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

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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

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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.

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Contents

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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

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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

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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.

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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.

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• 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.

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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.

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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

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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

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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

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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

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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.

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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)

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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.

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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

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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.

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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

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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

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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”

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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?.

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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?

29