Need of financial advisors for mutual fund investors They should also maintain their decency and follow the code of ethics so that the investors could trust upon them. Thus the advisors should try to attract more and more persons and turn them into investors and finally their clients.
CHAPTER 6: CONCLUSION
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Need of financial advisors for mutual fund investors Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors in connection with financial advisors, how do they review their performance and what all improvements need to be made. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many people have not invested in mutual fund due to lack of awareness although they have money to invest. AMCs need to reorient their business towards fulfilling customer needs. As customers seek trusted advisors, the manufacturer-distributor relationship is not based on sale of financial products but for collectively promoting the financial success of customers across all facets of their professional and personal lives. The mutual fund industry needs to develop products to fulfill customer needs and help understand how its products cater to its needs.
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CHAPTER 7: APPENDIX
7.1 BIBLIOGRAGHY INTERNET: WWW.MONEYCONTROL.COM WWW.AMFIINDIA.COM WWW.VALUERESEARCHONLINE.COM WWW.MUTUALFUNDSINDIA.COM WWW.INVESTOPEDIA.COM WWW.ECONOMICTIMES.COM
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7.2 QUESTIONAIRE
Dear Respondents, I, Kavita Iyer a management student of Tolani Institute of Management Studies, Adipur have been assigned to conduct a survey on NEED OF FINANCIAL ADVISORS FOR MUTUAL FUND INVESTORS. Please oblige to spend few minutes to answer the following questions. This study is for academic purpose only. This data will be used for interpretation and analysis and no information shall be disclosed anywhere. SECTION-1 Pl tick () 1. Have you ever invested in Mutual Fund? Yes [ ] No [ ]
2. If not invested in Mutual Fund then why? Lack of knowledge about Mutual funds Insufficient funds to invest Not advised by financial advisors Complicated product features Other attractive avenues 3. Do you prefer investments in other products with flexibility of liquidity compared to mutual funds? (E.g.: equity, gold/silver, ULIP etc) Yes [ ] No [ ]
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Need of financial advisors for mutual fund investors 4. Have you compared ROC (Return on capital) compared to other products over mutual funds? 1. Always 2.Frequently 3.Seldom 4.Occasionally 5. Never
Yes [ ]
No [ ]
6. Have you ever been betrayed or miss sold by your financial advisor? Yes [ ] No [ ]
8. At which stage did you prefer to seek financial advisors? Less than 25 years 25-34 years 35-44 years 45-54 years 54 years and above
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SECTION-2 1. Personal Details: (a). Name: (c). Age: Pl tick () for below questions: Below 20 years 21-30 years 31-40 years 41 years and above Under graduate Graduate Post graduate (f). Occupation. Service Profession Business Student Others (b) Phone: (d) E-mail id:
(e). Qualification:-
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