Report- Krishna Kant 07atcs243

8/8/2019 Report- Krishna Kant 07atcs243

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A REPORT

ON

(FINANCIAL ADVISOR)

BY

Name of the Student: KRISHNA KANT ID.No:07ATCS243

AT

Faculty of Science & Technology, ICFAI University

(August, 2010)

(ING Vysya Life Insurance, Hyderabad)

An Internship Program - III station of


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Faculty of Science & Technology, ICFAI University

Station: ING vysya Life Insurance Centre: Hyderabad

Duration: 5thjuly to 15

thDec., 2010 Date of Start: 5

th jul , 2010

Date of Submission:

Title of the Project: Financial Advisor

Name/Id/discipline

Of Student: Krishna Kant/07ATCS 243/Computer science

Name of the IP faculty: Prof. A. Chandrasekhar

Abstract:

ING vysya, a brand name in the INSURANCE sector is

providing a lot of assistance in altogether development. It has helped

us a lot to know the roles and responsibilities of an agent. Besides

this the basic qualification and procedure needed to become an life

insurance agent, the relationship between customer and agent,

importance of Ethical behavior.

Signature(s) of students (s) Signature of IP facultyDate: Date:

Designation ofThe ex ert: Mrs. LANKA GEETHA, Sales mana er

Name(s) and

Pro ect Areas: Life Insurance A ents


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ACKNOWLEDGEMENT

I would like to express my gratitude to Dr. R.K. Patnayak, vice chancellor of

ICFAI University Agartala for allowing me to take up this internship and for

providing all the facilities required for completing this report. I would also like to

thank him for his guidance during the completion of this report.

I am also thankful to Prof. Chandrasekhar sir, Instructor-in-charge IP III for

providing me the support in preparing this report.

Above all, I would like to express my gratitude to my parents for encouraging me

during the completion of the report.


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Table Of Contents

Abstract sheet (ii)

Acknowledgement (iii)

1. Introduction

2. Role of financial advisor

3. Retirement planning

4. Qualification

5. Conclusion

6. Bibliography


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INTRODUCTION

Financial advisor (FA) and financial consultant (FC) are contemporary titles for

stockbroker, broker, account executive or registered representative. A variant

spelling, financial adviser also is used sometimes. Traditionally, the job has

involved buying and selling securities (such as stocks and bonds) on behalf of

clients. The change in titles is supposed to reflect the fact that, rather than being

focused primarily on facilitating transactions, Financial advisors really should be

investment advisers and financial planners who take a holistic view of their clients'

financial needs and goals. Other variations in title, such as wealth management

advisor, also are used, sometimes to denote a financial advisor who has additional

training, certifications and/or experience.

Some financial advisors specialize in serving individual or retail clients and othersconcentrate on business or institutional clients. Some securities firms prefer thatfinancial advisors specialize in this fashion, others leave it up to the individualadvisors to choose whatever mix of clients they prefer. Business clients whorequire specialized advice and services (such as in working capital management or

business loans) may prefer financial advisors with detailed knowledge in theseareas.Ideally, the financial adviser helps the client maintain the desired balance ofinvestment income, capital gains, and acceptable level of risk by using proper assetallocation. Financial advisers use stock, bonds, mutual funds, real estate

investment trusts (REITs), options, futures, notes, and insurance products to meetthe needs of their clients. Many financial advisers receive a commission paymentfor the various financial products that they broker, although "fee-based" planning is

becoming increasingly popular in the financial services industry.

A further distinction should be made between "fee-based" and "fee-only" advisers.

Fee-based advisers often charge asset based fees but may also collect commissions.Fee-only advisers do not collect commissions or referral fees paid by other productor service providers.


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Role of a Financial Advisor

The question of whether or not to work with a financial advisor is very personal.For some people, dealing with financial issues is unpleasant and requires a greatdegree of undesired discipline. For these people, the real question will be how tochoose the right advisor, rather than whether or not to work with one. Otherschoose to embrace the financial decisions which we cross in our lives, such as

investing and purchasing real estate, and may be resourceful enough to workwithout an advisor. Interestingly, many of those who are most eager to seek helpare actually very knowledgeable about financial issues. They confer with

professionals to reinforce ideas and seek second opinions about what they may

already know. Perhaps my cousin Laura has a good feel for investing but shedoesnt know much about how to determine insurance needs. Or, insurance maynot present any problem for her, whereas issues surrounding her will and choice of

beneficiaries does. I had a professor once tell me that anybody wise enough tohandle all aspects of their personal finances on their own should probably be in the

business of advising others. This wasnt always the case, but financial issues have become so complex and convoluted that even experts must meet up to refreshthemselves from time to time.

Traditional Financial Planning

Take for example a married couple with one or two children and a stable income.This is a great case for financial planning because of how many issues a family inthis situation will deal with. They may be trying to help support elderly parentswhile putting money away towards college for kids and planning for retirement atthe same time. They probably want their family to live in decent style, dress well,and take an occasional vacation. Most importantly, they need adequate funds tocomfortably cover all the necessities- because these are items one cant everignore.

Goal Planners

This financial planning scenario may appear for a client who is reaching 40 andstarting to pull down some decent bucks. She may want one million dollars savedup by age 59, not including the value of her home. This amount, shes concluded,will provide her with adequate income for the rest of her life. We will deal withthis type of client in two phases: accumulation and dispersion of assets. The

process here is mathematical in nature, involving timing and monthly savings


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targets.

Speculative ClientsThere are plenty of people who are less concerned with an exact age when they can

stop working and more focused on taking risks now to make money. This is not asshort-sighted as it may seem. Weve all heard the phrase risk and return andmany of those who understand the concept of calculated risk are living in betterstyle as a result. These clients may obtain an advisor to help them study the risks ina potential investment. They may also need the advisor because they cant utilize

financial instruments such as options and futures without one. Or, they may simplyneed advice on putting together a portfolio of stocks which meets their objectivesand risk tolerance.

In reading these three scenarios youve probably crossed at least one which sounds

familiar to you or somebody you know. Your financial advisor, if properly trained,can do a number of things for you. The first is to expose your current situation insuch a way that you can get a good grip on it. There are traditional ways of doingthis, such as putting together personal financial statements which you can use totrack your progress. Then, there are client-specific methods for those advisors who

get a good understanding of a clients psychological process.

Your advisor should also teach you about investment vehicles that exist fordifferent forms of savings. For example, 529 plans exist to save for highereducation expenses*. Its named after section 529 of the IRS tax code and allowsfor distributions for qualified higher education expenses to be exempt from federalincome tax. This provides a nice incentive for using the plan rather thanaccumulating funds elsewhere. The 529 plan gained in popularity after the passageof the Economic Growth and Tax Relief Reconciliation Act (EGTRRA). Other

examples of beneficial savings vehicles include IRAs for tax-deferred savings,and 401k plans for corporate workers looking to reduce their taxable income baseand, depending on the plan, possibly catch an employer match. However, noteveryone knows that these different vehicles exist and knows how to properlyutilize them. Your planner can help expose these benefits for you.

Your financial planner can also administer a plan for specific goals. This processgoes hand in hand with creating and maintaining a budget. If you need $30,000 fora car, and you have $10,000 today plus your future earnings potential, you canfigure out with excellent accuracy a savings pattern which will make this possible.

Perhaps youll figure out that $2,000 saved annually for 7 years plus accruedinterest will be sufficient. If you divide this cost monthly, this difficult expense


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will run you only about $175 per month. That isnt quite as scary, is it?

Further, your financial advisor may have a specialty. Some advisors like to hone inon certain demographics, such as the high net-worth market or clients in

retirement. Others will specialize in an investment product such as insuranceneeds. In the following chapter, we will discuss some of the different types offinancial professionals and how they get paid. .

Id like to briefly return to my original point that financial advisors are not just for

the wealthy. Nowadays, personal finance issues can be as complicated for themiddle class as they are for the wealthy. Often a simple flat-fee can be enough toretain the sort of financial plan which can dramatically improve your personalfinancial situation. Try to keep an open mind, and find a planner who will sit downwith you and develop saving, spending, and investment plans. You may find it the

most valuable few dollars you will ever spend.


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Retirement planning

One of the major services that financial advisers offer is retirement planning. A

financial adviser should have knowledge of budgeting, forecasting, taxation, asset

allocation, and financial tools and products to establish realistic goals and the

strategy by which to reach them. In the United States, this will include the use of

several investment tools such as 401(k)/403(b) Roth account(s), Individual

Retirement Accounts/Roth IRAs, mutual funds, stocks, bonds and CDs.

The financial adviser determines what percentage of the available income is

necessarytaking into account tax liabilities, expected inflation, and projectedreturn on investmentto meet a minimum balance by the client's target age ofretirement. This is a fairly straightforward calculation, and many automated tools

do this. The financial adviser's greatest contribution is asset allocation: determininghow to maximize the return on investment while satisfying the client's risktolerance.

Investing

Financial advisers may help their clients invest for both long and short term goals.It is the financial adviser's duty to determine the clients' goals and risk toleranceand then to recommend appropriate investments. Generally, a long time horizon

allows for the advisor to recommend more volatile investments with potentiallygreater risks and rewards. Such investments include direct investment in stocks orthrough collective investment products such as mutual funds and unit investmenttrusts/unit trusts.

If the client has shorter term goals, the adviser should recommend less volatileinvestments with shorter time spans. Such investments could include cash deposits,certificates of deposit, and short term bonds. While these types of investmentgenerally have lower returns there is less volatility and there is less likelihood of

losing principal capital. Although short-term investments can guard against loss of

capital, their value can be eroded by inflation over longer periods of time.


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Qualification of financial advisor

Your most important investment decision may be to whom you entrust thestewardship of your family's wealth. Most likely, your investment portfoliorepresents many years of toil, discipline, and good fortune. It embodies theharvests of days past and forms the foundation of your familys future.

If you do not have the expertise, the time and the desire to manage your investmentportfolio yourself, the most important investment decision you may ever make isyour selection of who you will work with to manage your portfolio for you. Your

choice of a steward for your family's hopes and dreams is an undertaking best notentered into lightly or casually.

Global perspective

Managing an investment portfolio effectively is more challenging than ever. TheUnited States no longer dominates the world economy. Over the past five years,the dollar has lost substantial value against other major currencies and is no longerthe premier international currency of trade. Growing demand for and dwindlingsupplies of energy and other resources has put considerable upward pressure oncommodities prices, which cant help but restrain the future growth of worldeconomies.

To be effective today and into the future, a portfolio manager must have a global perspective one that takes into account political trends and technologicaldevelopments that can affect the growth of economies, the profitability ofcompanies, the prices of commodities, and the strengths of currencies.

Attention to purchasing power

The decline of the dollar against other currencies erodes your wealth's purchasing power. It fosters further inflation within U.S. economy. Your portfolio managermust seek to protect your wealth against such purchasing power erosion.


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Mature market perspective and objectivity

The worlds financial markets are growing more interconnected daily. But, they are

still driven day-by-day by participants expectations about the future. Any event or

development that affects peoples expectations will affect market prices.

To be effective, a portfolio manager must be able to differentiate between marketnoise and truly important, long-term economic trends. He or she also needs theobjectivity to see the investment possibilities of new technologies as well as torecognize that, when something appears too good to be true, it probably is.

Wisdom beyond the conventional

Some financial advisers claim that the investment markets are efficient they

immediately and always reflect all available information. Therefore, everyinvestor is best served by a portfolio of index funds. The wise portfolio manager,however, knows that all this information that is immediately reflected in themarkets is actually investors perceptions of the information and expectations of

what it might mean for the future.

Recent bubbles-followed-by-crashes in technology stocks and the housing marketare strong indications that the markets are not truly objectively efficient. In ourview, although index funds can be very effective in building portfolios of variousasset classes, they should not be expected to outperform a well managed portfolio,

nor should they be viewed as less risky than managed portfolios. By definition,index funds deliver nearly 100% of the representative markets return, and at least100% of its risk.

Ability to relate to you and your needs

When investing your money, the investment manager must recognize that it isindeed your money. He or she must be able to truly understand you and yourinvestment needs and goals, and relate market behavior and the firm's investment

approach to your personal situation, investment horizon, and tolerance for risk.

Willingness to assure that your needs are appropriate for the firms approach

Some investment advisory firms seemingly accept as clients anyone and everyone,regardless of whether the firm's investment strategy is really right for them.


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If your primary goals are protection of wealth and preservation of purchasing power and your portfolio managers goal is to turn a little wealth into a lot ofwealth as quickly as possible, most likely you will be exposed to far more risk thanyou are prepared to handle psychologically or financially.

So, avoid the our-strategy-fits-everyone firm. Find an advisor that has a well-defined investment strategy that fits you and your goals.

Focus on after-tax returns

If the income from your account is currently taxable, your portfolio manager

should have the willingness and ability to manage your account accordingly, takinginto consideration the tax basis and holding period of your investments.


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Conclusion

In todays world taking investment decision is a vital activity and significantly the

process of investment Banking is constantly evolving especially as far as the

investment banking products are concerned. In fact a survey in the market scene

shows that these are the banks that are constantly inventing new products. What is

a major factor to be taken into account is that these products are usually

accompanied by very high profit margins and this basically is mandatory as the

buyers are not sure how to value them.

The only negative point to this whole scenario is that as these products cannot be

patented or copyrighted, they are very often copied quickly by other Investment

Banks. This basically causes a downslide and the margins are forced downward as

the pricing approaches commodity pricing; hence it can be said with conclusionthat in the history of investment banking though many have theorized that all

investment banking products and services would be commoditized, and the

concentration of power in the bulge bracket would be eliminated yet in real life it

has failed to happen. The reason behind this is simple and while many products

became commoditized, new ones were constantly being invented. Take for

example the trading stocks for customers, which is now a commodity style

business. However at this juncture it is worth being mentioned that by creating

stock derivative contracts is now a very high margin business. This is simply as thecontracts are difficult to evaluate and apart from that while many products have

been commoditized, an increasing amount of investment bank profit has come

from proprietary trading. This thus is a must as size creates a positive network

benefit.

It cannot be denied that for first time investors or those not confident of the market

the Investment banks have a vital role to play as they are basically the institutions

that assist public and private corporations in raising funds apart from providing

them strategic advisory services for various kinds financial transactions.

Investment banks differ from commercial banks. Thus while a commercial bank

serve to directly take deposits and make commercial and retail loans the

investment banks act more on an advisor capacity. In recent years, however, the

lines between the two types of structures have blurred and now there is not much

tangible difference between both kinds of banks. It is imperative to mention here

the Glass-Steagall Act of US. The act was initially created in the wake of the 1929


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market crash and what is significant is that it basically prohibited banks from both

accepting deposits and underwriting securities. In the coming years however we

notice that the Gramm-Leach-Bliley Act repealed the Glass-Steagall in 1999.

Whatever be your choice of investment the basic rule remains the same and thats

you must go to a proper person for investment advice before you make a deposit.

Bibliography

I. www.google.com

II. www.wikipedia.com

III. IC-33 Life Insurance

Documents

Report- Krishna Kant 07atcs243