wealth management at hsbc internship report
TRANSCRIPT
Summer Internship Project Report
On
“CUSTOMER EXPERIENCE AND WEALTH PRODUCT AWARENESS (WEALTH MANAGEMENT) AT HSBC LTD”
By
V SIVARAMA RAJU VEGESNA A0101910099
MBA (G) Class of 2012
Under the Supervision of
Mr. T.V.RAMAN
Assistant Professor Department of Finance
In Partial Fulfilment of the Requirements for the Degree of
Master of Business Administration – MBA(G)
At AMITY BUSINESS SCHOOL
AMITY UNIVERSITY UTTAR PRADESH SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA
2011
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AMITY BUSINESS SCHOOL
CUSTOMER EXPERIENCE AND WEALTH PRODUCT AWARENESS (WEALTH MANAGEMENT) AT HSBC LTD
DECLARATION I declare
(a) That the work presented for assessment in this Summer Internship Report is
my own, that it has not previously been presented for another assessment and
that my debts (for words, data, arguments and ideas) have been appropriately
acknowledged.
(b) That the work conforms to the guidelines for presentation and style set out in
the relevant documentation.
Date: V SIVARAMA RAJU VEGESNA
Place: Noida Enroll. No: A0101910099
(MBA Class of 2012)
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AMITY UNIVERSITY UTTAR PRADESH
AMITY BUSINESS SCHOOL
CERTIFICATE
I hereby certify that V SIVARAMA RAJU VEGESNA, student of Masters of Business
Administration, MBA Batch of 2012, at Amity Business School, Amity University Uttar Pradesh
have completed Summer Internship on “CUSTOMER EXPERIENCE AND WEALTH
PRODUCT AWARENESS (WEALTH MANAGEMENT) AT HSBC LTD” under my
guidance.
MR. T.V.RAMAN
Assistant Professor,
Department of Finance
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ACKNOWLEDGEMENTS
This is an acknowledgement of the intensive drive and assistance of many individuals who have
contributed to the successful completion of the research.
I am grateful to Mr. Srinivas Mendu (Branch Manager and Vice President, HSBC), for granting
permission to carry out the research in their organization.
I am also obliged and grateful to my industry guide Mr. Bharat Ramanujam (Associate vice
president, HSBC Advance), for his valuable suggestions, sagacious guidance in all respects
during the course of my training.
My sincere thanks are due to my faculty guide Asst Prof. T.V.RAMAN, Finance Department,
Amity Business School, Amity University, Noida for his valuable guidance rendered from time
to time during the course of the summer training.
I wish to put on record of my thanks to Dr. Sanjay Srivastav, ADG, Mr. K.Ratheesan, CRC
and Ms. Kritika Dasgupta, CRC, Amity Business School, Amity University, Noida, whose
encouragement led to the successful completion of the summer training research project.
Great acknowledgements are expressed to all coordinators, teaching and nonteaching members
whose support cannot be ignored in completing this project in time.
(V SIVARAMA RAJU VEGESNA)
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TABLE OF CONTENTS
S.No Topic Page No. 1. Introduction………………………………………………………………... 1 Industry Profile……………………………………………………... 1 Indian banking sector………………………………………………. 2 Company Profile…………………………………………………… 4 HSBC Advance……………………………………………... 5 An overview of Wealth Management………………………………. 6 Wealth management at HSBC……………………………………… 8 Purpose of Study…………………………………………………… 13 Theoretical Framework-Competitor Analysis……………………… 13 2. Literature Review…………………………………………………………... 17 3. Research Methods and Procedures…………………………………………. 20 Purpose of Study…………………………………………………… 20 Research Design…………………………………………………… 20 Research Questions………………………………………………… 21 Participants………………………………………………………… 22 Data Collected……………………………………………………… 22 Instruments Used…………………………………………………… 22 4. Data Analysis & Findings………………………………………………….. 23 Review Of Methodology…………………………………………… 23 Results of Research Questions……………………………………... 23 Summary Of Findings ……………………………………………… 35 Findings from wealth managers informal interviews………………. 36 5. Conclusions & Recommendations…………………………………………. 37 Discussion of Research Questions…………………………………. 37 Recommendations………………………………………………….. 39 Limitations…………………………………………………………. 40 Implications for Practice…………………………………………… 40 Implications for Future Research…………………………………... 40 References………………………………………………………………….. 41 Bibliography………………………………………………………………... 42 Annexure1…………………………………………………………………... 43 Annexure2…………………………………………………………………... 45
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List of Figures
S.No Name of the Figure Page No. 4.1 Awareness of customers regarding wealth products offered at HSBC…………. 24 4.2 Types of wealth products at HSBC……………………………………………. 25 4.3 Source of information about the products………………………………………. 26 4.4 Prior information to customers by HSBC employees…………………………... 27 4.5 Customers interest to know about HSBC products…………………………….. 28 4.6 Percentage of customers done investments in bank…………………………….. 29 4.7 Percentages in terms of investments in different banks………………………… 30 4.8 Reason behind not investing in HSBC…………………………………………. 31 4.9 Primary objective of customers behind investments…………………………… 32
4.10 Rating of wealth management by customers…………………………………… 33
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List of Tables
S.No Name of the Table Page No. 4.1 Awareness of customers regarding wealth products offered at HSBC……….. 23 4.2 Prior information to customers by HSBC employees………………………… 27 4.3 Customers interest to know about HSBC products…………………………... 28 4.4 Percentage of customers done investments in bank…………………………... 29 4.5 Rating of wealth management by customers…………………………………. 33
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ABSTRACT
India is a nation with emerging financial markets. The growth is immense in this sector.
This sector is also known as BFSI (Banking, Financial Services and Insurance) Industry. Wealth
management is one of the sectors which is emerging now a days in India. HSBC is the first bank
in India to start up with wealth management services. This project totally deals with the various
aspects of wealth management of HSBC, which include customer experience, wealth product
awareness. In order to achieve this personal interviews are carried out and structured
questionnaire is used to extract the same. This research was also conducted to know the reasons
behind different customers investment activities. The scope also includes where and why HSBC
lacks behind in the market has analyzed and the necessary recommendations have been
suggested.
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CHAPTER 1: INTRODUCTION
Industry profile
Banking is an important aid to industry and trade, and it also provides a variety of
services to the public in general. Indeed banking may be regarded as an indispensable
part of the economy of every country. The significance of banking has increased all over
the world with the rise in income levels and growth in the volume of financial
transactions.
Bank is an institution which deals in money and credit. It accepts deposits from
the public and grants loans and advances to those who are in need of funds for various
purposes. Banking is an activity which involves acceptance of deposits for the purpose of
lending or investing. In addition to accepting deposits and lending funds, banking also
involves providing various other services along with its main banking activity. These are
mainly agency services, but include several general services as well.
A banker is one who undertakes banking activities, accepting deposits and lending
money for different purposes. The Banking Regulation Act, 1949 defines banking as an
activity of accepting funds from the public for the purpose of lending or investment.
The essential features of banking activities are as follows:
Accepting deposits from public
Lending or investment of such deposits
Incidental to the activities of accepting deposits for lending or investing, banks
undertake the following activities:
Promoting and mobilizing savings of the public
Providing funds to trade and industry by way of discounting bills, overdraft, cash
credit facility, and transfer of funds from one place to another
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Providing agency services to customers, such as collection of bills, payment of
insurance premium, purchase and sale of securities, etc., and other general
services, such as issue of travelers cheques, credit cards, locker facility, etc.
Money deposited with the bank is assured as far as its safety is concerned. Further
the depositor is allowed to withdraw it whenever required. Banks allow interest
on deposits. Such interest helps in the growth of funds deposited with the bank.
Thus the rate of interest provided on deposits acts as an incentive to the
depositors.
Indian Banking Sector
India has a well developed banking system. Most of the banks in India were
founded by Indian entrepreneurs and visionaries in the pre-independence era to
provide financial assistance to traders, agriculturists and budding Indian
industrialists. The origin of banking in India can be traced back to the last decades
of the 18th century. The General Bank of India and the Bank of Hindustan, which
started in 1786 were the first banks in India. Both the banks are now defunct. The
oldest bank in existence in India at the moment is the State Bank of India. SBI is
presently the largest commercial bank in the country. In every country, the bank
which is entrusted with the responsibility of guiding and regulating the banking
system is known as the Central Bank. In India the central banking authority is the
Reserve Bank of India.
At present, banks have diversified their activities and are getting into new
products and services that include opportunities in credit cards, consumer finance,
wealth management, life and general insurance, investment banking, mutual
funds, pension fund regulation, stock broking services, custodian services, private
equity, etc. Most of the leading Indian banks are going global, setting up offices
in foreign countries, by themselves or through their subsidiaries.
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The last decade has seen many positive developments in the Indian banking
sector. The sector now compares favorably with banking sectors in other areas on
metrics like growth, profitability and non-performing assets (NPAs). A few banks
have established an outstanding track record of innovation, growth and value
creation. This is reflected in their market valuation. However, improved
regulations, innovation, growth and value creation in the sector remain limited to
a small part of it. The cost of banking intermediation in India is higher and bank
penetration is far lower than in other markets.
India‘s banking industry must strengthen itself significantly if it has to support the
modern and vibrant economy which India aspires to be.
As per the McKinsey‘s report ‗India Banking 2010‘, the banking sector index has
grown at a compounded annual rate of over 51 per cent since the year 2001, as compared
to a 27 per cent growth in the market index during the same period. It is projected that the
sector has the potential to account for over 7.7 per cent of GDP with over Rs.7, 500
billion in market cap, and to provide over 1.5 million jobs.
Major Developments
Indian Bank has received the Central Bank of Sri Lanka's nod to open its branch
at Jaffna in Sri Lanka.
Indian Bank has signed an agreement with Weizmann Forex Ltd, and will now
offer foreign remittances service over the counter at all its branches.
The National Payment Corporation of India is rolling out an instant interbank
mobile payment service (IMPS) that will enable retail customers of seven banks
to enjoy 24X7 funds transfer. State Bank of India, Bank of India, and Union Bank
of India, ICICI Bank, HDFC Bank, Axis Bank and YES Bank on November 22,
2010 became the first set of banks to go live with the IMPS.
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Amongst the private banks, owing to strong growth in interest income, the
country‘s third largest private sector lender, Axis Bank, reported a net profit of
US$ 166.3 million for the second quarter of FY11, a 38.28 per cent increase from
US$ 120.3 million a year ago.
HDFC Bank, India‘s second largest private lender reported a 32.7 percent rise in
net profits at US$ 204.3 million for the quarter ended September 30, 2010.
Company Profile
The HSBC Group commenced operations in India in 1867 with a branch in
Calcutta (now Kolkata). They claim an earlier commencement, as the Mercantile Bank of
India, China and London, which the Group acquired in 1959, was established in 1853,
with a branch in Bombay (now Mumbai).
HSBC is one of India's leading financial services groups, with over 35,000
employees in its banking, investment banking and capital markets, asset management,
insurance broking, insurance, software development and global resourcing operations in
the country. The Hong Kong and Shanghai Banking Corporation Limited in India offers a
full range of banking and financial services to over 1.7 million customers through its 50
branches and 152 ATMs across 29 cities HSBC is a leading custodian in India. More than
5% of India's exports and imports pass through HSBC India's banking channels. The
asset management business in India is one of the leading players in the industry. The
Bank is at the forefront in arranging deals for Indian companies investing overseas and
foreign investments into the country. It has a fully enabled and established insurance
advisory of international standards. It is one of the leading players in domestic and export
factoring, and one of the leading banks for an increasing number of SMEs. The Bank is
the founding and a principal member of the HSBC Group which, with around 8,000
offices in 87 countries and territories and assets of USD 2,418 billion as at 30th June
2010, is one of the world‘s largest banking and financial services organizations.
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HSBC performs the following functions:
Banking - accounts & cards Borrowing- loans & mortgages Investment - wealth & growth
Planning- saving & retirement Protection- insurance& security.
HSBC Advance
A new emerging mass affluent proposition from The world‘s local bank. HSBC
Advance is the Bank‘s second global premium product and is positioned alongside HSBC
Premier. HSBC Advance captures the globally growing, emerging mass affluent segment
which is estimated to be around 154 million worldwide. This is in accordance with
HSBC‘s global strategy to increase its market share among affluent consumers. HSBC
Advance is the entry proposition that introduces consumers for relationship-based
banking and wealth management‘. HSBC Advance also serves as the second tier
proposition of HSBC Premier, for customers who are looking for priority service
offering, but do not require the level of attention that a Premier customer may require in
managing their finances.
Financial needs may differ, but the need to do financial planning does not. The long
term investment perspective aims to preserve the purchasing power. At HSBC, it is their
endeavor to suggest products and services, based upon an understanding of the
customers‘ financial needs and aspirations. HSBC advance account comes with a
financial planning tool called the Personalized Financial Review (PFR). The PFR assists
in analysing the customers‘ current finances as well as future financial needs by taking
into consideration his lifestyle, investment objectives, income stability, risk profile,
financial obligations and other factors. With the help of a PFR, Wealth Manager of
HSBC Advance helps to draw a financial plan for the future, which is in line with
financial goals, thereby bringing customers closer to tomorrow.
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Wealth Management
Wealth Management can be defined as an all inclusive set of strategies that aims
to grow, manage, protect and distribute assets in a much planned, systematic and
integrated manner.
'Wealth Management' is the term given to the process of integrating financial planning
components - i.e. investment management, risk management (a.k.a. insurance planning),
financial planning, and estate & legacy planning - into a cohesive and holistic strategy to
achieve goals and objectives along the life cycle.
It is simply the term applied to the complete integration of critical personal financial
planning. The concept places equal importance on related components such as:
Investment - specifically portfolio construction and ongoing monitoring.
Risk Management - Insurance portfolio planning.
Pre and Post Retirement planning – PF’s, etc.
Integrating and maximizing after-tax income – Tax advice etc.
Life style issues - Doing the above to achieve personal, professional, and family
goals. Wealth Thus Management is the process of tying all these pieces together.
WHO REQUIRES WEALTH MANAGEMENT SERVICES?
Wealth management is helpful for Individuals who have accumulated wealth and
the main objective of the person is to save the same.
The benefits of wealth management
It is better way to manage the wealth.
Investors need not to spend their valuable time.
Investors do not have to endure complicated transactions and a lot of paperwork.
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It is the most efficient and profitable use of one’s resources (through trust)
It provides proper planning of estate.
It can provide a strategy for one’s financial affairs.
It enables an investor to evaluate where he is now (current situation), where he
want to get to (identifying future goals) financially in the future and how he can
achieve his goals (provides direction).
The HNWIs face complexity and need tailored solutions to manage their wealth
by a specialist.
Building for sound financial planning through experience.
WEALTH MANAGEMENT SERVICE PROVIDERS
Wealth management services are provided by several entities such as:
Banks
Professional trust companies
Brokerages houses
Thus the major players in the industry are:
HSBC
Standard Chartered
Citibank
BNP Paribas
ICICI Bank
HDFC Bank
Anand Rathi
Kotak Mahindra Bank
ABN Amro Bank and brokers
DSP Merrill Lynch and
JM Morgan Stanley
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WEALTH MANAGEMENT PROCESS AT HSBC
The various phases of the Wealth Management process followed at HSBC are the
following:
Risk Profiling
Personal Financial Review
Portfolio Designing
Monitoring and Reviewing
Getting Started
The first thing to do is set up an obligation free meeting. The financial planner will
take the time to get to know the client and learn about his current situation and goals.
They will guide him through everything his need to consider identifying the best
strategies for success. The job for the adviser is to create his or her own definition
that is acceptable and attractive to prospective clients. Then, each adviser must figure
out how he or she will fulfill this coordinating role.
RISK PROFILING
The financial planner will ask the client to consider:
Your time - Which stage of life are you in currently and what time frames do you
need to consider for investments
Your attitude - Do you want to achieve your goals sooner or are you prepared to
wait to see long term results? What risks are you prepared to take?
Your circumstances -What are your immediate cash flow needs? Do you want
your investments to grow or do you need them to provide an income as well?
Your options - What are the most efficient tax strategies for you considering your
current circumstances?
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With the help of the tool of Investment Suitability Questionnaire, questions pertaining
to composition of existing portfolio, the client’s investment motives, attitude towards
investment volatility, experience, time horizon, etc advisor can ascertain the risk appetite
of the client, which can be categorized into the following:
Aggressive Moderately Aggressive Balanced Moderately Conservative Conservative
So this gives a fair idea about the possible avenues of asset allocation suited to clients
needs.
PERSONAL FINANCIAL REVIEW
To live comfortably, plan comprehensively…
HSBC’s Relationship Managers take a different approach than other investment
advisors. They work through an in-depth discovery process with the clients to understand
and document what they want to do in this lifetime, from now until retirement, and from
then on. Taking this information, and a similarly thorough understanding of all their
assets and liabilities today, the Relationship Manager maps out a course to help the client
achieve the income he will need to do exactly what he wants to, when he wants to. It is
software designed to identify and seek to achieve the returns necessary to get client to the
income he will need, based on how he intends to live, one year at a time.
Start by seeing a complete picture of you today…
The Wealth Manager’s comprehensive approach to wealth management starts by
identifying all the varied pieces of the client’s financial life today. It will include analysis
of the client’s net worth, earnings, asset allocation, education funding, insurance, stock
options and equity compensation, assets locked up in a business, real estate, loans, and
retirement plan distributions and social security. It is a detailed procedure because what
comes out will be a blueprint for the client’s lifestyle.
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And craft a Blueprint for income, year by year…
The advisor works with the client to understand how long he wishes to work,
where he would like to retire, and more. The outcome—the comprehensive wealth
management plan—will include sophisticated cash flow models for what the client will
need today and what he will need in retirement in order to fund the lifestyle he envisions.
And the HSBC’s Relationship Manager will review with the client a range of strategies
designed to help him accomplish the tasks identified together; strategies that go far
beyond investments to incorporate every aspect of his financial picture.
Once the client and the financial planner have come to an understanding of what it
is that he wishes to achieve, the next step is to develop his financial plan. The financial
planner will recommend a financial strategy designed to meet the client’s specific goals
and objectives. He will talk the client through their recommendations, give them practical
advice as to how can it be implemented and allow them to ask questions in case of any
queries and make any necessary changes.
HOW DOES IT WORK?
In this particular software, it starts with asking the client to define what his major goals in
life are. So first of all inputs are derived as to his major goals in life.Some examples of
the same are:
Children’s Education
Child’s Marriage
Car
House
Vacation
Retirement
Property
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Once the Relationship Manager gets an understanding of his aspirations and objectives,
he makes adjustments for:
• Inflation
• Returns Expected
PORTFOLIO DESIGNING
Once the client’s needs are identified, risk profiling done, financial review done
and financial plan finalized, it's time to put it into action. As part of the financial planning
service, HSBC helps the clients in lodging their investments.
Portfolio Designing consists of two interrelated parts:
Determining a Strategic Asset Allocation (deciding how much of
your capital should be invested in each asset class) and
Investment Selection (choosing the investments within each asset
class).
The client specifies their needs and risk profile. They also express how much
capital are they willing to invest. It is then the wealth managers who decide the asset
allocation across different asset classes. Once that is decided, they then decide how much
should be allocated in each asset class chosen by them suited for the client according to
his requirements.
MONITORING, REVIEWING AND SERVICING
Periodic formal reviews of the client’s finances are essential to his ultimate financial
success. The Relationship Managers review quarterly, semi-annual, or annually, as
appropriate to the case and pre-agreed between client and the manager. These reviews
can be done in person or by telephone with materials sent ahead by mail or internet.
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Each review will address market conditions, the return on client’s portfolio for the
preceding period, asset allocation and investment-specific updates. This is also a good
time to discuss any changes in his financial circumstances or investment goals. It may be
appropriate to review and update aspects of his financial planning.
Finally, feedback is encouraged on what is being done right and what can be done
better. HSBC provides statements quarterly, plus for any other month that there is activity
in his account. It also provides an excellent system of secure internet access, should he
wish to monitor his account on a more frequent basis.
From time to time, HSBC mails out special updates on market conditions or on
specific securities that its clients hold. Clients may also occasionally receive a call from
a team member if it is felt that some action should be taken in the client’s portfolio.
Additionally, an email newsletter 6 to 8 times per year is also sent out.
As time goes by, it is possible that the needs of the clients undergo a change. So
the financial planner can help ensure that the financial plan continues to meet those
changing circumstances. By providing him with ongoing support, the financial planner
will be able to recommend options that best suit client’s current needs, whether they
revolve around wealth creation, wealth protection, superannuation or retirement incomes.
Last but not least, the Wealth Managers are always just a phone call away if the
clients have questions.
The following are the advantages of wealth management:
Helpful In Tax Planning: The wealth management professional always shows the good
path to the customers and provides the service of tax planning.
Helpful In Selection of Investment Strategy: The wealth Management team has a
customer-centric approach and helps the customer plan his investment strategy and
analyze risk and return.
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Helpful in forward looking: Wealth Management aims at planning and thus reduces the
level of uncertainty for the future.
Helpful for Indian Economy: Banks which are engaged in business of WM earn
revenues from the foreign countries which are beneficial for the domestic economy.
Purpose of the Study In wealth management sector many financial institutions have come up other than
HSBC and a heavy competition is present in the market. The challenge faced by HSBC is
to know whether its customers are aware of its wealth products are not. They also wanted
to know the reasons of the customers for not investing in HSBC, the basic investment
objectives of the customer and also their perception of investing on wealth products. The
study also includes the wealth managers reviews on wealth management and their
customer experiences.
Theoretical Framework-Competitor Analysis
HSBC has several competitors globally, in addition to domestic competitors in
each location. The importance of the each largely depends on the customer segment, and
the type of business. The Indian wealth market is delicately poised, and that is apparent
from the competition between domestic and foreign players. The influx of foreign
competitors has led to a domestic fight back, as banks, brokerage houses and new
entrants develop their offerings.
Of all the domestic competitors seeking to target HNWIs in 2009-10, the most
notable is perhaps Reliance Money with a network of over 10,000 outlets across 5,000
towns and cities in India to do so. With its extensive local network and considerable
knowledge of the local market, Reliance‘s entrance into the Indian wealth market poses a
number of threats to even the largest foreign banks. As the largest brokerage house in
India, the firm has a pre-existing base of investor to target, and the potential for referrals
from other Reliance businesses is considerable.
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In India ICICI bank and Axis-Bank are very well known banks in the field of
wealth management. ICICI Bank is using the services of global players like Merrill
Lynch, City group, and UBS for catching the clients for Wealth Management business.
ICICI Bank and its subsidiaries are engaged in the development of various attractive
products (services) for the clients with net worth of $ 1 million. India's No.2 lender
banker ICICI expects to sustain the 70% growth in its private wealth management
business.
One of India's leading private sector bankers, Axis bank also combined with
Banque Privee Edmond de Rothschild Europe based wealth management expertise
institution & is going to make new standard for the NRI's wealth management. The Axis
Bank, 5th largest bank by market capitalization in India provides payroll services to over
12000 corporates across 2.8 million salary accounts.
The list of recent entrants takes in all types of wealth managers, from long-
established players like Goldman Sachs to burgeoning brands such as Barclays Wealth
and domestic brokerages such as Motilal Oswal.
The obvious competitors of HSBC are similar giant sized global banking groups
such as Citibank, ING, JP Morgan Chase, Bank of America and Deutsche Bank. Some
large multinational banks—the local subsidiaries of Citibank, HSBC, and Standard
Chartered have developed strong and profitable local franchises with a wide range of
services. Others, including JPMorgan-Chase and Deutsche Bank, are much more
selective and in some cases are narrowing their activities in emerging markets, refocusing
on investment banking and private banking activities. However, depending upon the
market segmentation virtually all sized banks can present competition to each other.
In terms of assets, Citibank is the biggest foreign player in India with Rs95, 490
crore worth of assets in fiscal 2010, followed by HSBC (Rs90, 441 crore) and Standard
Chartered (Rs89,545 crore).
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Considering the pace of growth, foreign banks are behind their local peers. The
compound annual growth rate (CAGR) of HSBC‘s assets in the past five years was
19.27%, Citi‘s 16% and Standard Chartered‘s 14.27%. In contrast, Axis Bank Ltd, which
is double the size of HSBC‘s India operations, has grown at 29.41%. HDFC Bank Ltd,
another Indian private bank with an asset base of Rs2.23 trillion, has grown at a five-year
CAGR of 24.78%. Even State Bank of India, the nation‘s largest lender with Rs10.54
trillion of assets, has grown its book at 16.36%, better than Citibank and Standard
Chartered.
However, the growth in off-balance sheet items in foreign banks‘ books such as
guarantees, securitized loans, derivatives, among others, have been higher than the
domestic banks. While calculating their market share these are also taken into account.
In terms of experience HSBC ranks the 1st among all. HSBC‘s origins can be traced back
to October 1853, when Mercantile Bank of India, London and China was founded in
Mumbai. Standard Chartered started its Indian operations by opening its first branch in
Kolkata in April 1858, Citibank is 108 years old. Among other foreign banks, Deutsche
Bank AG, 30 years old in India, is present in 12 centres through 13 branches. Barclays
Bank Plc, which launched its India operations in November 2006, has seven branches.
UBS AG is one of the latest entrants in Indian banking space. Goldman Sachs and
Morgan Stanley are awaiting RBI‘s nod to enter commercial banking while Nomura is
planning to move the regulator for a banking license.
Most of India‘s private wealth has not been created by sophisticated portfolio
management strategies. It comes from simply riding the wave of India‘s stock market
boom. Inheritance has not been a vital wealth forming segment in India, unlike Europe
which has had a wealthy group for the last 200 years. India‘s growing markets has
created a first generation of wealthy individuals who own small, medium and large
enterprises. Additionally the willingness to list these enterprises on the Indian stock
market, or transact them has created a significant amount of wealth.
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Currently, there are 32 foreign banks in India and collectively they have 310
branches, 0.43% of the 71,998-strong branch network across the nation. Currently,
foreign banks need to channel only 32% of loans to the priority sector, which for them
also includes loans given to exporters. There is no stipulation on rural branches though
RBI is relatively liberal with foreign banks proposals for setting up branches in such
areas. Once they choose to take the subsidiary route for Indian operations, foreign banks
will be given time to achieve the priority sector lending target. Their tax liability will also
go down from 40% to around 33%. Foreign banks‘ market share in assets is doubled;
their growth will depend on how fast the local players are growing. Foreign banks in
India have, so far, operated as branches of their headquarters. Most of their profits are
currently accrued from wholesale banking operations, but they are now trying for a share
of the country‘s growing retail banking industry. The Reserve Bank of India, the
country‘s central bank, has suggested this year allowing foreign banks to operate via a
wholly-owned subsidiary model. But, under the central bank‘s proposals, it would
become easier for foreign banks to obtain licenses to set up branches and offer new
financial products to their retail customers. The RBI estimates allowing them to double
their share of Indian banking assets from the current 7.7 per cent to 15 per cent.
Incremental market share that the foreign banks will gain will translate into profits too
good to ignore, irrespective of any priority sector demands. They will double their market
share of loans, and make huge gains in new product offerings such insurance and capital
market instruments.
HSBC is keen to ramp up presence in India and is also not averse to go in for a
subsidiary bank model in this market. Its ambition is to be not just the largest foreign
bank (in India), but also play the leading role in international flow two-way between
India and rest of the world. The liquidity in HSBC stock is mainly in London and Hong
Kong. It is a bank which is well capitalised and the opportunity to support Indian
operations exists. In terms of distribution, Standard Chartered Bank leads the pack with
95 branches, followed by Hong Kong and Shanghai Banking Corp. Ltd, or HSBC (50)
and Citibank (43).
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CHAPTER 2: LITERATURE REVIEW
Dublin Business Wire Research and Markets (March 29, 2011) published an article
“Private Wealth Management India - Family Offices for Ultra-High Net Worth Individual
(UHNWI)” has said that the focus of companies are now shifting towards Ultra high net
worth individuals or families (those who have invest able assets more than rupees 45
crore or $10 million) from the high net worth individuals (those who have investable
assets more than rupees five crore or $1 million). This article mainly talked about Ultra-
HNWIs and families in India. It also talks about the emergence of family offices in India.
It deeply analyzes the segregation advisory services on the basis of wealth in India.
It was also mentioned Indian Ultra-HNWIs have unique demands in terms of products
and services. Ultra-HNWIs have high risk taking abilities as compared to HNWIs. Thus,
the products offered to them are more sophisticated and risky. Due to high invest able
base and diversified needs, they also require more customized and tailor-made services to
manage their family needs as well as grow their wealth.
RBI Report (2010) on ‘Trends and progress of Banking in India’ gives us information
regarding the current state of Indian Banking industry and also prospective from global
trends and how these perspectives work on Indian banking industry. It also talks about
the global developments in regard to the macroeconomic scenario and also financial
markets. A clear note of how the policy environment is present is shown through various
other parts of the same report. It also discusses about the performance of the banks in the
particular year the developments that are taking place in the industry. It also speaks about
NBFC’s (Non Banking Finance Companies) which are neglected in Indian Financial
market for obvious reasons but this report has provided necessary information and
knowledge about the Financial Market.
18
AMFI (April 2010) newsletter is the official quarterly review of Association of Mutual
Fund in India. It gives information about the mutual fund industry that particular quarter.
The Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian
Mutual Fund Industry on professional, healthy and ethical lines and to enhance and
maintain standards in all areas with a view to protect and promote the interest of mutual
funds and their unit holders. This news letter gives a clear not of how the mutual fund
companies are doing so that new investors can have a look before they invest. It talks
about the current trends and challenges in the industry. The challenge for the industry
right now is to activate, strengthen and support the distribution system, which plays a
crucial role in promoting Mutual Fund schemes among retail households. This paper
gives the updates on SEBI, regulatory body meeting.
Dr. Amit Kumar Dwivedi, Punit Kumar Dwivedi, Dharmendra Kr. Singh (June 2008) in
their paper on ‘Wealth management in India : Issues & Concerns’ has told that now a
days the word wealth management is becoming more important and so many banks are
engaged in wealth management. They have also given the position of India in wealth
management. In the annual survey done by Cap Gemini, SA and Merrill Lynch it was
found that ranks of millionaires grew 6% in the previous year, because the number of
richer people grew in India and China where India is competing China. India & China has
got increase in millionaires by 23% & 20% respectively. So they told that there will be
more wealth management business opportunities in India and China.
They also concluded that wealth management has various aspects some are
favorable and friendly for the Indian economy and some are very dangerous for the
Indian economy. The customers have to beware and they have to make SWOT analysis
before choosing the wealth management option. The limitations given by the authors are
chances of fraud, inflation.
19
ChandraShekhar (Jan 2008) in his article ‘India’s wealth management business set to
boom’ he mentioned that Indian wealth management industry is emerging up with more
opportunities. He also quoted a report named ‘Overview of Indian Wealth Management
Market’ which has said that over the next four-five years, wealth management service
revenues are expected to contribute to over a third (32-37 per cent) of full-service
financial institutions. He also said that disposable income is expected to grow from the
current 2 percent to 5 percent in 2017. In 2008, Indian financial sector shares about 7 per
cent of the total national disposable income. The share of the financial institutions would
grow to 18 per cent by 2012, it is estimated.
It was forecasted that by 2012, the country’s wealth management market to be $1
trillion, with approximately 42 million households where in it was 13 million households
at that point of time.
Rashmi Shankar & Paroma Sanyal (2007) have mentioned in their paper, ’What Drives
Bank Performance?’ the factors that drive all the banks, such as impact of ownership,
competition and productivity on profitability. The results in the paper explain that
profitable banks are more likely to have a diverse range of output, to be operationally
efficient and to have high spreads. They also came to a conclusion that banks in India
have resorted to output expansion rather than efficiency enhancement as a strategy to
boost profits. The paper also talks about the foreign banks outshining the Indian private
banks. This paper has indirectly supported the investment of the banks in Information
Technology. More the amount of competition and profits leads to more amount of
innovation in the process automation which leads to technology investments. This paper
also gave insight about the different ball game between public sector banks, private sector
banks and multinational banks which have entered Indian Banking sector in the name of
green field investments.
20
CHAPTER 3: RESEARCH METHODS AND PROCEDURES
Purpose of study
In wealth management sector many financial institutions have come up other than
HSBC and a heavy competition is present in the market. The challenge faced by HSBC is
to know whether its customers are aware of its wealth products are not. They also wanted
to know the reasons of the customers for not investing in HSBC, the basic investment
objectives of the customer and also their perception of investing on wealth products. The
study also includes the wealth managers reviews on wealth management and their
customer experiences.
Research Design
The research design of customer wealth product awareness is descriptive in nature
since it provides an answer to below questions:
Who is considered?
The potential customers who are part of HSBC bank.
What information should be obtained?
To know the customers interest, knowledge and investment activities in
wealth management.
To know the primary objectives of the customers behind wealth
investments.
Why are we obtaining the information from respondents?
To know the effectiveness of the organization in wealth management
department and to know drawbacks if any.
21
In what way are we going to obtain the information?
The information is obtained through a structured questionnaire through
personal interview of the respondent.
Primary data is collected by taking the responses of the HSBC customers
with an aid of a structured questionnaire.
The research design for the wealth managers is explorative since informal
interviews are taken from them.
Research Questions
Customer wealth product awareness
The basic objectives of this research are:
To know the awareness of HSBC customers regarding HSBC wealth
management.
To know the primary investment objectives of the customers.
To know the major competitors of HSBC.
To know the customers perception about investing on wealth products.
Wealth Managers Reviews
The basic objectives of this research are:
To know the wealth managers reviews on their clients.
To know the problems faced in wealth management
22
Participants
The participants in my research are potential customers of HSBC bank,
Hyderabad who walked in to the bank and who generally have a basic idea about wealth
management. The sample size of customers is 35.
And also wealth managers who are part of HSBC Advance, Hyderabad are part of
my research. The sample size taken is 15.
Data Collection
The data of customer wealth product awareness is collected by marking the
responses given by the potential customers of the HSBC bank. It is done my meeting the
walk in customers personally in the branch and collecting the data with the help of a
structured questionnaire of which the results are discussed later in the report. The
questionnaire method was selected because it translates the information needed into a
specific question that the respondents can and will answer. The questionnaire motivates
and encourages the respondents to become involved in the interview to co-operate, and to
complete the interview.
The data is also collected from the wealth mangers of the same bank regarding the
wealth management by taking the informal interviews in the HSBC bank itself.
Instrument Used
The research instrument used for understanding the wealth product awareness and
wealth management of HSBC Ltd. are closed ended questionnaires of 10 questions
excluding demographics.
The research instrument used to understand wealth managers reviews are open
ended informal interview of 9 questions.
23
CHAPTER 4: DATA ANALYSIS AND FINDINGS
Review of Methodology
The survey was conducted through personal interviewing the potential customers
of the HSBC Ltd. who had walked in to the bank with an aid of personal questionnaire.
The prime intention of the survey was to know the how far the customers of HSBC are
satisfied to have their investments in wealth management sector of HSBC and the
primary motive of the customer to invest on wealth products. The sample size is 35. The
data analysis is as follows.
Results of Research Questions
Q1) Are you aware of the wealth products provided by HSBC?
Table 4.1: Percentage of Awareness
Awareness
Frequency Percent
Valid Yes 21 60.0
No 14 40.0
Total 35 100.0
24
Figure 4.1: Percentage of Awareness
From the above results it clearly says that 60% of the customers said that they are aware
and 40% of customers are unaware of wealth products provided of HSBC.
25
Q2) If yes, what are the products you are aware of?
Figure 4.2 : Types of wealth products at HSBC
From the above pie chart it is clear that
29% of the customers are aware of Mutual Funds.
24% of the customers are aware of SIP.
15% of the customers are aware of Fixed Deposits.
7% of the customers are aware of Broking.
25% of the customers are aware of Insurance.
26
Q3) How did you get to know about these products?
Figure 4.3 : Source of information about the products
From the above pie chart it is clear that
70% of customers came to know about the wealth products through RM.
10% of customers came to know about the wealth products through
advertisements.
17% of customers came to know about the wealth products through their
Relatives and Friends.
3% of customers came to know about the wealth products through other sources.
27
Q4) Does any employee from HSBC have ever contacted you before regarding wealth
management?
Table 4.2: Prior information to customers by HSBC employees Informing customer regarding WM
Frequency Percent
Valid yes 29 82.9
no 6 17.1
Total 35 100.0
Figure 4.4: Prior information to customers by HSBC employees
From the above results it clearly says that 82.9% of the customers said that employee
from HSBC tried to contact regarding the wealth management.
28
Q5) Are you interested to know about the wealth products offered by HSBC?
Table 4.3: Customers interest to know about HSBC products Intersted to know about WP_HSBC
Frequency Percent
Valid yes 6 17.1
no 29 82.9
Total 35 100.0
Figure 4.5: Customers interest to know about HSBC products
From the above results it clearly says that only 17.1% of the customers said that they are
interested to know about the HSBC wealth products and the remaining 82.9% are not
interested.
29
Q6) Have you already invested in wealth products in any bank?
Table 4.4: Percentage of customers done investments in bank Investment on WP in any bank
Frequency Percent
Valid Yes 34 97.1
No 1 2.9
Total 35 100.0
Figure 4.6: Percentage of customers done investments in bank
From the above results it clearly says that 97.1% of the customers said that they have
invested on wealth products of some bank and only 2.9% did not invest. Out of 35, only
one customer did not invest on wealth products in any bank.
30
Q7) In which bank did you invest?
Figure 4.7: Percentages in terms of investments in different banks
From the above pie chart it is clear that
30% of customers invested in HSBC.
19% of customers invested in ICICI.
19% of customers invested in HDFC.
32% of customers invested in OTHERS(SBI, IDBI etc).
31
Q8) Why not HSBC?
Figure 4.8: Reason behind not investing in HSBC
From the above pie chart it is clear that
59% of customers are unaware of the products at the time of investment.
41% of customers did not invest due to different reasons.
Not even a single customer gave the reason lack of RM’s interaction.
32
Q9) What is your primary investment objective?
Figure 4.9: Primary objective of customers behind investments
From the above chart it is clear that
20% of customers primary objective is to earn inflation adjusted returns.
22% of customers primary objective is to preserve the initial capital.
23% of customers primary objective is to maximize the long term potential
growth.
8% of customers primary objective is to earn regular income.
27% of customers primary objective is to earn a supplement and possibly some
capital gain.
33
Q10)On a scale of 1 to 5, how do you rate investment on wealth products is a wise
option?
Table 4.5: Rating of wealth management by customers Investment on WP is a wise option_Rate
Frequency Percent
Valid 1.00 2 5.7
2.00 1 2.9
3.00 9 25.7
4.00 19 54.3
5.00 4 11.4
Total 35 100.0
Figure 4.10: Rating of wealth management by customers
34
From the above bar diagram the percentages are as follows:
5.7% of customers rated 1.
2.9% of customers rated 2.
25.7% of customers rated 3.
54.3% of customers rated 4.
11.4% of customers rated 5.
35
Summary of Findings
1. The level of awareness of the HSBC customers towards its wealth products is
60% which is less.
2. Most of the customers are aware of SIP and insurance. The percentages are as
follows.
29% of the customers are aware of Mutual Funds.
24% of the customers are aware of SIP.
15% of the customers are aware of Fixed Deposits.
7% of the customers are aware of Broking.
25% of the customers are aware of Insurance.
3. It was found from the data that customers are mostly into other banks when
compared to HSBC. Investments are mostly done with other banks.
4. The main objective of the customers to invest on wealth products is to have an
supplement income and most probably some capital gain.
5. Most customers reacted positively regarding investments on wealth products.
They ranked it high to say that investment on wealth products is a wise option.
6. Generally the customers who are aware of these products provided by HSBC
came to know through mostly through RM only.
7. The general reason behind customers not investing in wealth products in
HSBC was derived to be lack of knowledge at the time of investment.
36
Findings from wealth managers’ Informal Interviews
As part of my primary research, I took some informal interviews from the wealth
managers. The sample size is 15 managers who are part of HSBC Advance.
On basis of Wealth manager Survey we able to analyze following things
Customers have moderate level clarity about wealth management concepts like
stocks, mutual funds etc.
The main basic objectives of clients for availing wealth management services are
to have capital appreciation with less risk ie., secure investments. They also do
this planned investment in order to fulfill the future needs like car, house etc.
Customers are more concerned with risk and return, tax protection from wealth
management process.
Customer ask question related to how their wealth is managed, details about the
investment product etc.
Customers are mostly interested to invest in Mutual Funds and SIP’s mainly.
Customers mostly availing this wealth management services are doctors,
businessman, private employees by profession.
Average age of customers availing wealth management services is 35-60yrs.
Average size of wealth managed per each customer is around Rs 5-30 lakhs.
Wealth manager see very huge potential market in middle income group which
have monthly income of 50k to 1lakhs.
Wealth Manager face challenges in area of trust building, awareness, competition.
The major problems in the wealth management sector are very dynamic markets
and having the consistency in payments by the customer.
The problems can be overcome by convincing the customers, going for long term
investments, investing in sectors where you have low risk low returns.
37
CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS
Discussion of Research Questions
Customer wealth product awareness
Understand the level of awareness of the HSBC wealth products.
Wealth management is still in the emerging stages in India, though I took
the responses from potential customers of HSBC only 60% are aware of
wealth products provided by HSBC. It is to say HSBC is performing in the
moderate level and HSBC should take necessary measures.
To know the primary investment objectives of the customers.
An individual invest on different wealth products in order to have some
returns. The customer who wants to get high returns in short term should
go for high risks. The customer who want to play safe should either go for
long term investment or low risk investments which might give low
returns. Through my research I found that the basic motive of customers to
invest in wealth products is to earn a supplement and possibly some
capital gain.
To know the major competitors of HSBC bank.
HSBC is facing a lot of competition from different banks. The major
banks like HDFC, ICICI, SBI, Reliance Mutual Fund are the major threats
for HSBC Bank. This is because less connectivity of HSBC. Place is
playing a major factor and also the services too.
38
To know the customers perception about investing on wealth products.
Perception change from person to person. Basically I took the ratings of
the customer on a scale of 1to 5 whether investing on wealth products is a
wise option or not where 1 is the lowest rating and 5 being the highest. It
was found through the research that many people have positive perception
on these investments so many customers rated 4 and 5.
Wealth managers reviews
To know the wealth managers reviews on their clients.
This is basically to know the reviews of their clients regarding the
conceptual quality of their clients, clients basic objective etc. through the
informal interviews taken I came to know that clients are moderately
matured in terms of conceptual clarity.
To know the problems faced in wealth management.
There many problems and challenges faced by the wealth managers and
the risks involved in wealth management sector like market fluctuations
etc.
39
Recommendations
HSBC should target the mass affluent segment and satisfy their wealth
management needs through innovative financial solutions.
HSBC should also start promotion campaigns about wealth management and
importance of investments on wealth products because many people are unaware
of these services.
HSBC should increase its branching across the major cities in India because
presently its operations in India are very less.
HSBC should start providing more customization as other banks like HDFC,
ICICI do so that it can compete with them.
HSBC should build upon its strengths and enhance its competitive advantage to
stay ahead of competition.
The Relationship Managers must be made aware of the importance of activity
management. The habit of daily reporting and monitoring of activities should be
promoted.
A number of global marketing initiatives act as opportunities because it will
continue to build the HSBC brand.
Wealth management is still emerging in India so it will be good for HSBC if it
takes the initiative and work on it to capture the maximum share.
HSBC can increase its share of the non-resident Indian business by providing
more convenient and comprehensive cross-border banking services to them.
40
New branch banking licenses have been granted to foreign banks such as
Australia New Zealand Bank, National Australian Bank, Commonwealth Bank of
Australia and Credit Suisse. Competition will continue to be tough with local
players, both in the private and public sector, so HSBC should be aggressive
before these banks become.
Limitations
My research was undertaken only in Hyderabad Region.
Response bias might distort the data being collected.
As wealth management is not popular in India, customers are not totally
aware of it.
Implications for Practice Thus as discussed in the project, wealth management is emerging in India, and it
is very necessary to educate people regarding it and its products. The awareness must be
created. HSBC can do this by conducting campaigns in private offices, corporate etc.
through this it can create awareness in the literates. Even it should target industrialists
and business man by conducting many promotions. HSBC is now doing airport
advertizing program it should expand this program.
They also should improve their operations in India so that they can increase their
market share and also create convenience to the existing customers.
Implications for Future Research The concept wealth management is in the earliest stages in India. So after creating
awareness about this in India and once the wealth management reaches the boom this
research with bit changes in the questionnaire can be done again to know how effectively
HSBC is performing in wealth management and the data collected then will be more
reliable. Then the research can be conducted not only in the metropolitans but also it can
be carried out in many cities.
41
REFERNCES Dublin Research and Markets, (2011). Private Wealth Management India - Family Offices for Ultra-High Net Worth Individual (UHNWI) Retrieved from:http://www.businesswire.com/news/home/20110329005826/en/Research-Markets-Private-Wealth-Management-India
RBI, (2010). Trends & progress of banking in india Retrieved from http://www.rbi.org.in
AMFI, (2010). Journal Retrieved from http://www.amfiindia.com/
Chandrasekhar.G., (2008). “ India’s wealth management business set to boom” Retrieved from: http://www.thehindubusinessline.in/2008/01/23/stories/2008012350651200.htm
DR. Dwivedi Kumar Amit, Dwivedi Kumar Punit, Singh KR Dharmendra. (2008). “Wealth Management in India: Issues & concerns” Retrieved from http://finance.indiamart.com/investment_in_india/banks_in_india.html
Rashmi, Shankar & Paroma, Sanyal. (2007).What Drives Bank Performance?. Retrieved
from: http://people.brandeis.edu/~psanyal/India_Bank_Performance.pdf
42
BIBILOGRAPHY
www.hsbc.co.in
http://HSBCprivatebank.com/services/index.html
http://www.vrl-financial-news.com/pdf/MWiI%20TOC%20and%20Summ.pdf
http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/india_banking_2010.pdf
http://www.investorwords.com/2510/insurance.html
https://www.iba.ie/development2009/index.php?option=com_content&view=article&id=76&Itemid=167
http://www.bobsguide.com/guide/news/2010/Dec/10/Key_Trends_in_the_Indian_Wealth_Management_Market%3A_Market_Dynamics_at_Work_.html
http://www.tax4india.com/wealth-tax-india/latest-on-wealth-management-in-india.html
http://www.ibef.org/artdisplay.aspx?cat_id=60&art_id=17575&refer=n49
http://www.wealthbriefing.com/webshop/opportunities-for-wealth-management-in-india-212.html
http://reports.celent.com/PressReleases/20080102/WMIndia.htm
43
ANNEXURE1
Questionnaire for wealth product awareness Demographic Details:
Name: _______________________________________________
Age: ___
Sex: ○ Male ○ Female
Occupation: ______________________
Wealth Product Awareness:
1) Are you aware of the wealth products provided by HSBC?
o Yes
o No (if no, go to question 4)
2) If yes, what are the products you are aware of?
○ Mutual funds ○ SIP (Systematic Investment Plan)
○ Fixed Deposits ○ Online Broking
○ Insurance
3) How did you get to know about these products?
o RM
o Advertisements
o Relatives/friends
o If any other, please specify ________________
4) Does any employee from HSBC have ever contacted you before regarding wealth
management?
○ Yes ○ No
44
5) Are you interested to know about the wealth products offered by HSBC?
○ Yes ○ No
6) Have you already invested in wealth products in any bank?
○ Yes ○ No
7) In which bank did you invest?
○ HSBC ○ ICICI ○ HDFC ○ OTHERS, SPECIFY______
8) Why not HSBC?
o Unaware of the products at the time of investment.
o Lack of RM’s interaction.
o If any other, please specify_________________
9) What is your primary investment objective?
○ To earn inflation adjusted returns.
○ To preserve the initial capital
○ To maximize the long term growth potential
○ To earn regular income
○ To earn a supplement income and possibly some capital gain
10) On a scale of 1 to 5, how do you rate investment on wealth products is a wise option?
(1-lowest, 5-highest)
45
ANNEXURE2
Questionnaire for Wealth Managers (Informal Interviews)
Name of the Wealth Manager:
Age:
1. What is the level of conceptual clarity of clientele about the Wealth
Management?
2. What is the basic objective of client while availing the services of wealth
management?
3. What are the concerned areas of the clientele regarding wealth management?
4. What are the kinds of questions asked by clients before or after taking services?
5. Which are the maximum services used by clients?
6. Details related to Client Profiles
Average Age :
Average size of their wealth
7. What are the opportunities unexplored as yet in wealth management?
8. What are the problems faced in the wealth management sector?
9. How do you overcome the problems faced?