MMA: Wealth Management – Asset Allocation: Why, How.

Last week, I attended a Madras Management Association program series titled Personal Finance and Wealth Management Series. The first of the series was on Wealth Management and Financial Planning. ICICI Bank wealth management is the knowledge partner for the series. Vineet Dhar Business Head Wealth Management, ICICI Bank Wealth Management and Dhaval Kapadia Head Financial Planning Desk, Wealth Management and Private Banking made an interactive presentation. The Program was chaired by R Raghuttama Rao, Managing Director, ICRA Management Consulting Services Limited
The main theme of the presentation was,
Structured Investment is the way to go.

Structured Investment is based and systematic and scientific methods backed by research.

All aspects of individuals profile and outlook are to be taken into consideration

ICICI Bank’s wealth management and other wealth managers in the ‘industry’ will be more than willing to help anyone willing to take the structured investment route.

Key aspects covered in the first part of the series were guidance for profiling and discussion on Asset Allocation. The benefits of going through the process systematically and more importantly reviewing the progress against goals periodically and effecting course corrections and re-balancing were stressed. As can be expected, knowledgeable and helpful Wealth Managers form ICICI will be happy to help out with a smile and a spectrum of products are available to fit every type of investment need.
The Vineet and Dhaval were pretty scornful of conventional investment wisdom of using gold and real estate to build major portion of your wealth portfolio. The discourse leaning was towards institutionalized and well regulated forms of investments that fits well within their structured framework and tracked by their research radar. And there was extra extra stress in merits of investing in stocks. A clueless investment novice like me is able to see caveats in the discourse. My objections are simple – is there enough quality basic data to give credence to research based approach? This question becomes complex when you consider that much of the Indian economy is unorganized and thus cross verifiable data is hard to come by. And the role of black money in skewing data and research is another of my concern. The concept of well regulated is also a matter of my concern – regulation just means that ordinary folks cannot game the market, whereas the powerful and the mighty( especially the mega Manhattan players) can getaway with anything.

While the intent was to guide people to manage and grow their wealth, the content and presentation had a lot of shortcomings. For instance they started off with a good question, “What is the difference between an Investment and Savings” but never attempted to answer it.

Despite best effort by the Chair Raghuttama Rao to keep questions and discussion to the topic, there was a free run on to macro economics especially currency. The presenters were just feeding the digression rather than directing to the topic of personal finance.

The MMA evening events in the city thus far has always been about high level view of topic under discussion. The audience need to be settled into the ‘hands-on apply it in life’ mode to make the series effective. Perhaps some mocks and well designed games will do the trick.

I was surprised to note that the message the presenters were driving at is ‘Wealth Management is complex, leave it to (our) experts’ where as they must be telling ‘Wealth Management is fun if you know it, We are here to help. In the long run you will find it worth the while’ They were throwing jargons after jargons without any examples to relate. A typical customer outlining his profile and his investments in a simple well made video would go a long way. Made me wonder if ICICI is deviated from the path of reaching out to larger section of people via self service and automation.
6789r come and get gyan from our experts
Overall a very laudable initiative. And I look forward to the next session in the series and my sharing the abundance!

Bonus Links:
More MMA Events.
Another coverage by NrichSoft – a blog about personal finance.


About labsji

I blog, Therefore I exist ! Funny things are funny to me. Cool things are cool to me. Innovations tick me. I attempt spirituality religiously :)
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14 Responses to MMA: Wealth Management – Asset Allocation: Why, How.

  1. Krish says:

    The whole edifice of WM is founded on the conviction that wealth creators can be sweet talked into believing that they don’t make good managers of their own wealth. Wonder why? Simple. When it’s your own creation, you’ll be ultra careful and risk averse in its outlay. A WM gets a life at the point where financial creativity meets an edgy and insecure mind, gently shaking you out of your conservative smugness, instilling a sense of greed. (You said they threw `jargons over jargons’ – now you know why!) Their professed goal is of course to give you the lifestyle of your choice by walking you thro terrains you’ve never been before (stock markets, speculation), but remember – there are no guarantees over their outcome. The only guarantee is that by seeking to *manage* your wealth, they manage to create some for themselves – thro a web of commissions, fees, brokerages, kickbacks and bonuses at every turn and churn. That is guaranteed.

    The name of the game is “in-breeding”. ICICI has its own Mutual Fund (Pru ICICI MF), Life Insurance division (ICICI Prudential), General Insurance (ICICI Lombard), Demat and stock trading portal (ICICI Direct), I-Bank (I-Sec), VC fund (ICICI Venture) besides the bank that it is. All of them will have to survive. By *structuring* your investment needs around the profitability needs of these institutions, they make sure each one of them is `assured’ of a certain income stream, year after year, from you. The WM gets a slice of their revenues as kickbacks. On top of it, the WM will charge you an annual fee (even if your investments depreciate) and a carry (on capital appreciation / profits accruing to you) for this “service” that they do to you.

    Here’s the final blow that’s embedded only in the fine print of the agreement you sign. They make sure that the agreement surfaces only when you are completely brainwashed and you haven’t got your reading glasses. (At your next conference, try asking for a copy and tell me if they gave you one). If their structured investment fails to deliver – or if you find your net worth wiped out without a trace – they aren’t responsible. Overseas branches of ICICI bank already have close to $1.5b in sub-prime mortgage exposures. They have to make it up from somewhere else. You were just meant to be broke.

  2. labsji says:

    Hey Krish,
    Thanks for joining in with an elaborate comment. One thing everyone need to appreciate is ICICI or any other full spectrum Wealth Management Institution is here not with charitable intent, but the basically make money. But the problem comes if there is conflict of interest as you rightly mentioned due to ‘In-breeding”.
    There is no cure like cross verifiable data. And learning on your own to use the available data and wisdom to your advantage.

  3. Krish says:

    For the WM, the problem doesn’t come “if there is conflict of interest” – they make sure there’s a *symmetry of interest* between their various divisions 🙂

    I am not sure verifiable data could be of much help in risk-reward equations. Data comes post event and it can’t guide progressive outcomes of investment calls that are extremely subjective. Yesterday Infosys was a multi-bagger, today it’s a dog of the sensex. It’s a game of making some right calls …bullish or bearish and upon your prayers being answered by the Lord that is the market.

  4. labsji says:

    So you are advocating a follow your instincts approach to investments rather than ‘professionally’ advised wealth management?
    How does one nurtures their investment instincts? Can they borrow at least somethings from the structured investment approach? How to keep the ‘professional’ financial product peddlers at arms length yet get some clues from them?
    Your views and clues on this will be much appreciated.
    The informal, unstructured and fairly unregulated way retail real estate investment happens came up during the discussion. I brought up the topic of venture capital as investment option especially in the context of the GDP growth and entrepreneurial action around it. I was conjecturing that, since the venture ecosystem has not matured and kept pace with the economic growth, there is a good opportunity to fund/invest ventures informally akin to (informal)real estate transactions. It is basically a shade of VC via friends and family network. ( peer-to-peer venture investment aided by systems similar to )
    As someone in the VC. PE space your views on it will be very insightful.

  5. Krish says:

    You can’t learn to swim if you sit on the shore. Start by taking small exposures to a few good quality businesses and watch their performance and the industry to which they belong. Don’t bet the farm just yet, use funds which you would put away every year in long term papers like 15 years PPF or a 6 years NSC. When your money is in, you’ll seriously watch the market everyday, straddle different strategies and start buying businesses instead of just stocks that move up or down. You’ll begin to see patterns.

    Wonder what they said to your question on VC as an investment option… VC funds in the recent past have delivered less than 7% CAGR on an average. Far below the Indian stock market that yielded close to 45% y-o-y since 2004-05. So is real estate. WM will hardly have any clue on that. It’s a cyclical business with a different set of dynamics. You need to be enormously liquid to buy up real estate assets during times of cyclical downturn and distress. Here’s where terms like grave dancer, scavenger etc., would point to astute investors like Sam Zell and Don Trump…

    Your idea of closed-circuit VC funds (family/friends) will work so long as you have a bunch of like minded folks with a sense of adventure. If not, soon you’ll be left to deal with mud slinging and blame game at the first whiff of a downturn, rankling the relationships built thro years of genetics / amity. You have to be a good judge of an early opportunity and it calls for enormous patience while in the trenches, cool temperament while walking with the founding team, connections that yield good early leads, willingness to start all over again if by a bad stroke of luck the ground beneath your feet happens to cave in.

    I guess you’ve blocked links inside comment space. Don’t miss that link in my first comment that tells you volumes of how third party fund managers behave. Check it out.

  6. Feanor says:

    I have no idea about the investment scene in India, but with my close run to the top and subsequent collapse to the bottom during the internet boom and bust, I can make the following points:
    1. why invest in mutual funds? whether they go up or down, the manager takes his commission. better to go for passive index trackers.
    2. when a fund claims that it has returned 50% year-on-year nobody bothers to ask how much risk was taken on-board in order to generate that risk. is a fund taking on annualised vol (risk) of 50% to return 50% better than one that takes only a risk of 30% to return 50%. of course not.
    3. behavioural dynamics tells us that by the time the retail customer enters a booming market, it is probably too late for the biggest gains. likewise, refusing to believe that the markets are collapsing, the common customer stays invested when really he should be cutting losses. in this, i find, the vast majority of fund managers are not much better behaved. check out this paper, which demonstrates that most managers make their money out of sheer luck, and then there are a large number who are so bad that they are losing money entirely by their own incompetence, and not bad luck at all.

  7. labsji says:

    Welcome Feanor to the discussion. The “professional management” in mutual fund is also to be taken with a pinch of salt? Hmmm.
    Increasingly, in every domain, the commoner is much better off taking things on their own hands. The big shift to peer-to-peer. Power to the people etc.

    Will more democratization of the market help. I somehow think the lopsided power distribution between market players is root of many evils.

    Flames welcome!

  8. Feanor says:

    The market, at least in the developed world, is ‘democratic’ to an extent. With e-trading, it’s possible for any person off the street to develop a portfolio; research tools provide as much information as can be swallowed. There are two ways in which the private citizen is screwed: one, the problem of insider knowledge, which is very real (investment banks invariably get access to information somehow or the other ahead of the masses); two, the transaction costs which are much, much higher for retail clients than for institutions. For these reasons, people tend to invest with professionals, but they don’t really bother to investigate if the professionals are any good. “Past history is no guide to future returns” is only the first caveat in choosing a provider.

  9. labsji says:

    Hmmm. Democratic to participate is not enough. Democratic to influence and change the course of the market, having a say etc. The volumes are skewed against the retail investor.

    Power and action shift to the ‘Longtail’. Or better still a market designed by and for the Longtail!

  10. labsji says:

    Gp Capt R Vijayakumar, VSM, ED of MMA writes inviting for the next program in the series:

    I am pleased to attach the soft copy of the invitation card for the programme under Personal Finance and Wealth Management Series being organized by MMA. The objective of this series is to give a strong grounding in all aspects of Personal Finance and Wealth Management to MMA Members. The second presentation under this series on the theme “Insurance and Retirement Planning” with the support of ICICI Bank Ltd as Knowledge Partner is scheduled on Thursday, 7th February 2008 at 6.30 pm at Hotel GRT Convention Centre, Chennai-17. Invitation card is being couriered today and soft copy is enclosed for your advance information. You may kindly block your diary accordingly. Kindly confirm your participation to MMA Secretariat on phone: 24962766 or email: to enable coordination of administrative arrangements.

    Looking forward to see you at the programme on 7th February 2008.

    Thanks & Regards
    Gp Capt R Vijayakumar, VSM

    Executive Director

  11. Pingback: Business » MMA: Wealth Management - Asset Allocation: Why How. Joy Of Innovation

  12. trixs says:

    Why people continue to fell they need financial advisers is beyond me. Spend an afternoon with a few good books and set up an asset allocation plan with vanguard funds. Check out for some example portfolios.

  13. Dear Balaji

    I happened to visit your blog through google. The topic on wealth management presentation by ICICI was worth reading.

    I think the ideal wealth management model will be to charge a small fee every year and that too only when the total invested money of the client grows by certain percentage. This will make sure that the wealth manager handling the investments will worry about growth in clients investments than his incentives.
    I am running exactly the same model of wealth management in my firm Smart Investing Solutions. My name above has link to my blog where I write on markets and investing. Do visit and comment. Your comments will be very valuable.
    Thanks & Regards
    Suresh Kaimal

  14. Celia Hanks says:

    I think that while managing your own investments may be possible for some, it can seem impossible to others based on their financial skills and capabilities. That is why there are wealth management companies out there to begin with. Selecting a wealth manager is not a task that should be taken lightly. One should choose their wealth managers wisely and do their research to ensure that they fully understand the process and what they have to gain from their wealth management services.

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