OCTOBER 2010 | FINANCIAL PLANNING JOURNAL | 1 OCTOBER 2010 | FINANCIAL PLANNING JOURNAL | 2 EDITOR’s DESK OCTOBER ‘ 10 Volume III, Issue 8 EDITOR Ranjeet S Mudholkar, CFPCM ASST. EDITOR Prashant Kapoor, CFPCM EDITORIAL CONTRIBUTORS Arnav Pandya, CFPCM Insurance Industry in India has come a long way since 1818, when the first life (Chief Coach, FinCare Consulting) insurance company was established in Calcutta. Since then, the Industry has Narayan Krishnamurthy witnessed several changes through multiple phases, the most dynamic one being the Nilanjan Dey (Director, Wishlist Capital Advisors) post deregulation phase from 1999 onwards, which was marked with establishment of the Insurance Regulatory and Development Authority (IRDA) and opening up the COVER & DESIGN sector to competition from private sector players. From the presence of state insurers Ajay V. Sutar alone in the post nationalization period, the sector now comprises of 23 insurers in the life insurance and 24 insurers in the non-life segment. RESEARCH CM Amit Jaiswal, CFP Amidst the growing competition, according to the data published by IRDA, the CM Anisha Jain, CFP insurance penetration in the country has also increased to 4.6% in 2008 from just Aparna Karpate Pushkar Chugh, CFPCM 1.5% in 1990. Today, we are the fifth largest life insurance market in the emerging insurance economies globally and are growing at 32-34% annually. It is also observed MARKETING that The product innovation and distribution are the key areas which are driving the Aditya Gadge, CFPCM industry onto the next level. Dinesh Kriplani Jasneet Bindra Apart from providing coverage for managing personal financial risks, today insurance Nayana Shakya solutions are also promoting savings and helping individuals plan effectively for their Sanjeeva Mathur life goals like child education, retirement etc. The insurance companies are moving Vidhu Mehta from insurance sales focus to marketing an essential financial product. They are also REGIONAL OPERATIONS (NORTH) using multiple channels like Telemarketing, Direct Marketing, Worksite Marketing, Alok Kumar, CFPCM Bancassurance etc. to reach out to their target audience more effectively. The Priti Juneja technology is also playing a pivotal role in distribution at various levels. On one side it Vyas Rai Nagpal, CFPCM is providing tools for meeting the training and learning needs of the sales force, on the other side it is also helping to deliver quality service to customers. SUBSCRIPTION & MEMBERSHIPS Joshana Jain The lead article of this issue looks at how Insurance Distribution is evolving in the Khursheed Azmi Preeti Patne country. In the current times with the use of technology, the insurance distribution Priti Gharat is moving beyond Traditional Agency channel to employing the use of multiple Trupti Mayekar interactive channels like social media marketing, kiosks etc. With the increasing customer expectations and dynamic regulatory environment, many constituents in the FINANCE & ADMINISTRATION distribution chain are also moving away from product sales alone and are building up Manisha Sachanandani capabilities to be able to provide comprehensive advisories. The CFPCM certification Mohamed Iqbal can be a major enabler in this transformation process by equipping distributors with Vijesh Bhoir the requisite skill sets for becoming trusted advisors for the clients. For bulk subscription enquiries, advertisement opportunities, article submissions & letters to Editor kindly Bringing to you the wisdom of leading professionals in the Financial Planning domain, write to; this issue also covers articles on a wide array of topics and practice management areas The Manager, like guiding clients through the transition from Employment to Entrepreneurship, Financial Planning Journal, Exchange Traded Funds and the role it can play in Investment Planning, Capital Financial Planning Standards Board India, 702, 7th Floor, Leela Business Park, Andheri Kurla Road, Protection Funds etc. Andheri (East), Mumbai - 400059 Phone : +91 22 6171 2424, Fax: +91 22 6171 2444 Our aim is to bring together the Financial Planners on a common platform for a Email: [email protected] ; Website: www.fpsbindia.org continuous learning and development. 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Title Registration No. - MAHENG11233/13/1/2007-TC OCTOBER 2010 | FINANCIAL PLANNING JOURNAL | 3 Insurance Distribution Channels Advisory to become crucial The insurance marketplace is undergoing a POINT transformation that may eventually lead to L significant changes in how and where consumers purchase insurance products from. The success CA and future of these new channels will hinge O on the quality and degree of advice they offer F in strengthening distribution and spreading insurance. - Narayan Krishnamurthy 18 3 Editor’s DESK Ranjeet S Mudholkar, CFPCM 7 CHAIRMan’s MESSAGE Ajay Srinivasan, CFPCM 14 8 READERS FORUM PASSIVE INVESTING Letters to the Editor ExchangE TradEd FundS – A Route To efficienT Investing In the present scenario, with the rise of ETFs, and with its ability to provide for higher efficiencies in comparison to the traditional routes for capital market investing, it is important for Financial Planners to give it a due consideration, in line with the client needs. 10 FP REPORTER Amar Ranu Senior Manager, Third Party Products-Research 45 TAX QUERY CORNER Motilal Oswal Securities Limited Questions and Answers on Taxation By Tax Experts S C Vasudeva & Co. 53 PLANNER’S LIBRARY Book Tittle : Predictably Irrational- The Hidden Forces that Shape our decisions 30 Book Reviewed by: CLIENT ADVISORY Aditya Gadge, CFPCM GUIDING CLIENTS THROUGH THE TRANSITION TO ENTREPRENEURSHIP Manager-Marketing & Business Development, FPSB India With the availability of plethora of entrepreneurial opportunities in the current times, many skilled individuals are now taking the entrepreneurial route. The heavy diversion of finances towards their ventures could affect their personal finances adversely. Hence, Financial Planners should to be able to 54 DIRECTORY OF EDUCATION PROVIDERS guide their clients for making a smooth transition without compromising on their life goals. Udayan Ray, CFPCM 57 DIRECTORY OF CFPCM CERTIFICANTS Editor-Outlook Money 78 CONTINUOUS EDUCATION QUESTIONS 30 OCTOBER 2010 | FINANCIAL PLANNING JOURNAL | 4 34 Snapshot 34 CLIENT UNDERSTANDING FINANCIAL ADVISORY AND DECISION MAKING UNDER UNCERTAINTY Realisti c investment forecasts are essenti al to fi nancial advisory. While it may be challenging to accurately esti mate the future worth of an investment portf olio, but the awareness about the range of possible risk and returns is required to be able to take well informed decisions. 38 Lalatendu Raju, CFPCM Senior Financial Planner, iTrust Financial Advisors 38 FP CLASSROM DEMYSTIFYING TECHNICAL RATIOS For considering investi ng into a market linked plan, whether though a mutual fund route or an ULIP, we need to look at some key stati sti cal data on the risk and return of funds that is not as accessible as performance data. Here is an understanding on the same. S. Ramesh Kumar, CFPCM Regional Training Manager ING Vysya Life Insurance Company Limited 42 42 INVESTMENT PLANNING InvESTMEnT PLAnnIng FoR conSERvATIvE InvESToRS - A CASE FOR CAPITAL PROTECTION FUNDS Asset Allocati on for conservati ve investors is a challenging exercise considering their preference for capital safety without substanti ally compromising on returns. A Capital Protecti on Fund could be an investment avenue of considerati on for such investors. Here is a deeper understanding on the same. Debabrata Majumdar Head – Wealth Management K R Choksey Investment Managers Pvt. Ltd. 46 HR MANAGEMENT 46 vALuE cREATIon In SERvIcE EconoMY - THE HR PERSPEcTIvE A CASE STUDY OF STOCK BROKING FIRMS IN INDIA In ti mes of globalizati on and changing paradigms, it is important for fi nancial services organizati ons to be able to create value for all stakeholders. HR plays an important role in culti vati ng the Value Driving Culture within an organizati on, and formulati ng a road map enabling Creati on of Value Chain for the key stakeholders i.e. Employees, Line Managers, Customers and the Shareholders. Dr. M S Manohar Group Head & Vice President - HR Karvy Group Dr. Shankar Anappindi Manager – HR Karvy Group Financial Planning Journal is published monthly by Financial Planning Standards Board, India. Opinions and views are solely of writers and do not necessarily reflect those of the FPSB India & their respective organizations as well. Material published in the Journal is of a general nature and is not intended to be comprehensive nor does it constitute