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Roadblocks in financial advisory
Summer Training Project Report submitted in partial fulfilment of the
requirements for the
Diploma of
Post Graduate Diploma in Management
at
Jaipuria Institute of Management, Lucknow
By
Ved Prakash, Jl12PGDM174
PROJECT GUIDE: PROF. SHALINI SINGH
i
EXECUTIVE SUMMARY
The main objective of the study is to find out why people are not interested to take
advice by financial Planner .What are the factors influencing the decision making
process of the investors in Lucknow and their perspective about the different kinds of
investments. The study also attempts to understand those products which the investors
believe were pushed to them and were not beneficial to them. For this the method chosen
was qualitative research by in-depth interviews. It was verified by our survey that most of
the investors have been cheated by the agents in the past as in most of the cases agents
used to suggest the product which carried high commission. Clearly in this situation there
is need of an investment advisor who can give an unbiased advice to the investor.
The study tries to find out the reasons of unwillingness to hire an investment advisor by
an investor even though investors are in constant need of an advisor. Many educated
professionals were interviewed personally & were asked to fill the questionnaire
prepared. Need for developing brand image & trust among investors are identified as the
medium to eradicate roadblocks. One of main recommendation for breaking the
roadblocks is to gain the trust of prospective investors by personally meeting them and
increase the client base by providing better and updated service to the present client
ii
ACKNOWLEDGEMENT
I am deeply indebted to Mr SharadBindal, Chief marketing officer, BFC Capital,
Lucknow, under whose guidance the present study was conducted. He has been giving
valuable suggestions, generous help and corrections during all the phases of the project
and without the help from him;thiscould not have been completed successfully.
I owe a debt of gratitude to Mr AnuragAgarwal, Head Strategic BusinessBFC Capital,
Lucknow, for his exceptionally coherent guidance and favourable concern at every stage
of the project. He has always been a true support in all the phases of the project.
I would also like to extend my indebtedness to Mr KhushalKohli, Wealth Manager, BFC
Capital Lucknow, for his guidance and support from time to time.
I would like to thank all the respondents, officers and HRs from various corporates, PSUs
& government offices we visited for giving their time and invaluable responses in making
my project report.
I am thankful to Officers and Staff at BFC Capital who have shown tremendous
cooperation and support throughout the course of study.
I also thankful to Faculty guide Prof. Shalini Singh faculty, Jaipuria institute of
management, lucknow for their continuous support & cooperation throughout my project
without which the present work would not have been possible.
iii
Contents
iv
CHAPTER-1..................................................................................................................................1
1. 1. INTRODUCTION..........................................................................................................1
1.1.1. Our team.................................................................................................................2
1. 2. BUSINESS PHILOSOPHY............................................................................................2
1.2.1 Mission...................................................................................................................2
1.2.2 Vision......................................................................................................................2
1.2.3 Quality policy.........................................................................................................2
1. 3. MANAGEMENT............................................................................................................2
1. 4. PRODUCT OFFERED...................................................................................................3
1. 4.1. Mutual Funds:.........................................................................................................3
1. 4.2. Insurance:....................................................................................................................6
1. 4.2..1. Insurance is for the earning member of the family..............................................6
1. 4.2..2. Your life insurance needs....................................................................................6
1. 4.3. Fixed Deposit..........................................................................................................7
1. 4.4. POST OFFICE........................................................................................................8
1. 4.5. BOND.....................................................................................................................9
1. 4.6. PMS.......................................................................................................................10
1. 5. SCOPE OF SERVICES................................................................................................10
1.5 1. Services related to financial planning and advisory..............................................10
1.5 2. Services related to execution.................................................................................11
1. 6. FINANCIAL ADVISORY MODEL.......................................................................................11
1.6 1. Advisory model with fixed yearly charges............................................................11
1.6 2. Advisor on demand (pay when you want advice)..................................................12
1.6 3. Investment Advisor on One-time payment basis...................................................12
1.6 4. Fees charged as a percentage of Portfolio Worth..................................................12
1. 7. FUNDAMENTAL CONFLICTS WITH TRADITIONAL ADVISORY MODEL.......12
1. 8. BENEFITS OF ASSOCIATING WITH BFC CAPITAL PVT. LTD...........................14
1. 9. WORKING PROCESS.................................................................................................14
1. 10. PROBLEM DEFINITION........................................................................................16
CHAPTER-2................................................................................................................................17
2. 1. RESEARCH METHODOLOGY..................................................................................17
2. 1.1. Management problems..........................................................................................17
v
2. 1.2. Research Design:..................................................................................................17
2. 1.3. Sampling:..............................................................................................................18
CHAPTER -3...............................................................................................................................19
3..1. Data Collection and Analysis........................................................................................19
CHAPTER- 4................................................................................................................................21
4..1. FINDING......................................................................................................................21
CHAPTER-5................................................................................................................................22
5.1. RECOMMENDATION................................................................................................22
LIST OF REFERENCES AND APPENDICES...........................................................................23
REFRENCES...........................................................................................................................23
BOOKS:...............................................................................................................................23
INTERNET:.........................................................................................................................23
ANNEXURE - I...........................................................................................................................24
ANNEXURE-II............................................................................................................................26
Figure 1: B FC CAPITAL LOGO..................................................................................................7
Table 1:BFC Capital Scheme For Membership(Solitaire)............................................................15Table 2:BFC Capital Scheme For Membership(Platinum).............................................................15
vi
CHAPTER-1
1. 1. INTRODUCTION
Figure 1: BFC CAPITAL LOGO
BFC Capital is a company promoted by financial professionals with a vision to place the
organization among the best Financial Service Providers. Our main endeavour is to provide
solutions to our clients, after assessing the requirements of the client, by understanding his
profile for risk, return, liquidity & tax liability. Our orientation is towards enhancing our
customer service standards at all times.
BFC Capital is one of the leading players in the Indian financial services space. We offer advice
and execution platform for the entire range of financial services covering products ranging from
Equities and derivatives, Commodities, Wealth management, Asset management, Insurance,
Fixed deposits, Loans, Investment Banking, GOI, Bonds and other small savings instruments.
BFC Capital is committed to its independence and works exclusively for the benefit of its clients
without any conflicting interests. It provides Client centric services with full transparency and
dedication.
BFC Capital founded as treasury management in 2004. BFC Capital entered in Financial
Advisory in 2009. BFC Capital follow unique business model to serve satisfactory financial
services to the Customer. BFC Capital Pvt. ltd. capital stands at Rs. 390 crores (as of March 31,
2013).BFC Capital sharing12% of the total UP MF market.
1
Today, BFC Capital are one of the leading financial services institutions with operations in
Lucknow. We also have one of the most recognized and trusted brand symbols: We strive to
create long-term value for our member through strong business fundamentals. We are committed
to keeping our promises and to doing business the right way.
1.1.1. Our team
Team BFC Capital comprises of top investment professionals with outstanding academic and
professional backgrounds. Each Employee has extensive experience at leading financial
institutions and maintains a specific expertise in trading, portfolio management, risk analysis,
compliances and taxes. Consequently, BFC Capital is able to provide its clients with
comprehensive and specialized investment solutions.
1. 2. BUSINESS PHILOSOPHY
1.2.1 Mission
To provide end to end solutions to our members exactly matching their requirements and thereby
delivering best possible risk adjusted returns to them.
1.2.2 Vision
To place the organization amongst the most ethical brands across the globe and to be known as
the most trustworthy organization in the finance industry.
1.2.3 Quality policy
BFC Capital, are committed to provide a process and system driven atmosphere and culture to
our members by adjusting and adapting to their changing needs and market dynamics.
1. 3. MANAGEMENT
• Sunil Gupta: A Financial professional with over nine years of experience in Finance
Industry. He is Chief Executive Officer of the company. He takes care of third party
relationships. He also takes care of EPF/ Gratuity trusts, Banks and Corporate segment.
2
• Sharad Bindal: A Financial professional with over ten years of expertise in Distribution
of Financial Products, working as Chief Marketing Officer of the company. Mr. Bindal
takes care of all matters related with sales & marketing strategies. He takes care of trusts,
Corporate, HNI & NRI segment.
• Alok Bindal: Mr. Alok Bindal is having vast experience in the field of finance &
accounts. He is Director of the company.
1. 4. PRODUCT OFFERED
1. 4.1. Mutual Funds:
A mutual fund is a fund that is created when a large number of investors put in their money
collectively, and is managed by professionally qualified people, called Fund Manager, with
experience in investing in different asset class viz. shares, bonds, money market instruments, and
other asset class like Gold and real estate.
Mutual Funds are compulsorily registered with the Securities and Exchange Board of India
(SEBI) , which acts as regulator of Mutual funds for the protection of Investors.
When a person invests in a particular scheme of mutual fund, the fund house allots what are
called UNITS to the investors, at a price that is fixed through a process approved by SEBI. This
price is based on the “net asset value”, in simple terms which is the total value of investment in a
scheme divided by the total number of units issued to investors in the said scheme. Normally,
NAV’s are computed and published on a daily basis.
1. 4.1.1. Types of Mutual Funds
1. Equity Funds
Equity funds aim to provide capital growth by investing in the shares of individual companies.
Any dividends received by the fund can be reinvested by the fund manager to provide further
growth or paid to investors. Both risk and returns are high but equity funds could be a good
investment if you have a long-term perspective and can stay invested for at least five years.
3
2. Debt or Income Funds
The aim of debt or income funds is to provide you with a steady income. These funds generally
invest in securities such as bonds, corporate debentures, government securities (gilts) and money
market instruments. Opportunities for capital appreciation are limited.
3. Balanced Funds
The aim of balanced funds is to provide both growth and regular income as such schemes invest
both in equities and fixed income securities in the proportion indicated in their offer documents.
The investor may wish to balance his risk between various sectors such as asset size, income or
growth. Therefore the fund is a balance between various attributes desired, however, NAVs of
such funds are likely to be less volatile compared to pure equity funds
4. Liquid Funds
Liquid funds are a safe place to park your money; it is an appealing alternative to bank deposits
because they aim to provide liquidity, capital preservation and slightly higher interest rates than
bank accounts. Returns on these funds fluctuate much less compared to other funds as the fund
manager invests in 'cash' assets such as treasury bills, certificates of deposit and commercial
paper.
5. Index Funds
Index funds are passively managed funds i.e. the fund manager attempts to mirror the
performance of a benchmark index like the BSE Sensex or the S&P CNX Nifty, by being
invested in the same stocks. NAVs of such schemes would rise or fall in accordance with the rise
or fall in the index.
1. 4.1.2. Benefits of Investing in Mutual Funds
Mutual funds have gained in popularity with the investing public especially in the last two
decades following are some of the primary benefits.
4
Professional Financial Experts
Every Mutual Fund scheme has a well-defined objective and behind every scheme, there is a
dedicated team of financial experts working in tandem with specialized investment research
team. These experts diligently and judiciously study companies, their products and performance,
and after thorough analysis, they decide on the best investment option most aptly suited to
achieve the scheme’s objective as well as investor’s financial goals.
Diversifying Risk
It plays a very big part in the success of any portfolio. Mutual funds invest in a broad range of
securities. This limits investment risk by reducing the effect of a possible decline in the value of
any one security. Mutual fund unit-holders can benefit from diversification techniques usually
available only to investors wealthy enough to buy significant positions in a wide variety of
securities.
Low Cost
Mutual Funds generally provide an opportunity to invest with fewer funds as compared to other
avenues in the capital market. You can invest in a mutual fund with as little as Rs. 5,000 and also
have the option of investing a little of Rs.500 every month in a SIP or Systematic Investment
Plan.
Liquidity
You can encase your money from a mutual fund on immediate basis when compared with other
forms of savings like the public provident fund or National Savings Scheme. You can withdraw
or redeem money at the Net Asset Value related prices in the open-end schemes. In closed-end
schemes, lock in period is mentioned; investor cannot redeem his investment until that period.
Variety of Investment
5
There is no shortage of variety when investing in mutual funds. There are funds that focus on
blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds and with due assistance
from a financial expert, the investor can choose a scheme that aptly fits his requirements, and
helps him achieve maximum profitability
1. 4.2. Insurance:
Insurance is a highly misunderstood product and it's often bought and sold for the wrong reasons.
At the same time it's a very important part of your life and you must know certain ground rules
for making the right decisions in the New Year. Many of us consider insurance just another
investment for tax saving. Our day-to-day life is full of unpredictable risks for example loss of
life, loss of income, critical illness, disability etc. Insurance planning means figuring out
adequate cover against "insurable risks" and getting the maximum out of the premium you pay.
Tax exemption is just another aspect of it.
Having the right insurance cover gives you peace of mind as it provides financial support in case
of contingencies
1. 4.2..1. Insurance is for the earning member of the family
Life insurance is a replacement for your income. When your income ceases or falls insufficient
either due to death, illness, retirement or a major goal such as children's education or marriage,
insurance fills in the gap. On your death, the money received from term insurance policies will
provide a corpus with which the family can pay off debts, convert dreams to reality and still lead
a comfortable life. You must have seen cases of non-working mothers or non-earning family
members getting insured. It goes against the fundamental principle of insurance.
Therefore it's important that the breadwinner covers the risks to his life and income, so that his
family's quality of life is not compromised after he is gone.
1. 4.2..2. Your life insurance needs
Calculating life insurance needs is not a simple exercise but you must evaluate your current and required cover in 2010 and take corrective action. Remember that each of us has our own lifestyle, goals, aspirations and dependents which may be completely different from the life
6
situation for your friend or colleague. So what works for someone else may not work for you. There are essentially three ways to calculate your insurance needs
a) Expense protection
Calculates the corpus required to take care of the family's future expenses and goals. Inflation diminishes the value of money and hence expenses need to be adjusted to inflation for calculation of protection required.
b) Human life value
It is the economic value of an individual; the present value of all his or her future income. Setting aside the part of income one spends on oneself, the protection required through human life value calculates today's value of one's income for the years till his or her retirement.
c) Needs analysis
In this method you calculate your needs by considering each of your dependents and what financial milestones you want to achieve for them. The needs may range from child education, marriage to repayment of loans. Next you assess your current assets and investments and shortfall due to loss of life. This gap in income can be filled up by insurance.
1. 4.3. Fixed Deposit
FDs are one of the oldest and most common methods of investing. When it comes to assured
returns, choosing the right type of savings scheme makes all the difference. Fixed Deposits let
you make the most of value-added benefits as you create wealth at low risk.
Fixed Deposits in companies that earn a fixed rate of return over a period of time are called
Company Fixed Deposits.
1. 4.3..1. Types of Companies offering Fixed Deposits
Financial Institutions
Non-Banking Finance Companies (NBFCs).
Manufacturing Companies
Housing Finance Companies
7
Government Companies
You can also go for Fixed Deposits with Banks.
1. 4.3..2. Features and Benefits
Company Fixed Deposits offer comparatively higher returns than banks.
Choose the best tenure for you from a wide range as per your convenience.
You can choose how frequently you want to receive your interest payments:
1. Maturity
2. Yearly
3. Half-yearly
4. Quarterly
5. Monthly
Company Fixed Deposits are nontransferable that means there is no fear of FD
receipt being stolen. In case it falls into wrong hands, it cannot be misused.
Premature encashment of deposit is available any time subject to payment of
prescribed penalty
Diversify Risk- The deposits should be spread over a large number of
companies engaged in different industries. This way, you'll be able to diversify
your risk among various industries/companies.
Wide Choices- Many companies operating in the Company Deposit market.
This will help you decide whether to renew or reshuffle the deposit.
Attractive rates as applicable from time to time.
1. 4.4. POST OFFICE
Trapping rural savings has been a pressing need since time immemorial. The authorites have
taken undue advantage of the existence of post office even in remote nooks and corners of the
country. They are forced to undertake normal banking activities liken SB, TD, RD, MIS.
The systems and procedures handling these schemes are clumy, laborious and outdated. The
leathargy of bureaucraft in taking remedical action results in frittering away of scarce and
8
valuable resources. The rate of interest were reduced considerably and continuously from 1.1.99
to 1.3.2003. However these schemes offer better return most other avenues.
The salient features of the current schemes are given below:
National Savings Certificates (NSC)
Public Provident Fund (PPF)
Post Office Monthly Income Scheme
Senior Citizen Saving Scheme (SCSS)
1. 4.5. BOND
In finance, a Bond is a debt security, in which the authorized issuer owes the holders a debt and,
depending on the terms of the bond, is obliged to pay interest (the coupon) to use and/or to repay
the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed
money with interest at fixed intervals.
Thus a bond is like a loan; the holder of the bond is the lender (creditor), the issuer of the bond is
the borrower (debtor), and the coupon is the interest. Bonds provide the borrower with external
funds to finance long-term investments, or in the case of government bonds, to finance current
expenditure.
The Bond market in India can be divided into two categories, firstly the Govt. bonds i.e.
securities issued by central and state government (therefore loans being taken by the Central and
state governments), Financial Institution Bonds, PSU (Public sector Undertaking) bonds, and
Corporate bonds/Debentures.
The most compelling reason for investing in bonds are fixed interests and lesser risk associated
with them. While the credit risk is nil for Government bonds, in case of other debt instruments
issued by corporate, financial Institutions and PSU’s, certain element of risk is associated with
them and therefore they are rated by the Credit rating agencies. Depending on the rating, which
is a comment on the risk return profile of the instrument, the interest in the instrument varies.
9
1. 4.6. PMS
BFC Capital offer investment management and advisory services to individuals who not only
understand the long-term potential of equities as an asset class, but also understand the
associated risks. BFC capital also have an access to a number of Third Party PMS by various
Fund Houses and NBFCs with research desk that actively researches and tracks their
performance.
The service provides professional management of equity portfolios and Mutual Funds
with the objective of delivering consistent long-term performance while controlling risk.
BFC Capital recognize that portfolios need to be constantly monitored and periodic
changes made to optimize the results.
A research team is responsible for establishing our investment strategy and providing us
real time information to support it.
Client servicing and customization is the key. BFC Capital takes care of all the
administrative aspects of a particular portfolio with a monthly reporting on the overall
status of the portfolio and performance.
1. 5. SCOPE OF SERVICES
1.5 1. Services related to financial planning and advisory
Collection of Key Documents
Detailed interaction to Identify Needs
Detailed Analysis
Comprehensive Financial Plan
Identify Realistic Financial Goals
True Picture Current Portfolio
Analyse Securities, Bonds, Schemes, etc.
Preparing Working Papers (exclusive feature of BFC Capital)
10
Financial Planning Report
Periodic Research Report
Organize Educational Campaigns
1.5 2. Services related to execution
Completing Legal & Operational Formalities
Important Alerts & Reminders
Timely Submission & acknowledgement of all docs.
Online facilities, door step services
Dedicated Wealth Manager
Access to Top Management & easy grievance redressed
Predefined frequency of portfolio review
Timely Portfolio booking & Portfolio Rebalancing
1. 6. FINANCIAL ADVISORY MODEL
1.6 1. Advisory model with fixed yearly charges
In this model, the advisor will be available for you throughout the year, whether you need
him/her or not. It’s kind of yearly contract where he advises you on anything you ask him on
your financial life. If in some year you ask more, that’s fine, you pay same fixed cost and in
some years if you don’t “consume” his services much, still you pay him the same money. With
this model, you are clear about the fixed cost you will incur on your financial advisor and even
advisor knows that his cash flows are fixed. This model is one of the best advisory models, but
sadly this model is not very popular in India particularly tier2 and tier3 cities.
11
1.6 2. Advisor on demand (pay when you want advice)
This model is very much like the above one, but in this advisor is paid “on the go”. So
whenever client takes the advice or use the time of the advisor for asking anything, advisor is
paid for that much time, nothing less and nothing more. This model is not that much
widespread, but some courageous advisors take this route. So if a client takes 30 hours of the
advisor in some year then for those 30 hours fee is paid. And if in some year only 5 hours is
taken then just fee is paid for 5 hours only. For advisor it makes his life easy as he spends his
time only for what he is paid for and is really committed to produce the value for that time.
Indian is not comfortable with this model.
1.6 3. Investment Advisor on One-time payment basis
A lot of advisor works on one time basis where advisor works with the client till the time
client get what he/she need. Advisors really try to make sure that there are yearly
relationships, but many time clients don’t come back after a year as they feel it’s a waste
doing it again and again. But some advisors just run on this model.
1.6 4. Fees charged as a percentage of Portfolio Worth
Call it wealth management or Financial Planning as well as Wealth Management, in this
model a fixed percentage of client’s net-worth is charged. The yearly fixed fees can be
present or missing, but a percentage of assets under management (total worth) are taken by
the advisor/planner/wealth-manager. A lot of people feel comfortable with this model as this
is linked to their net worth. If there is no increase in their net worth, then no fees to be paid,
but if the net worth increases, you give away a part of it in fees.
1. 7. FUNDAMENTAL CONFLICTS WITH TRADITIONAL ADVISORY MODEL
Traditionally, advisors charge their fees as percentage of portfolio managed. The dominant
investing advisory model, based on assets under management (AUM), is bad for many
investors. It exposes them to unnecessary risks and comes at too high a cost. Both factors can
be mitigated through good financial advice. Therein lies the problem: many people can’t
afford that advice. People are often aware that their nest eggs are subject to financial risks,
but most are unaware that seeking professional help means facing advisor risk – the risk of
12
financial loss or emotional damage due to advisors’ poor decisions and (in)actions. Advisor
risk arises for a variety of reasons which include: ineptitude, dishonesty, and conflict.
Any discussion of advisor risk must examine the fundamental conflicts that currently exist
between advisors and their clients. The first fundamental conflict is that clients yearn for the
peace of mind that comes from knowing an expert is available to ease jangled nerves.
Advisors much prefer to spend their time soliciting new clients or working on their analyses
rather than functioning as therapists.
The cruel irony of the existing advisory model is that the amount of attention paid to client’s
emotional needs is proportional to client wealth. Thus, the wealthiest clients get all the
attention, while those who have the least, and who arguably most desperately need good
investing advice, get hardly any attention at all.
Typical AUM advisory fees range from 0.5% to 2% annually. In his bestselling book, Stocks
for the Long Run, Wharton finance professor Jeremy Siegel provides some insight using basic
assumptions and shows that a one per cent annual fee assessed over 30 years can reduce nest
egg value by a third. A 3% fee can reduce the accumulated value by about 50%!.
Transparency is another fundamental conflict. In general, complexity and opacity favour
advisors. Lack of transparency allows some advisors to make misleading performance claims
and to confuse investors. Advisors may benefit when investors are confused because they can
sell them more complex and expensive services.
The final conflict has to do with education. A more educated or knowledgeable investor is in
position to make better decisions. Better educated investors know how to vote with their
wallets and ballots to support honest services and curb irresponsible industry practices.
Advisors are well aware that educated investors demand better risk-adjusted performance,
understand the importance of minimizing fees, seek greater transparency, and are less likely
to give up control of their assets. Some advisors fear that investor education has the potential
to seriously undermine their role. For this reason, the “educational” experiences they offer
may be restricted to thinly veiled marketing efforts.
13
1. 8. BENEFITS OF ASSOCIATING WITH BFC CAPITAL PVT. LTD.
Advisory Model followed by BFC Capital overcomes all the fundamental limitations
mentioned above as they curb Advisor Risk,provide Client focus & satisfaction, Feesare
charged annually and the amount is minimal `5000 &`10000 only, transparency in each &
every transaction, online facility, and last but not the least imparting education to investors.
Twice or thrice a month BFC Capital Pvt Ltd conducts an program as part of their Corporate
Social Responsibility named “Quality Circle Program” to impart knowledge to existing
clients as well as to a common investor from Lucknow city. The fee structure is designed to
benefit the small investor, which are as follows.
a) Solitaire: 10,000 per annum
Table 1:BFC Capital Scheme For Membership(Solitaire)
Monthly Income > 1,00,000, or
Portfolio to be managed by BFC > 10,00,000, or
Portfolio to be managed for All family members
b) Platinum: 5,000 per annum
Table 2:BFC Capital Scheme For Membership(Platinum)
Monthly Income < 1,00,000, and
Portfolio to be managed by BFC < 10,00,000, and
Portfolio to be managed for Spouse & dependants
14
1. 9. WORKING PROCESS
Financial planning is the process of successfully meeting financial needs of life through the
proper management of finances. It is your roadmap to Financial Health, & Sustainable Wealth
creation.
There are six stages to the process of doing a financial plan
First step: The First Step of financial planning is to establish the professional relationship. BFC
Capital Wealth Manager explains all the detail about Company and related to membership.
Wealth Manager.
Second step: The second step of the financial planning process is gathering data. Wealth
Manager Using data survey form or questionnaire collects all the relevant information that is
required for financial planning. In this meeting he is trying to determine and discussed client
goal, need and priorities. BFC Capital wealth Manager Focus on Financial Needs Assessment
Form, together with the collection of documents as required by legislation, a general
questionnaire and a determination of your investment profile all form part of this section.
Third step: The third Step is processing and analyzing the information gathered from Client.
BFC Capital will undertake a review of the following:
Client’s financial position
Current cash flow statement
A review of existing insurance policies
Analyze the information to determine the strengths and weaknesses in the client’s
Finances evaluate our client’s objectives in view of available resources,
Economic conditions as they relate to future resources.
Analysis and evaluation of the client’s financial status. Here we often use sophisticated computer
programmes. The comprehensiveness of the analysis depends on the type of analysis and
services that you require.
Fourth step: Development and submission of a Financial Plan with recommendations and
alternative proposals, where necessary. A personal report and plan is compiled following the
analysis and information provided by you. Proposals will be made as well as explanations of
15
the implications and costs of implementation. Where necessary, alternative proposals will be
made. All this is done to enable you to make an informed decision. After discussion, or at the
client’s request, the plan can be adapted.
Fifth step: A fifth step in the financial planning process is implementing the plan. Client may
need help in obtaining products and in pursuing strategies identified in step four. The client and
adviser agree about when and how the plan will be implemented and what recommendations
should enjoy the highest priority. The adviser helps with the implementation and can serve as
coordinator of the process and as the link with other professional people like attorneys and
auditors and products.
Final step :In final step is monitoring the plan. Periodically wealth manager should review plan
to evaluate the significance of any changes in tax, economic conditions, and available investment
techniques. If client choose to use company investment advisory services client will be
encouraged to have quarterly meetings related to assets under management.
1. 10. PROBLEM DEFINITION: BFC Capital follow “Financial Advisory” model which is
overcomes all the fundamental limitations that are mentioned in topic 1.6 & 1.7 and charged
annually amount `5000 &`10000 only, transparency in each & every transaction, online
facility etc.
BFC conducted a two survey in the city Lucknow .Finding of those survey are following-
1) People prefer advisory over selling.
2) Majority of the investors were cheated by hiding the important terms and agreements
regarding its features and complexity of offer documents.
3) More than 35% of the people were misled even after being aware of the regulatory
changes.
4) Lack of knowledge and blind faith on agent.
These finding shows that the investor are facing problem, loses money. After these
problem’s why investor not interested in hiring financial advisor.
To study why people are not interested in hiring financial planner. What are factors that are
stop the to become client of BFC Capital. To get answer of these question BFC Capital
Allotted me project topic “Roadblocks in Financial advisory”
16
CHAPTER-2
2. 1. RESEARCH METHODOLOGY
Research Methodology is a way to find out the result of a given problem on a specific matter or
problem that is also referred as research problem. Different sources use different type of methods
for solving the problem.
Research methodology is the arrangement of condition for collection and analysis of data in a
manner that aims to combine the relevance to the research purpose with economy in procedure.
Research is conceptual structure within which research is conducted. It is way to systematically
study and solve the research problems.
2. 1.1. Management problems
Why people are not interested to hire financial Planner .what reasons that are stop them to hire
financial planner for financial planning.
Research problems
- To know awareness & understanding of Advisory model in the public (Lucknow)
- To know reasons for reluctance from middle class investor towards financial
planning.
2. 1.2. Research Design:
A Research design is a plan that shows how a researcher intends to study an empirical question.
Choice of research design depends on a number of factors. A good research design will ensure
that the marketing research project is conducted effectively and efficiently.
After discussing with some investor and wealth manager, why people not interested in hiring
financial planner, what are the factors that are stop them to become customer of BFC Capital Pvt.
Ltd. Descriptive research is used to answer descriptive research questions: What is happening?
How is something happening? Why is something happening?.
17
The study involves finding out factors why people not interest in taking financial advisory .The
research Design descriptive in nature.
2. 1.3. Sampling:
It is important to select a sample purposely, focusing on the group we want to study. Participants
must be chosen for the specific qualities that they bring to the study. This is often called
“purposive strategy”-"intentionally sampling research participants for the particular perspectives
they offer. A carefully chosen sample allows exploring different experiences among various
individuals or groups. Selection decisions must consider the researcher’s ability to access
research participants.
Quota Sampling – The target population for BFC Capital Pvt Ltd in retail are the individuals
with family income more than `60,000 in Lucknow city having urban population of 3037718
(source: census 2011).
In this Study quota sampling is used. Sampling technique that do not use chance selection
procedures and rather they rely on the personal judgment of the researcher. Quota sampling
requires that representative individuals are chosen out of a specific subgroup. In this study
project study I have collected data whose family income is more than 60,000 in lucknow
Employees from various corporate offices & PSUs in Lucknow were contacted including Sate
Government Corporation Employee , Bank Professionals, School or College teacher ,Doctors,
Vodafone, Hindustan Times , DainikJagran, Airtel, Idea Cellular, TATA Docomo, TATA
Motors , TATA Motors (Passenger Vehicle division), NBRI (National Botanical Research
Institute), Reliance Communication, NTPC, TVS Motors, Tata Sky, Maruti Suzuki, TVS
Motors, TCS, Honda Motors, DainikBhaskar, BHEL and Central Pollution Control Board
(CPCB). On basis of secondary data made available to us by BFC Capital, Sample size of 150
individuals was taken.
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CHAPTER -3
3..1. Data Collection and Analysis
For this study in BFC capital I directly met the clients who were not interested in financial
planning so that ask the reasons and collect the response from them. When get detail why people
are not interested to hire financial planner. Explain the benefit of financial planning accordingly
so that they are able to understand.
The stake holders identified to be involved with investment industry
Businessmen
Bureaucrats
Professionals like Doctors, architects, engineers
Persons involved in administration/top management of government and private
institutions
Information needed from each group of stake holders identified to be involved with investment
industry is identified.
Inferences:
(Annexure II)
Although 73% of the population mentioned that they are satisfied with their current
financial management, 67% admitted that they are a victim of misselling of financial
instruments.
While 6% of investors are unaware of any misselling or malpractices done to them by
their advisor or agents.
87% of the investors are of the thought that they understand the difference between
selling & advisory, then also only 60% would prefer advisory over selling.
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Even after understanding the concept of Advisory Model, 27% of investors would prefer
pure selling over Advisory.
33% of well-educated investors are of the thought that they could beat inflation by
investing in traditional investments
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CHAPTER- 4
4..1. FINDING
After taking out the inferences based on the findings, some broad conclusions can be drawn.
These conclusions basically indicate the thought process of educated earning professionals.
The broad conclusions are:
Brand image is one of the vital factors for the success of this model. Saving of an individual is
very important for the overall well-being, so an individual wants to go for a known brand.
In many persons’ opinion, an advisor whom they have interacted before will get high
preference. When an advisor is known to an investor then chances of getting the service
from that advisor increases even if that advisor does not carry a brand name.
Educated professional are more dependent on themselves for managing their money. Most
of them said that they do not take the advice of banker and agents. So it can be said that in
today’s scenario educated professional do not fall into the trap of agents.
Bad experience in the past has come out as one of the major obstacle in the advisory model. In
the interviewee opinion those who have bad experience in the past will try to play safe. So we
can conclude that it will take some time when people will get over of the past malpractices.
Some other facts which came out during the interview are:
Generally investors belonging to middle and upper middle class play safe. Most of the
investor is inclined for a safe investment like fixed deposit and PPF/PF since investing in
fixed deposit and provident does not require financial skill.
If there is Change of need in a person’s life they will be more in need of a financial
advisor. In the current scenario middle class family and upper middle class family
requirement continuously changes so they may need a financial advisor.
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CHAPTER-5
5.1. RECOMMENDATION
The following suggestions are strongly recommended
Transparency and compliance: Focus on transparency and compliance, while targeting
customers with attractive, segment focused products.
Online platform: Use online platform so that people register with BFC Capital from anywhere
and become a client and use service online from anywhere at any point of time.
Online Marketing: In Current scenario working age population of India i.e. 63.9% (age group
of 15-64 source: World bank) and increased reach & usage of Information Technology company
should focus on various online marketing techniques it might be through social networking sites
like Facebook, Google Plus ,Forum ,Twitter or by uploading videos on YouTube, informational
blogs, Email Marketing (by forwarding informational news or know how to recipients by e-
mail).The Company could promote its website as a query solving portal or conduct quizzes,
events or online discussion.
Develop Brand Image: Investors connect brand name with credibility, differentiation, visibility,
stability & trust that they can impart on their wealth managers. Most of the investors want to go
with a well-known brand. For attaining brand identity, company should work on imparting high
quality service to the existing client.
Increase Networking: Currently, company is relying heavily on word-of-mouth from existing
satisfied clients. For mass penetration company should come up with marketing strategies by
segmenting and targeting the client base.
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LIST OF REFERENCES AND APPENDICES
REFRENCES
BOOKS:
o Marketing Management, 14th edition, Philip Kotler, Kevin Lane Kotler, Published by
Prentice Hall, USA
o Barnewall M (1987), “Psychological Characteristics of the Individual Investor”, in Willia
mDroms, ed., Asset Allocation for the Individual Investor, Charlottsville.o Hoffmann, Arvind, Heiner Franken, and Thijs Broekhuizen. "Customer intention to adopt
a fee-based advisory model." An empirical study in retail banking, 2011.o BarnewallMacGruder M (1988), “Examining the Psychological Traits of Passive and
Active Investors”, Journal of Financial Planning.o Harris Interactive Inc., Public Relation research. “The 2012 Consumer Financial Literacy
Survey”, National Foundation for Credit Counseling.o NarangSomil (2007) “Investigating the Factors Affecting the investment Decision in
Residential Development”, The University of Nottingham.o Inderst, R. and M. Ottaviani (2009). Misselling through agents. The American Economic
Review 99 (3), 883 – 908.
INTERNET:
o www.bfccapital.com
o http://en.wikipedia.org/wiki/Financial_adviser
o http://www.moneycontrol.com/personal-finance/planfinance/
o http://www.fpsbindia.org/
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ANNEXURE - I
Assessment Form
Name ………………………………….. Age ……………………………
Your annual household family income
Rs 0- 2 lakh Rs 2- 5 lakh Rs 5- 10 lakh More than 10 lakh
1) Are you really satisfied with the current status of your financial management? YES NO I am not sure
2) Have you ever been the victim of misselling of financial products? YES NO I don’t know
3) Do you understand the concept of advisory model? YES NO
4) If the answer to 3. is NO, then are you interested in understanding the financial advisory model?
YES NO
5) Do you understand the difference between selling and advisory? YES NO
6) Do you prefer advisory model over pure selling of financial products? YES NO
7) Have you attended the Quality Circle Program conducted by BFC Capital? YES NO
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8) If the answer to 6. is YES, then did you like the session? YES NO
9) If the answer to 8. is NO, please specify any particular reason for it
………………………………………………………………………………………………………………………
10) What is/are the reason(s) for not getting associated with BFC Capital (You can tick more than one reason)?
Do not have enough savings Cannot trust BFC Already happy with the way I manage it I do not want to pay membership fees I want very quick returns Not interested in investing anywhere Others
Please specify
11) Do you think that you can create wealth and beat inflation by doing fixed deposits and traditional savings only?
YES NO I don’t know
12) Would you be willing to take services from BFC, if it provides honorary membership (Zero fees) to you for a year?
YES NO
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ANNEXURE-II
Yes; Series1; 11; 73%
No; Series1; 2; 13%
Not Sure; Series1; 2;
13%
Are you really Satisfied with the current status of your financial management?
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Yes; Series1; 10; 67%
No; Series1; 4; 27%
I Don't Know; Series1; 1; 7%
Have you ever been the victim of misselling of financial products?
Yes; Series1; 10; 67%
No; Series1; 5; 33%
Do you understand the concept of Advisory Model?
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Yes; Series1; 13; 87%
No; Series1; 2; 13%
Do you understand the difference between selling and advisory?
Yes; Series1; 9; 60%
No; Series1; 4; 27%
Can't Say;
Series1; 2; 13%
Do you prefer advisory model over pure selling of financial products?
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Yes; Series1; 3; 20%
No; Series1; 10; 67%
I don't know;
Series1; 2; 13%
Do you think that you can create wealth and beat inflation by doing fixed deposits
and traditional savings only?
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