INTRODUCTION

TO
THE
AREA
UNDER STUDY

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Introduction to the area under study

 Wealth Management
 Mutual Funds
 Life Insurance
 ULIP’s

 Commercial Vehicle Finance

Wealth Management

Wealth management is a service provided by financial institutions to help

high net worth individuals protect and grow their wealth. This advanced
investment advisory discipline involves providing a diverse range of
services, such as financial planning, investment management, tax planning
and cash flow and debt management, based on client requirements.

There are two aspects to the wealth management process; protecting

assets from creditors, market crashes or slowdowns, taxes, lawsuits and
other unexpected events, and growing asset values through methods that
actively manage risk and reward profiles to clients needs.

Wealth management helps people determine their monetary goals and

develop actionable strategies that could help them realize their goals. It
also defends their finances against risks. Wealth management is a service
designed specifically for high net worth individuals. The threshold for high
net worth varies by country and institution, but the most common definition
is individuals who have more than US$1 million in assets, not including
their home. Some high net worth individuals have done well in growing
their assets from a low base to their current levels, and may feel that they
can continue to manage their own portfolios. However, as a person’s
wealth grows and/or the markets get more challenging, it becomes
increasingly difficult to realize the expected returns.

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Benefits of Wealth Management

Wealth management helps in:

• Reducing taxes associated with income, capital gains and estate.

• Protecting assets from misjudgments and creditors.
• Improving yields with more diversification and less risk.
• Managing liabilities such as mortgages and college funding

The Main Tools of Wealth Management are:

 Mutual Funds
 ULIPs
 Life Insurance

Mutual Funds

Before we understand what is mutual fund, it’s very important to

know the area in which mutual funds works, the basic understanding of
stocks and bonds.

Stocks: Stocks represent shares of ownership in a public company.

Examples of public companies include Reliance, ONGC and Infosys.
Stocks are considered to be the most common owned investment traded
on the market.

Bonds: Bonds are basically the money which you lend to the government
or a company, and in return you can receive interest on your invested
amount, which is back over predetermined amounts of time. Bonds are
considered to be the most common lending investment traded on the
market. There are many other types of investments other than stocks and
bonds (including annuities, real estate, and precious metals), but the
majority of mutual funds invest in stocks and/or bonds.

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What Is Mutual Fund

A mutual fund is just the connecting bridge or a financial

intermediary that allows a group of investors to pool their money together
with a predetermined investment objective. The mutual fund will have a
fund manager who is responsible for investing the gathered money into
specific securities (stocks or bonds). When you invest in a mutual fund,
you are buying units or portions of the mutual fund and thus on investing
becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available

investments as compare to others they are very cost efficient and also
easy to invest in, thus by pooling money together in a mutual fund,
investors can purchase stocks or bonds with much lower trading costs than
if they tried to do it on their own. But the biggest advantage to mutual funds
is diversification, by minimizing risk & maximizing returns.

Thus a Mutual Fund is the most suitable investment for the common man
as it offers an opportunity to invest in a diversified, professionally managed
basket of securities at a relatively low cost. The flow chart below describes
broadly the working of a mutual fund

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5
Mutual Funds Industry in India

The origin of mutual fund industry in India is with the introduction of the
concept of mutual fund by UTI in the year 1963. Though the growth was
slow, but it accelerated from the year 1987 when non-UTI players entered
the industry.

In the past decade, Indian mutual fund industry had seen a dramatic
improvement, both quality wise as well as quantity wise. Before, the
monopoly of the market had seen an ending phase; the Assets Under
Management (AUM) was Rs. 67bn. The private sector entry to the fund
family raised the AUM to Rs. 470 in March 1993 and till April 2004; it
reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the
total of it is less than the deposits of SBI alone, constitute less than 11% of
the total deposits held by the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India
is new in the country. Large sections of Indian investors are yet to be
intellectuated with the concept. Hence, it is the prime responsibility of all
mutual fund companies, to market the product correctly abreast of selling.

The mutual fund industry can be broadly put into four phases according to
the development of the sector. Each phase is briefly described as under.

First Phase - 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament.
It was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In
1978 UTI was de-linked from the RBI and the Industrial Development Bank
of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase - 1987-1993 (Entry of Public Sector Funds)

Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug
89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of
Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end of
1993 marked Rs.47, 004 as assets under management.

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Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI
were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The
industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there
were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit
Trust of India with Rs.44,541 crores of assets under management was way
ahead of other mutual funds.

Fourth Phase - since February 2003

This phase had bitter experience for UTI. It was bifurcated into two
separate entities. One is the Specified Undertaking of the Unit Trust of
India with AUM of Rs.29,835 crores (as on January 2003). The Specified
Undertaking of Unit Trust of India, functioning under an administrator and
under the rules framed by Government of India and does not come under
the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March
2000 more than Rs.76,000 crores of AUM and with the setting up of a UTI
Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with
recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and
growth. As at the end of September, 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421 schemes.

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Overview of existing schemes in mutual fund category

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 Wide variety of Mutual Fund Schemes exists to cater to the needs
such as financial position, risk tolerance and return expectations etc. The
table below gives an overview into the existing types of schemes in the
Industry.

Type of Mutual Fund Schemes

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BY STRUCTURE

Open Ended Schemes

An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy
and sell units at Net Asset Value ("NAV") related prices. The key feature of
open-end schemes is liquidity.

Close Ended Schemes

A closed-end fund has a stipulated maturity period which generally
ranging from 3 to 15 years. The fund is open for subscription only during a
specified period. Investors can invest in the scheme at the time of the initial
public issue and thereafter they can buy or sell the units of the scheme on
the stock exchanges where they are listed. In order to provide an exit route
to the investors, some close-ended funds give an option of selling back the
units to the Mutual Fund through periodic repurchase at NAV related
prices. SEBI Regulations stipulate that at least one of the two exit routes is
provided to the investor.

Interval Schemes

Interval Schemes are that scheme, which combines the features of

open-ended and close-ended schemes. The units may be traded on the
stock exchange or may be open for sale or redemption during pre-
determined intervals at NAV related prices.

BY NATURE
Under this the mutual fund is categorized on the basis of Investment
Objective. By nature the mutual fund is categorized as follow:

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1. Equity fund:

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 These funds invest a maximum part of their corpus into equities
holdings. The structure of the fund may vary different for different schemes
and the fund manager’s outlook on different stocks. The Equity Funds are
sub-classified depending upon their investment objective, as follows:

• Diversified Equity Funds

• Mid-Cap Funds
• Sector Specific Funds
• Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity
funds rank high on the risk-return matrix.

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2. Debt funds:

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The objective of these Funds is to invest in debt papers. Government
authorities, private companies, banks and financial institutions are some of
the major issuers of debt papers. By investing in debt instruments, these
funds ensure low risk and provide stable income to the investors. Debt
funds are further classified as:

• Gilt Funds: Invest their corpus in securities issued by Government,

popularly known as Government of India debt papers. These Funds
carry zero Default risk but are associated with Interest Rate risk.
These schemes are safer as they invest in papers backed by
Government.

• Income Funds: Invest a major portion into various debt instruments

such as bonds, corporate debentures and Government securities.

• MIPs: Invests maximum of their total corpus in debt instruments

while they take minimum exposure in equities. It gets benefit of both
equity and debt market. These scheme ranks slightly high on the
risk-return matrix when compared with other debt schemes.

• Short Term Plans (STPs): Meant for investment horizon for three to
six months. These funds primarily invest in short term papers like
Certificate of Deposits (CDs) and Commercial Papers (CPs). Some
portion of the corpus is also invested in corporate debentures.

• Liquid Funds: Also known as Money Market Schemes, These funds

provides easy liquidity and preservation of capital. These schemes
invest in short-term instruments like Treasury Bills, inter-bank call
money market, CPs and CDs. These funds are meant for short-term
cash management of corporate houses and are meant for an
investment horizon of 1day to 3 months. These schemes rank low
on risk-return matrix and are considered to be the safest amongst all
categories of mutual funds.

3. Balanced funds: As the name suggest they are a mix of both equity
and debt funds. They invest in both equities and fixed income securities,
which are in line with pre-defined investment objective of the scheme.
These schemes aim to provide investors with the best of both the worlds.
Equity part provides growth and the debt part provides stability in returns.

BY INVESTMENT OBJECTIVE

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 • Growth Schemes: Growth Schemes are also known as equity
schemes. The aim of these schemes is to provide capital
appreciation over medium to long term. These schemes normally
invest a major part of their fund in equities and are willing to bear
short-term decline in value for possible future appreciation.

• Income Schemes: Income Schemes are also known as debt

schemes. The aim of these schemes is to provide regular and
steady income to investors. These schemes generally invest in fixed
income securities such as bonds and corporate debentures. Capital
appreciation in such schemes may be limited.

• Balanced Schemes: Balanced Schemes aim to provide both growth

and income by periodically distributing a part of the income and
capital gains they earn. These schemes invest in both shares and
fixed income securities, in the proportion indicated in their offer
documents (normally 50:50).

• Money Market Schemes: Money Market Schemes aim to provide

easy liquidity, preservation of capital and moderate income. These
schemes generally invest in safer, short-term instruments, such as
treasury bills, certificates of deposit, commercial paper and inter-
bank call money.

OTHER SCHEMES

• Tax Saving Schemes: Tax-saving schemes offer tax rebates to the

investors under tax laws prescribed from time to time. Under Sec.88
of the Income Tax Act, contributions made to any Equity Linked
Savings Scheme (ELSS) are eligible for rebate.

• Index Schemes: Index schemes attempt to replicate the

performance of a particular index such as the BSE Sensex or the
NSE 50. The portfolio of these schemes will consist of only those
stocks that constitute the index. The percentage of each stock to the
total holding will be identical to the stocks index weightage. And
hence, the returns from such schemes would be more or less
equivalent to those of the Index.

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 • Sector Specific Schemes: These are the funds/schemes which
invest in the securities of only those sectors or industries as
specified in the offer documents. e.g. Pharmaceuticals, Software,
Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The
returns in these funds are dependent on the performance of the
respective sectors/industries. While these funds may give higher
returns, they are more risky compared to diversified funds. Investors
need to keep a watch on the performance of those sectors/industries
and must exit at an appropriate time.

Types of returns:

There are three ways where the total returns provided by mutual funds can
be enjoyed by investors:
• Income is earned from dividends on stocks and interest on bonds. A
fund pays out nearly all income it receives over the year to fund
owners in the form of a distribution.
• If the fund sells securities that have increased in price, the fund has
a capital gain. Most funds also pass on these gains to investors in a
distribution.
• If fund holdings increase in price but are not sold by the fund
manager, the fund's shares increase in price. You can then sell your
mutual fund shares for a profit. Funds will also usually give you a
choice either to receive a check for distributions or to reinvest the
earnings and get more shares.

Pros & cons of investing in mutual funds:

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 For investments in mutual fund, one must keep in mind about the
Pros and cons of investments in mutual fund.

Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they

are professionally managed, by well qualified professional. Investors
purchase funds because they do not have the time or the expertise to
manage their own portfolio. A mutual fund is considered to be relatively
less expensive way to make and monitor their investments.

2. Diversification - Purchasing units in a mutual fund instead of buying

individual stocks or bonds, the investors risk is spread out and minimized
up to certain extent. The idea behind diversification is to invest in a large
number of assets so that a loss in any particular investment is minimized
by gains in others.

3. Economies of Scale - Mutual fund buy and sell large amounts of

securities at a time, thus help to reducing transaction costs, and help to
bring down the average cost of the unit for their investors.
4. Liquidity - Just like an individual stock, mutual fund also allows
investors to liquidate their holdings as and when they want.
5. Simplicity - Investments in mutual fund is considered to be easy,
compare to other available instruments in the market, and the minimum
investment is small. Most AMC also have automatic purchase plans
whereby as little as Rs. 2000, where SIP start with just Rs.50 per month
basis.

Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds doesn’t perform in neither the

market, as their management is not dynamic enough to explore the
available opportunity in the market, thus many investors debate over
whether or not the so-called professionals are any better than mutual fund
or investor himself, for picking up stocks.

2. Costs – The biggest source of AMC income is generally from the entry
& exit load which they charge from investors, at the time of purchase. The
mutual fund industries are thus charging extra cost under layers of jargon.

3. Dilution - Because funds have small holdings across different

companies, high returns from a few investments often don't make much

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difference on the overall return. Dilution is also the result of a successful
fund getting too big. When money pours into funds that have had strong
success, the manager often has trouble finding a good investment for all
the new money.

4. Taxes - when making decisions about your money, fund managers don't
consider your personal tax situation. For example, when a fund manager
sells a security, a capital-gain tax is triggered, which affects how profitable
the individual is from the sale. It might have been more advantageous for
the individual to defer the capital gains liability.

Cholamandalam also have its own mutual funds plan. These plans are:

Equity Debt Hybrid

Chola Growth Fund Chola Triple Ace Chola Monthly
Income Plan
Chola Contra Fund Chola Freedom Income -
Short Term Fund
Chola Midcap Fund Chola Liquid Fund
Chola Multi-Cap Fund Chola Short Term Floating
Rate Fund
Chola Tax Saver Fund Chola Floating Rate Fund
Chola Opportunities Chola Gilt Investment Plan
Fund
Chola Hedged Equity Chola Treasury Management
Fund Fund
Chola Global
Advantage Fund

Chola Triple Ace: An income scheme with at least 80 per cent

investments in highest rated fixed income securities, and the balance in

18
high quality money market instruments. It offers a regular and stable
income. India's first 'AAAf' rated income fund (CRISIL), the investment
philosophy focuses on safety, liquidity and returns. It can even be availed
of as part of an asset allocation strategy.

Chola Freedom Income Short Term Fund: An income scheme with at

least 80 per cent investments in highest rated fixed income securities, and
the balance in high quality money market instruments, rated AAAf by
CRISIL. It is designed for institutions / corporates / HNIs / trusts / retail
investors who want tax-efficient and stable returns.

Chola Gilt Fund: An actively managed, medium to long-term fund that

maximizes returns by investing in GOI securities. Investments range from
short-term treasury bills to longer maturity gilt securities. Based on the
interest rate, the duration of the portfolio is shortened or lengthened.

Chola Liquid Fund: A well-diversified and highly liquid portfolio of money

market instruments, government securities and corporate debt, invested in
instruments with a residual maturity or repricing tenor of less than one
year. Rated AAAf by CRISIL, this product is for investors looking for
preservation of capital and high liquidity, and have idle funds for a very
short duration (1 day to 3 months).

Chola Floating Rate Fund: A portfolio of mainly floating rate debt

instruments, money market instruments and fixed rate debt instruments
swapped for floating rate return. Investors in a floating rate fund can hedge
themselves against interest rate volatility.

Chola Short Term Floating Rate Fund: For investors looking at a short-
to-medium-term horizon

Chola Monthly Income Plan: Invests up to 80 per cent in debt and money
market instruments for safety, and 20 per cent in equities, for higher
returns over the medium term – not as risky as pure growth funds. It does
not assure returns, but this product is designed for conservative investors
looking at regular dividend income in the form of dividend.

Chola Opportunities Fund: A focused equity fund with exposure to a few

high growth sectors, with a mix of large cap and mid cap companies,
biased towards a growth style of investing.

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Chola Growth Fund: A diversified equity fund with investment in large cap
stocks, it seeks to deliver a consistent and superior performance, by taking
a correspondingly lower risk.

Chola Midcap Fund (DCMF): Invests in tomorrow's bluechip companies

today. An open-ended equity scheme for capital appreciation, investing
primarily in midcap stocks – companies that have a market capitalisation
from Rs300 crore to Rs3000 crore. It selects stocks which are leaders,
from sunrise industries, globally competitive companies, with niche
positioning, which are proxies to large cap stocks.

Chola Multi-Cap Fund: 'Added' diversification and an opportunity to

capitalise on India's economic growth, the portfolio has an optimal blend of
large, mid and small cap stocks. Large cap and mid cap exposure is
maintained between 25 to 75 per cent, and small caps do not exceed 15
per cent, without bias to any particular sector.

Chola Global Advantage Fund: Provides long term capital appreciation

and / or income distribution by investing predominantly in equity and
equity-related instruments of Indian companies with export
competitiveness or which are expanding the business in global markets –
companies with at least 20 per cent projected turnover from exports of
goods / services over the next three years, selected from a universe of
more than 100 globally competitive companies.

Chola Contra Fund: Generates capital appreciation by investing in equity

and equity-related instruments using a contrarian strategy; buying into
fundamentally sound scrips that have underperformed or not performed to
full potential in the recent past.

Chola Hedged Equity Fund: Captures the growth potential of stocks and
uses an active hedging strategy using index and stock derivative
instruments to reduce the effect of market swings on long term
performance; it generates returns both in bull and bear markets,
generating returns with lower volatility.

Chola Treasury Management Fund: For safety and liquidity, investments

are predominantly in well-diversified and highly liquid portfolio of money
market instruments, government securities and corporate debt.

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The top 15 funds according to ICRA rating are:

TOP 15 FUNDS - PERIOD (LAST 1 WEEK)

Rank Scheme Name Date NAV Last 1 Since

(Rs.) Week Inception
1 JM Telecom Sector Fund - Jun 7.34 4.09 -8.45
Growth 7,
2010
2 Religare Gilt Fund - Long Jun 10.26 2.88 1.09
Duration Plan - Regular - 7,
Growth 2010

3 Tata Growing Economies Jun 10.74 2.52 3.38

Infrastructure Fund - Plan 7,
A - Growth 2010

4 ING OptiMix Multi Manager Jun 10.56 1.64 1.99

Equity Fund - Plan B - 4,
Growth 2010

5 UTI Gold Exchange Traded Jun 1834.95 1.61 23.36

Fund 7,
2010

6 Religare Gold Exchange Jun 1886.28 1.61 62.56

Traded Fund 7,
2010

7 Gold BeES Jun 1836.22 1.6 22.63

7,
2010

8 Kotak Gold ETF Jun 1834.62 1.6 29.15

7,
2010

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9 Quantum Gold Exchange Jun 912.91 1.6 20.74
Traded Fund - Growth 7,
2010

10 Reliance Gold Exchange Jun 1784.5 1.6 24.68

Traded Fund - Dividend 7,
2010

11 Kotak Indo World Jun 6.98 1.6 -14.14

Infrastructure Fund - 4,
Growth 2010

12 SBI Gold Exchange Traded Jun 1866.02 1.59 25.94

Scheme 7,
2010

13 ING OptiMix Multi Manager Jun 10.34 1.57 1.08

Equity Fund - Plan A - 4,
Growth 2010

14 ING OptiMix RetireInvest Jun 11.77 1.55 5.23

Fund - Series I - Growth 4,
2010

15 ING OptiMix 5 Star Multi Jun 13.74 1.55 9.83

Manager FoF Scheme - 4,
Growth 2010

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Process of sale of Mutual Funds in Cholamandalam is as follows:

 Leads Generation/Enquiry Generation

 Coordinate with the customer and arrange meeting

 Educating customer about the products

 Offering products as per his requirement and need

 Sale the product

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 Start

Lead
Generation

Coordinate
and
meeting
with
customer

Educate the
customer
about the
product

Offering
the product Ye
Sale
as per his s
need

N
o

Stop

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The next tool is Unit Linked Insurance Plan (ULIP)

Introduction to ULIP

ULIP came into play in the 1960s and is popular in many countries in the
world.

As times progressed the plans were also successfully mapped along with
life insurance need to retirement planning. In today's times, ULIP provides
solutions for insurance planning, financial needs, and many types of
financial planning including children’s marriage planning.

Unit Linked Insurance Plan - is a financial product that offers you life
insurance as well as an investment like a mutual fund. Part of the premium
you pay goes towards the sum assured (amount you get in a life insurance
policy) and the balance will be invested in whichever investments you
desire - equity, fixed-return or a mixture of both.

In single premium ULIP, you need to pay a single payment and you will
enjoy the benefits throughout the policy term. In case of regular premium,
you need to pay premium on regular basis, it can be paid by annual, half
annual, quarterly and monthly mode.

In terms of investment, both products offers similar options like equity, debt
and liquid. Under regular premium option you may ask for commitment to
pay more. But, under single premium product nobody will ask you to pay
more as a matter of commitment.

In the initial years of ULIP, single premium product offer better returns than
regular premium product. But, it's balance power shifts down latter. But this
is not in effect; the product is sold very aggressively due to IRDA norms.
Regular premium ULIP products are also good in various factors such as
affordability, tax benefit and large return.

There are also ULIP charges to consider than single and regular premium.
It is also important to take an overview of different charges are under ULIP
plans. It includes premium allocation charge, risk cover charges, policy

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administration charges, fund management charges, service tax charge,
miscellaneous charge, etc.

At the end, ULIP is a good mixture of life cover and investment. But don't
buy it for investment purpose only; there are another good options
available for the investment. Unit linked insurance plan (ULIP) is a life
insurance solution that provides the client with the benefits of protection
and flexibility in investment.
It is a solution which provides for life insurance where the policy value at
any time varies according to the value of the underlying assets at the time.
The investment is denoted as unit and is represented by the value that it
has attained called as Net Asset Value (NAV). ULIP came into play in
1960s and became very popular in Western Europe and America. The
reason that is attributed to the wide spread popularity of ULIP is because
of the transparency and the flexibility which it offers to the clients.
As time progressed the plans were also successfully mapped along with
life insurance needs to retirement planning. In today’s times ULIP provides
solution for all the needs of a client like insurance planning, financial
needs, financial planning for children’s future and retirement planning.

What Is ULIP?

ULIP stands for Unit Linked Insurance Plans. As we know that insurance is
for protecting our life from the any uncertain events like death or accident.
The purpose of the normal insurance plan is just protecting the life but not
ensuring any savings for the future. Many people wanted plan which gives
protection also gives the returns for their investment. So, insurance
companies come up with the ULIP plan where the premium about is
invested in the share market and returns better income on the maturity
period.

Unit-linked insurance plans, ULIPs, are distinct from the more familiar ‘with
profits’ policies sold for decades by the Life Insurance Corporation. ‘With
profits’ policies are called so because investment gains (profits) are
distributed to policyholders in the form of a bonus announced every year.
ULIPs also serve the same function of providing insurance protection
against death and provision of long-term savings, but they are structured
differently.

In ‘with profits’ policies, the insurance company credits the premium to a

common pool called the ‘life fund,’ after setting aside funds for the risk
premium on life insurance and management expenses.

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Every year, the insurer calculates how much has to be paid to settle death
and maturity claims. The surplus in the life fund left after meeting these
liabilities is credited to policyholders’ accounts in the form of a bonus. In a
ULIP too, the insurer deducts charges towards life insurance (mortality
charges), administration charges and fund management charges. The rest
of the premium is used to invest in a fund that invests money in stocks or
bonds. The policyholder’s share in the fund is represented by the number
of units.

The value of the unit is determined by the total value of all the investments
made by the fund divided by the number of units. If the insurance company
offers a range of funds, the insured can direct the company to invest in the
fund of his choice. Insurers usually offer three choices an equity (growth)
fund, balanced fund and a fund which invests in bonds.
In both ‘with profits’ policies as well as unit-linked policies, a large part of
the first year premium goes towards paying the agents’ commissions.

Which Is Better, Unit-Linked or ‘With Profits’?

The two strong arguments in favor of unit-linked plans are that — the
investor knows exactly what is happening to his money and two; it allows
the investor to choose the assets into which he wants his funds invested. A
traditional ‘with profits,’ on the other hand, is a black box and a
policyholder has little knowledge of what is happening. An investor in a
ULIP knows how much he is paying towards mortality, management and
administration charges.

He also knows where the insurance company has invested the money.
The investor gets exactly the same returns that the fund earns, but he also
bears the investment risk. The transparency makes the product more
competitive. So if you are willing to bear the investment risks in order to
generate a higher return on your retirement funds, ULIPs are for you.

Traditional ‘with profits’ policies to invest in the market and generate the
same returns prevailing in the market. But here the insurance company
evens out returns to ensure that policyholders do not lose money in a bad
year. In that sense they are safer.

ULIPs also offer flexibility. For instance, a policyholder can ask the
insurance company to liquidate units in his account to meet the mortality
charges if he is unable to pay any premium installment. This eats into his
savings, but ensures that the policy will continue to cover his life.

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Charges under ULIP

Contribution Related Charges

These are the charges that are represented as a percentage of the regular
or single contribution paid. In case of a regular contribution plan, it is
usually high in the first year to pay for the distribution cost. This charge
pays for the issuance and for distribution commissions. These charges are
running for the policy.

Administrative Charges

These are charges that are levied for the administration of the policy and
the related cost of administration of the insurance company, itself. They
are more related to the cost like IT, operational, etc cost of continuing the
policy.

Fund Management Charges

These are the charges for buying and selling debt and equity. These are
the charges are adjusted in NAV itself

Mortality Charges

This covers the cost of providing life protection for the insured and may be
paid once at the start of the policy for a recurrent manner for example this
charges levied to provide the insurance cover under the plan. Normally
these charges are one year charges as per the age of the holder.

Rider charges

Rider charges are similar in nature to the mortality charges as they are
levied to pay for the other protection benefits that the policy holder has
chosen for- like the critical illness benefit or the accident benefit, etc.

28
Surrender Charges

When the policy holder decides to surrender the policy or partially withdraw
some of the units for cash, a surrender charge may be apply.
Surrender charges are used to cover initial expenses that have been
incurred by the company but not yet recovered from the policyholder yet.

Bid offer Charges

In ULIP specifically certain insurers might create a difference in the price at

which they sell the unit and the price at which they buy the units. Investor’s
contributions are used to buy units in the investment fund at the offer price
and are sold when benefits are required at the bid price. The difference
between the offer and bid prices is known as the “bid-offer spread", this is
used to cover expenses when setting up the policy.

Transactional specific Charges

These charges are levied when the client does some specific transaction
like changing funds, topping up the investment component or withdrawals.

Benefits of Unit Linked Plan

ULIP distinguishes itself through the multiple benefits that it provides to the
consumer. The plan is a one stop solution providing
1. Life protection
2. Investment and Savings
(a Market linked fund based on risk profile
(b Switch option
(c Premium redirection
(d Automatic transfer plan(ATP)
3. Flexibility of cover continuance
4. Transparency.
5. Extra protection with riders:
(a Death due to accident .
(b Disability.
(c Critical illness.
6. Liquidity:

29
 (a During the term partial withdrawals.
(b At Maturity.

7. Tax planning.

How to Select the Right ULIP

For a product capable of adding significant value to investors' portfolios,
ULIPs have far too many critics.
A 5-step investment strategy will guide investors in the selection process
and enable them to choose the right ULIP.

1. Understand the Concept of ULIPs

Do as much homework as possible before investing in an ULIP. Gather
information on ULIPs, the various options available and understand their
working. Read ULIP-related information available on financial Web sites,
newspapers and sales literature circulated by insurance companies.
2. Focus on Your Need and Risk Profile
Identify a plan that is best suited for you (in terms of allocation of money
between equity and debt instruments). Your risk appetite should be the
deciding criterion in choosing the plan.
As a result if you have a high risk appetite, then an aggressive investment
option with a higher equity component is likely to be more suited. Similarly
your existing investment portfolio and the equity-debt allocation therein
also need to be given due importance before selecting a plan. Opting for a
plan that is lop-sided in favour of equities, only with the objective of
clocking attractive returns can and does spell disaster in most cases.

3. Compare ULIP Products from Various Insurance Companies

Compare products offered by various insurance companies on parameters
like expenses, premium payments and performance among others. For
example, information on premium payments will help you get a better
picture of the minimum outlay since ULIPs work on premium payments as
opposed to sum assured in the case of conventional insurance products.
Compare the ULIPs' performance i.e. find out how the debt, equity and
balanced schemes are performing; also study the portfolios of various

30
plans. Expenses are a significant factor in ULIPs; hence an assessment on
this parameter is warranted as well.
Enquire about the top-up facility offered by ULIPs i.e. additional lump sum
investments which can be made to enhance the policy's savings portion.
This option enables policyholders to increase the premium amounts,
thereby providing presenting an opportunity to gainfully invest any surplus
funds available.
Find out about the number of times you can make free switches (i.e.
change the asset allocation of your ULIP account) from one investment
plan to another. Some insurance companies offer multiple free switches
every year while others do so only after the completion of a stipulated
period.
4. Go for an Experienced Insurance Advisor
Select an advisor who is not only conversant with the functioning of debt
and equity markets, but also independent and unbiased. Ask for
references of clients he has serviced earlier and cross-check his service
standards.
When your agent recommends a ULIP from a given company, put forth
some product-related questions to test him and also ask him why the
products from other insurers should not be considered.
Insurance advice at all times must be unbiased and independent; also your
agent must be willing to inform you about the pros and cons of buying a
particular plan. His job should not be restricted to doing paper work like
filling forms and delivering receipts; instead he should keep track of your
plan and offer you advice on a regular basis.
5. Does Your ULIP Offer A Minimum Guarantee?
In a market-linked product, protecting the investment's downside can be a
huge advantage. Find out if the ULIP you are considering offers a
minimum guarantee and what costs have to be borne for the same.
Why do insurers prefer ULIPs?

Insurers love ULIPs for several reasons. Most important of all, insurers can
sell these policies with less capital of their own than what would be
required if they sold traditional policies.

In traditional ‘with profits’ policies, the insurance company bears the

investment risk to the extent of the assured amount. In ULIPs, the

31
policyholder bears most of the investment risk.

Since ULIPs are devised to mobilize savings, they give insurance

companies an opportunity to get a large chunk of the asset management
business, which has been traditionally dominated by mutual funds.

Advantage

1. The accretion to the fund invested can be checked on daily basis unlike
the traditional policies.
2. There is lot more flexibilities like partial withdrawal, switching,
redirection, early withdrawal, Sum Assured reduction, top up contribution,
etc.
3. Charges are transparent in nature, with the latest AML guidelines
insisting on common nomenclature of charges for all insurance companies.
4. The customer can time the market by exercising switch options and
make the most when markets are zooming or choose to be conservative
when markets are falling..It’s thus win-win situation
5. He gets a life cover at a nominal cost unlike mutual funds,
6. Almost all companies provide riders like accidental death and
disability/dismemberment riders, critical illness rider, hospital cash benefit
rider, income loss rider, etc
7. Stages in one life like education of children, marriage, and retirement
needs can be soundly planned by the help of ULIPs.
8. Tax advantages are also offered by the ULIPs.

Disadvantages

1. Investors find it difficult to understand the nuances of capital market and

therefore goes by the herd mentality. i.e., they invest because their friends
and family is investing without understanding how ULIPS are designed.
2. ULIPS are attractive for risk taking people and less attractive for risk
averse people.
3. Some consider taking term insurance and a mutual fund as a
combination to beat the ULIP.
4. Some consider charges levied exorbitant and not commensurate to the
returns offered
5. The complicated design of the polices make them less aware of the
product features and chances of misselling by agents are very high.

All of us want to save for a rainy day. We want our money or investment to:
 Give the best possible return and
 Be available to us when we require it.

32
 Financial planning makes this possible. Financial planning is an attempt
to maximize returns keeping in mind the liquidity and security of our
investment. The three basic principles (guiding factors) of financial
planning are:

Setting realistic financial goals

• Starting investments early
• Thinking long term while allowing for short-term needs that may arise.

One can invest money only when one possesses it, which is possible by
saving systematically. Selecting a good saving scheme can do this.

Feature of a Good Saving Plan

(a) Safety
(b) Flexibility
(c) Should have incentive to save continuously without default.
(d) Tax saving
(e) Should fulfill financial objective even in case of death.

Features of an ideal Investment Scheme

(a) Safety
(b) Liquidity
(c) Higher Yield
(d) Capital growth
(e) Tax saving

Safety: refers to financial soundness of investment.

Liquidity: means quickness with which an assets can be converted into

cash whenever required.

Yield: is the amount of money that an investment is expected to earn.

33
Capital growth: Any return, which is not taxable, will be preferred to those
on which taxes have to be paid. A good investment is that which earns
decent returns after providing for taxes and inflation.
However, there is no single wonder investment, which can have all the
above features. A prudent person should look for those investments, which
offer the ideal solution to his personal needs under his own set of
circumstances.

High Returns and Best Returns

(i) These are not necessarily the same.
(ii) High returns may be offset by risk to capital.
(iii) Best returns should be determined by the advantage an investment
offers.

The Investor’s Approach

Investor’s approach can be conservative (safety is of utmost importance),
enterprising (willing to take some risks) or speculative (willing to take high
risk in order to gain high returns). The investor’s approach is related to a
host of personal factors such as:
a) Age and family
b) Future responsibilities

ULIPs- Systematic Insurance cum Investment Plan

Any individual who has purchased a life insurance policy in the last year or
so surely would have a Unit Linked Insurance Plan (ULIP). ULIPs have
been selling like Wonder Products in the recent past and they are likely to
continue to outsell their plain vanilla counterparts going ahead.

A ULIP is a market-linked insurance plan. The difference between a ULIP

and other insurance plans is the way in which the premium money is
invested. Premium from, say, an endowment plan, is invested primarily in
risk-free instruments like government securities (GSECS ) and AAA rated
corporate paper, while ULIP premiums can be invested in stock markets in
addition to corporate bonds and GSECS. So what else apart from this
reason makes ULIPs so attractive to the individual? Here, we have
explored some reasons, which have made ULIPs so irresistible.

Transparency
However, ULIPs offer a transparent option for customers to plan their
various life stage needs through market-led investments as compared to
traditional investment plans.

34
Insurance cover plus savings

ULIPs serve the purpose of providing life insurance combined with savings
at market-linked returns. To that extent, ULIPs can be termed as a two-in-
one plan in terms of giving an individual the twin benefits of life insurance
plus savings. This is unlike comparable instruments like a mutual fund for
instance, which does not offer a life cover.

Multiple investment options

 ULIPs offer variety than traditional life insurance plans. So there are
multiple options at the individual's disposal. ULIPs generally come in
three broad variants:
 Aggressive ULIPs (which invest 80%-100% in equities, balance in debt)
 Balanced ULIPs (invest around 40%-60% in equities)
 Conservative ULIPs (invest up to 20% in equities)

Although this is how the ULIP options are generally designed, the exact
debt/equity allocations may vary across insurance companies. A ULIP
policyholder has the option to invest in a variety of funds, depending on
his risk profile. If one does not have the appetite to invest in equity, they
can choose a debt or balanced fund.

Flexibility

Individuals can switch between the ULIP variants outlined above to

capitalize on investment opportunities across the equity and debt
markets. Some insurance companies allow a certain number of free'
switches. This is an important feature that allows the informed
individual/investor to benefit from the vagaries of stock/debt markets. For
instance, when stock markets were on the brink of 7,000 points
(Sensex), the informed investor could have shifted his assets from an
Aggressive ULIP to a low-risk Conservative ULIP.

Switching also helps individuals on another front. They can shift from an
Aggressive to a Balanced or a Conservative ULIP as they approach

35
retirement. This is a reflection of the change in their risk appetite, as they
grow older.

Works like a SIP

Rupee cost-averaging is another important benefit associated with

ULIPs. Individuals have probably already heard of the Systematic
Investment Plan (SIP), which is increasingly being advocated by the
mutual fund industry. With an SIP, individuals invest their monies
regularly over time intervals of a month/quarter and don't have to worry
about `timing' the stock markets. These are not benefits peculiar to
mutual funds. Not many realize that ULIPs also tend to do the same,
albeit on a quarterly/half-yearly basis. As a matter of fact, even the
annual premium in a ULIP works on the rupee cost-averaging principle.
An added benefit with ULIPs is that individuals can also invest a one-
time amount in the ULIP either to benefit from opportunities in the stock
markets or if they have an investible surplus in a particular year that they
wish to put aside for the future. When you're buying a ULIP, make sure
you select one that works well for you. The important thing is to look for
and understand the nuances, which can considerably alter the way the
product works for you. Take the following into consideration:

Charges

Understand all the charges levied on the product over its tenure, not just
the initial charges. A complete charge structure would include the initial
charges, the fixed administrative charges, the fund management
charges, mortality charges and spreads, and that too, not only in the first
year but also through the term of the policy.

Fund Options and Management

36
Understand the various fund options available to you and the fund
management philosophy and objectives of each of them. Examine the
track record of the funds and how they are performing in comparison to
benchmarks. Who manages the funds and what experience do they
have? Are there adequate controls? Importantly, look at how easily you
can access information about your fund's performance when you need it
-- are their daily NAVs? Is the portfolio disclosed regularly?

Features

Most ULIPs are rich in features such as allowing one to top-up or switch
between funds, increase or decrease the protection level, or premium
holidays. Carefully understand the conditions and charges associated
with each of these. For instance, is there a minimum amount that must
be switched? Is there a charge on the same? Must you go through
medical underwriting if you want to increase the sum assured?

Company

Last but not least, insure with a brand you can trust to honour its
commitment and service you according to your requirements

First and foremost, investors need to understand that a ULIP is a

bundled product of their investments and their insurance proceeds.

37
Since privatization in 2000 and the introduction of ULIPs as a life
insurance product category, the overall insurance penetration in the
country has grown from around 2% to 4%. Today, more than 70 per cent
of the new business premium for life insurers comes from Ulips.

All Ulips have several funds in which your money can be put to work,
much like a mutual fund. Assuming that you choose the growth or the
equity plan, ask for the NAV performance for the last two years at least.
Choose three with the highest performance track record vis-a-vis the
benchmark. Now choose the best performing policy in terms of returns
with the lowest cost.

Here's a 5-step investment strategy that will guide investors in the

selection process and enable them to choose the right unit-linked
insurance plans (ULIPs).
But before we get there, let's understand what ULIPs are all about?
For the generation of insurance seekers who thrived on insurance
policies with assured returns issued by a single public sector enterprise,
unit-linked insurance plans are a revelation.
Traditionally insurance products have been associated with attractive
returns coupled with tax benefits. The returns part was often so
compelling that insurance products competed with investment products
for a place in the investor's portfolio.
Perhaps insurance policies then were symbolic of the times when high
interest rates and the absence of a rational risk-return trade-off were the
norms.
The subsequent softening of interest rates introduced a degree a much-
needed rationality to insurance products like endowment plans;
attractive returns at low risk became a thing of the past. The same
period also coincided with an upturn in equity markets and the
emergence of a new breed of market-linked insurance products like
ULIPs.
While in conventional insurance products the insurance component
takes precedence over the savings component, the opposite holds true
for ULIPs.
More importantly ULIPs (powered by the presence of a large number of
variants) offer investors the opportunity to select a product which
matches their risk profile; for example an individual with a high risk
appetite can shun traditional endowment plans (which invest about 85%

38
of their funds in the debt instruments) in favour of a ULIP which invests
its entire corpus in equities.
In traditional insurance products, the sum assured is the corner stone; in
ULIPs premium payments is the key component. ULIPs are remarkably
alike to mutual funds in terms of their structure and functioning; premium
payments made are converted into units and a net asset value (NAV) is
declared for the same.
Investors have the choice of enhancing their insurance cover, modifying
premium payments and even opting for a distinct asset allocation than
the one they originally opted for.
Also if an unforeseen eventuality were to occur, in case of traditional
products, the sum assured is paid along with accumulated bonuses;
conversely in ULIPs, the insured is paid either the sum assured or
corpus amount whichever is higher.
Insurance seekers have never been exposed to this kind of flexibility in
traditional insurance products and it would be fair to say that ULIPs
represent the new face of insurance.
While few would dispute the value-add that ULIPs can provide to one's
insurance portfolio and financial planning; the same is not without its
flipside.
For the uninitiated, understanding the functioning of ULIPs can be quite
a handful! The presence of what seem to be relatively higher expenses,
rigidly defined insurance and investment components and the impact of
markets on the corpus clearly make ULIPs a complex proposition.
Traditionally the insurance seeker's role was a passive one restricted to
making premium payments; ULIPs require greater participation from
both the insured and the insurance advisor.

Controversies in ULIPs
There is a controversy regarding ULIPs, which arises when SEBI filled
petition against IRDA in Supreme Court. SEBI argue that as the amount
is also invested in market and it is under SEBI control so the insurance
company cannot sell ULIPSs. While IRDA filled his statement as the
insurance is also include in ULIPs so it is under his control. The
Supreme Court give decision that the amount invested in market is
under SEBI’s control while the IRDA secure the interest of insured
amount and there should be more transparency in investment.

39
Process of sale of ULIPs in Cholamandalam is as follows:

 Leads Generation/Enquiry Generation

 Coordinate with the customer and arrange meeting

 Educating customer about the products

 Offering products as per his requirement and need

 Sale the product

40
 Start

Lead
Generation

Coordinate
and
meeting
with
customer

Educate the
customer
about the
product

Offering
the product Ye
Sale
as per his s
need

N
o

Stop

41
DIFFERENCE BETWEEN
MUTUALFUNDS
AND
ULIPs

42
How ULIPs are different from Mutual Funds

ULIPs vs Mutual Funds

Points of
difference ULIPs Mutual Funds
Determined by Minimum
the investor investment
and can be amounts are
Investment modified as determined by
amounts well the fund house
No upper Upper limits for
limits, expenses
expenses chargeable to
determined by investors have
the insurance been set by the
Expenses company regulator
Quarterly
Portfolio Not disclosures are
disclosure mandatory* mandatory
Generally Entry/exit loads
Modifying permitted for have to be
asset free or at a borne by the
allocation nominal cost investor
Section 80C
Section 80C benefits are
benefits are available only
available on all on investments
ULIP in tax-saving
Tax benefits investments funds

* There is lack of consensus on whether ULIPs are required to disclose

their portfolios. While some insurers claim that disclosing portfolios on a
quarterly basis is mandatory, others state that there is no legal obligation
to do so.
The next tool is Life Insurance

What is Life Insurance?

Life insurance ensures that your family will receive financial support in your
absence. Put simply, life insurance provides your family with a sum of
money should something happen to you. It protects your family from
financial crises.

In addition to serving as a protective cover, life insurance acts as a flexible

money-saving scheme, which empowers you to accumulate wealth-to buy
a new car, get your children married and even retire comfortably.

Key Benefits of Life Insurance:

Need for Life Insurance

Today, there is no shortage of investment options for a person to choose

from. Modern day investments include gold, property, fixed income
instruments, mutual funds and of course, life insurance. Given the plethora
of choices, it becomes imperative to make the right choice when investing
your hard-earned money. Life insurance is a unique investment that helps
you to meet your dual needs - saving for life's important goals, and
protecting your assets.

Let us look at these unique benefits of life insurance in detail.

Asset Protection

From an investor's point of view, an investment can play two roles - asset
appreciation or asset protection. While most financial instruments have the
underlying benefit of asset appreciation, life insurance is unique in that it
gives the customer the reassurance of asset protection, along with a
strong element of asset appreciation.

The core benefit of life insurance is that the financial interests of one’s
family remain protected from circumstances such as loss of income due to
critical illness or death of the policyholder. Simultaneously, insurance
products also have a strong inbuilt wealth creation proposition. The
customer therefore benefits on two counts and life insurance occupies a

44
unique space in the landscape of investment options available to a
customer.

Goal based savings

Each of us has some goals in life for which we need to save. For a young,
newly married couple, it could be buying a house. Once, they decide to
start a family, the goal changes to planning for the education or marriage
of their children. As one grows older, planning for one's retirement will
begin to take precedence.

Clearly, as your life stage and therefore your financial goals change, the
instrument in which you invest should offer corresponding benefits
pertinent to the new life stage.

Life insurance is the only investment option that offers specific products
tailormade for different life stages. It thus ensures that the benefits offered
to the customer reflect the needs of the customer at that particular life
stage, and hence ensures that the financial goals of that life stage are met.

The table below gives a general guide to the plans that are appropriate for
different life stages.

Life Stage Primary Need Life Insurance Product

Young &
Asset creation Wealth creation plans
Single
Young & Just Asset creation & Wealth creation and
married protection mortgage protection plans
Children's education, Education insurance,
Married with
Asset creation and mortgage protection & wealth
kids
protection creation plans
Middle aged
Planning for retirement Retirement solutions &
with grown up
& asset protection mortgage protection
kids
Across all life-
Health plans Health Insurance
stages

Cholamandalam deals in the products of TATA AIG Life Insurance.

45
Tata AIG Life is a joint venture of the Tata Group and American
International Group, Inc. (AIG). Tata AIG Life Insurance Company Ltd.
"Tata AIG Life" offers a broad array of life insurance products to
individuals, associations and businesses of all sizes, with a wide variety of
additional coverage to ensure our customers can find an insurance
product to meet their needs.

Life Insurance solution provided by the TATA AIG is as follows:

• Solutions for Individuals

• Solutions for Corporate

Solutions for Individuals: This section contains the plan for individuals not
for the group. Under this the pension plans retirement plans health
insurance plans are the major plans.

The various plans which Cholamandalam deals are as under:

o TATA AIG Life Health Protector

o Invest Assure Optima Plus
o Lakshya Plus
o Swarna Jeevan Plus
o Invest Assure Future Plus
o Invest Assure Pension Plans
o Maha Life Gold

TATA AIG Life Health Protector: This product is designed to protect

individual against most unforeseen causalities through a wide spectrum of
benefits. So that they can live worry-free. Policy premium remains constant
for 5 years.

Key features include:

• Accidental Death Benefit (ADB): Under this benefit, in the event of

your unfortunate death due to accident, your family will receive an
amount equal to ADB sum assured that has been specified by you .
• Total and Permanent Disability Benefit (TPD): Under this benefit
a lump sum amount equal to the TPD sum assured will be paid in
the event of sickness and accident.
• Critical Illness Benefit (CI): This benefit provides you with a lump
sum on diagnosis of any 1 of 12 Critical Illness or Surgeries.

46
 • Cancer Care Benefit: In case you are diagnosed with cancer, the
policy shall provide you with a lump sum amount.
• Term Life Benefit: In the unfortunate event of your death this
entitles your family to the sum assured as opted by you for this
benefit
• Cancer and CI cannot be taken together.

Invest Assure Optima Plus: Tata AIG Life InvestAssure Optima Plus,
a non participating unit-linked endowment insurance solution which
helps optimize individual’s investment returns, with a combination of
high allocation and Guaranteed Addition, while providing individual a
comprehensive financial protection.

Key features include:

• Low Premium Allocation charge from 2nd Year onwards

• Guaranteed Maturity Addition of 7.5% of Regular Premium Fund
Value
• Choose between seven Investment Fund Options i.e. Whole Life
Mid-Cap Equity Fund, Whole Life Income Fund, Whole Life Short
Term Fixed Income Fund, Whole Life Aggressive Growth Fund,
Whole Life Stable Growth Fund, Large-Cap Equity Fund and Super
Select Equity Fund.
• Choose from 5 available riders for added protection. These riders
are not mandatory and are available at a nominal additional cost.

Lakshya Plus: Tata AIG Life Lakshya Plus is an easy to purchase unit
linked insurance plan. The plan provides individual the dual benefit of
investment and protection with just a health declaration. It also acts as
a flexible money saver which helps individual to achieve the right asset
allocation through the benefits of rupee cost averaging.

47
Key features include:

• Policy terms: 15/20/25/30 years

• Premium paying term : same as policy term
• Sum Assured: 5 times the Annualized premium
• Guaranteed Maturity Addition of 8% of Regular Premium Fund Value
on maturity**
• Eight Investment Fund Options to choose from - Top-50 Fund, Top-
200 Fund, Aggressive Flexi Fund, Stable Flexi Fund, Bond Fund,
Large Cap Equity Fund, Infrastructure Fund and Super Select Equity
Fund
• Capitalize on volatile market conditions by saving through
Systematic Money Allocation & Regular Transfer Investment
(SMART)

Swarna Jeevan Plus: Tata AIG Life InvestAssure Swarna Jeevan

Plus, a unit linked non participating pension plan. This plan helps you
to invest your money, build and multiply your capital and you can look
forward to a regular income after you retire.

Key features include:

• Flexibility to choose option of increasing premium every year - A

tool to fight inflation
• Flexibility to choose from amongst five Fund Options & Automatic
Asset Allocation option to adjust your risk profile based on
your age
• Option to save under Systematic Money Allocation & Regular
Transfer Investment - SMART
• Additional Allocation by the company to your fund from third
premium year onwards for the entire term.
• Easy to purchase option with Swarna Jeevan Plus Certificate
• Regular income post retirement
• Flexibility of policy terms

48
.
Invest Assure Future Plus: Tata AIG Life InvestAssure Future Plus is
built as a custom-made retirement solution to meet your needs of
capital accumulation, growth and indeed, multiplication. This unit linked
pension plan invests your money in the fund and term of your choice
after deducting applicable charges.

Key features include:

• Flexibility to choose from amongst five Fund Options – Future Equity

Pension Fund, Future Income Pension Fund, Future Growth
Pension Fund, Future Balanced Pension Fund, Super Select Equity
Pension Fund
• Automatic Asset Allocation option to adjust your risk profile based on
your age
• Option to save under Systematic Money Allocation & Regular
Transfer Investment -SMART
• Easy to purchase option with Future Plus Certificate
• Regular income post retirement
• Flexibility of premium payment option as Single Premium or Regular
Premium
• Guaranteed Addition

Invest Assure Pension Plans: This plan provide a platform ensuring

the upside potential of the equity markets while safeguarding the
investors interest by offering a highest NAV guarantee on maturity. In
addition to this, the product offers a Return on Premium Guarantee on
Death and Vesting.

Key Benefits

• Death benefit: Fund Value at the applicable Unit Price or Return of

all Premium paid, whichever is higher will be paid to the nominee in
case of an unfortunate event of death of the policyholder
• Vesting benefit: On survival to the end of the policy term (till the
Vesting Date), we will pay you the higher of:

49
 o the Fund Value of the respective policy (Apex Pension, Apex
Pension 10, Apex Pension 15 or Apex Pension 20) at the
applicable Unit Price, OR
o the Guaranteed Maturity Unit Price multiplied by the number of
Units of the respective Return Lock-in Fund as on the Vesting
Date OR
o Sum of all premiums paid, provided that all due premiums
have been paid.

Maha Life Gold: This unique policy is an ideal planning vehicle to fund
your retirement. It provides a steady income and insurance coverage for
life. Premiums are payable only for the first 15 years, and can be used to
cover the future expenses of your children.

Key features include:

• A guaranteed annual coupon of 5% of the sum assured every year

for the rest of the insured’s term from the 10th policy anniversary.
• Yearly cash dividends are available from the 6th policy anniversary
onwards (depending on Company performance).
• The entire sum assured is paid tax-free as per current Income Tax
Laws.

Solutions for Corporate: For any corporation, its employees and

customers are its greatest assets. And it is important for the
organization to take the necessary measures from time to time to
maintain their motivation levels. Offering security to them and their
families with insurance cover is one way to show that you care.

TATA AIG also offer solutions for managing the liabilities on Gratuity
and Superannuation products for the employees.

Cholamandalam did not deals in that section

50
COMMERCIAL VEHICLE
FINANCE

51
Commercial Vehicle Finance

Vehicle finance is Cholamandalam Investment & Finance Company's

(CIFCL) largest business, accounting for over 80 per cent of its assets.
CIFCL finances heavy and light commercial vehicles, multi utility vehicles,
cargo three-wheelers (a segment in which it is a market leader) and cars.

It has a strong distribution network, with a presence in 120 locations, major

product presence and strong credit and recovery systems, marked by
customer service excellence. Apart from flexible credit norms, quick credit
decisions and speedy disbursements, CIFCL nurtures long-term
relationships with its customers, even advising them on the appropriate
choice of vehicles for business and personal requirements. The rate of
interest is depending on the IRR (Internal Rate of Return) which varies
from12% to 23% for 4 years. The file charge is 0.5% on the loan amount.

Process of Commercial Vehicle Finance

The process of vehicle loan goes through 3 steps. These steps are:

1) Sourcing (sourcing of sale): Different sourcing channels are Direct

Sales Team, dealerships, Agents, Transport Unions, Banks,
Company’s database
2) Offering finance rate
3) Credit (appraisal of case):Documents collection and verification
4) Operation: Payment to the customer

52
 Start

Sourcing
of sale

Offering
finance No
rates

Ye
s

Credit

Operation

Stop

53
 BOARD
OF
DIRECTORS

54
 Board of Directors

a. Mr. M.A. Alagappan Chairman

b. Mr. Indresh Narain Non-executive Director
c. Mr. R Krishnamurthy Non-executive Director
d. Mr. V P Mahendra Non-executive Director
e. Mr. R V Kanoria Non-executive Director
f. Mr. N Srinivasan Non-executive Director

55
 ABOUT
THE
COMPANY

56
 Company’s Profile

Cholamandalam Investment & Finance Company Limited (CIFCL) was

incorporated in 1978 as the financial services arm of the Murugappa
Group. In 2005, post the joint venture partnership between the Murugappa
Group and Bank Limited, Singapore, the Company was renamed as
Cholamandalam Investment & Finance Company Limited (CIFCL). The
Company that commenced business as an equipment financing company
has now emerged as a comprehensive financial services solution provider
that offers vehicle finance, business finance, home equity loans, mutual
funds, stock broking and distribution of financial products to its customers.
The Company operates from over 140 branches across India with an asset
under management of about Rs.8546 Crores. The subsidiaries of
Cholamandalam include Cholamandalam Securities Limited (DCsec) and
Cholamandalam Distribution Limited (DCDL).

The Murugappa group

Headquartered in Chennai, Rs. 15,907 crores (USD 3.14 billion)

Murugappa Group is one of India's leading business conglomerates.
Market leaders in diverse areas of business including Engineering,
Abrasives, Finance, General Insurance, Cycles, Sugar, Farm Inputs,
Fertilizers, Plantations, Bio-products and Nutraceuticals, its 29 companies
have manufacturing facilities spread across 13 states in India. The
organization fosters an environment of professionalism and has a
workforce of over 32,000 employees. The Group has forged strong joint
venture alliances with leading international companies like Bank, Mitsui
Sumitomo, Foskor, Cargill and Groupe Chimique Tunisien has
consolidated its status as one of the fastest growing diversified business
houses in India.

57
Agriculture and Farm Inputs Engineering
Overview Overview
Fertilisers Tubes, Chains and
Pesticides Metal Forms
Material Sciences
Plantations
Sugar and
Bio-Products
Nutraceuticals
Consumer Durables Services
Overview Overview
Bicycles Financial Services
Insurance Services
IT, Travels and
Marketing Services

58
The business has its origins in 1900, when Dewan Bahadur AM
Murugappa Chettiar established a money-lending and banking business in
Burma (now Myanmar), which then spread to Malaysia, Sri Lanka,
Indonesia and Vietnam. In these 100-plus years, it has withstood
enormous vicissitudes, including strategically moving its assets back to
India and restarting from scratch in the '30s, before the Japanese invasion
of Burma in World War II.

Starting with a sandpaper plant, the Group forayed into making steel safes,
and then into manufacturing. It set up an insurance company, and bought
a rubber plantation; making a small but significant beginning. The rest is
history.

Today, it is one of the country's biggest industrial houses. Group turnover

crossed the USD. 1 billion mark in 2003-04, with an impressive growth of
25 per cent over Rs. 4,206 crore in 2002-03, and a 40 per cent jump in
profit before tax over the previous year. Consolidated Group turnover for
2004-05 crossed USD 1.44 billion, a growth of 20 per cent over the
previous year. In 2005-06, combined turnover increased by 17 per cent to
USD. 1630 million (Rs. 7,340 crore) and net profit (PBT) by 45 per cent to
USD. 177 million (Rs 800 crore). The Group ended the year 2006-07 with
a turnover of Rs. 8,446 crore, and profit before tax of Rs. 649 crore. The
year 2007-08 saw a turnover of Rs USD 2.4 billion (Rs. 9,852 crore).
Group achieved a turnover of Rs. 13617 crs during 2009-10. Today, we
have set ourselves to achieve a total turnover of USD. 7.2 Billion by 2013-
14.

59
 Turnover of Murugappa group

16000
14000
Turnover (in crores)

12000
10000
8000
Turnover
6000
4000
2000
0
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2009-10
Years

60
OBJECTIVES
OF THE
COMPANY

61
Objective of the company

1. Stability in earnings over a business cycle.

2. Profitability in all business segments.
3. Controlled and profitable asset growth.
4. Sound portfolio structure/asset diversification.
5. Support Business Areas & maximize customer satisfaction.

62
 VALUES
OF
THE
COMPANY

63
Values of the company

The value of the company is defined as The Five Lights:

 Integrity

 Passion

 Quality

 Respect

 Responsibility

64
 Integrity
Passion
Quality
Respect
Respon
sibility

65
OBJECTIVE
OF
THE
STUDY

66
Objective of the study

Þ To analyze the recent trend of wealth management market in

Chandigarh.

Þ To analyze the recent trend of vehicle finance market in Chandigarh.

Þ To know the preference of persons in the sectors like Mutual Funds,

ULIPs , Equity etc.

Þ To know how economic condition affect the wealth management and

vehicle finance.
.

67
 RESEARCH
METHODOLOGY

68
Research Methodology

The project is based on the study of the data collected from the different
sources. The primary source of data constitutes the interaction with the
senior sales officer who are directly associated with the sale of various
wealth management tools and their team members, managers directly
associated with the home equity department and their team members and
the managers directly associated with the commercial vehicle finance and
their team members. Interaction with the persons (formal and informal)
interested in wealth management and persons already invested in the tools
of wealth management and questionnaire.

The secondary sources are the annual reports of the company and the
relevant literature and facts and figures available on the problem of the
study in various books, journals and magazines and the company’s
websites.

69
SECTOR
ANALYSIS

70
Sector analysis:

According to the report, India is slated to become a US$1 trillion market (in
assets under management) for wealth management providers by 2012,
with a target market size of 42 million house holdsIn the annual survey
done by Cap Gemini, SA and Merrill Lynch it was found that ranks of
millionaires grew 6% in the previous year, because the number of richer
people grew in India & China where India is competing China. India &
China posted the biggest gain in millionaires advancing by 23% & 20%
respectively.

71
CONCLUSION

72
Conclusion

After studying the overall concept of wealth management we can say that it
has various aspects some are favorable and friendly for the Indian
economy and some are very dangerous for the Indian economy. The
customers have to beware and they have to make SWOT analysis before
choosing the wealth management option. At present Indian Economy is
facing a lot of trouble by increasing inflation and hike in fuel prices in the
Indian as well as international market. As per Indian concept wealth
management can not success in India. But if Indian financial institutions
are engaged and choosing the WM business in foreign countries, most
probably middle-east countries, it may be some relief for the downward
moving Indian economy.

The economic crisis has had moderate negative effects on the

commercial vehicle market. The slowdown of commercial activities in
infrastructure, construction, manufacturing and other sectors resulted
in sluggish demand for commercial vehicles. However, in 2009-10, the
commercial vehicle segment regained its growth momentum, both in
terms of production and sales, on the strong fundamentals of
recuperating demand from almost all prominent sectors.
Especially, passenger carriers registered notable sales momentum and
boosted the overall commercial vehicle development outlook. In
coming years, rapid expansion of cities to suburban areas will also
create more demand for mass transportation vehicles in the country. It
is expected that a major part of India will be well-connected by the end
of 2013-14, which will fuel the demand for commercial passenger
carriers in the country. Keeping this in mind, we have projected the
sales of commercial passenger carriers to register nearly 13%
CAGR between 2010-11 and 2013-14.

73
DATA ANALYSIS

74
 Income Percentage

1.5 - 3 lakh 20

3 - 5 lakh 70

Above 5 lakh 10

80

70

20% of the persons are from the 1.5 – 3 lakh per annum income group

70% of the persons are from the 3 – 5 lakh per annum income group

10% of the persons are from the above 5 lakh per annum income group

60 75
 Portfolios mostly prefers percentage
low risk low return 30
high risk high return 10
moderate risk moderate return 60

70

60
30% of the persons prefer low risk low return portfolio

10% of the persons prefer high risk high return portfolio

60% of the persons prefer moderate risk moderate return portfolio

76
Most of the people now believe in moderate risk and moderate return and
low risk low return because market was very volatile in the past

Amount invested in the sector Percentage

Equity Share 10
Mutual Funds 25
ULIPs 35
Fixed Deposit 30

40

35
10% persons prefer equity share

25% persons prefer mutual funds

35% persons prefer ULIPS

30% persons prefer fixed deposit

30 77
Persons are not interested to invest directly in the share market due to the
past trend

Wealth Management Done By Percentage

Financial Institution 40
Yourself 20
Financial Advisor 40

45

40
40% of person managed their wealth by financial institution

20% of person managed their wealth by their self

40% of person managed their wealth by financial advisor

35 78
BIBLIOGRAPHY

79
BIBLIOGRAPHY

• www.choalmandalam.com
• www.mutualfundsindia.com
• www.iciciprudential.com
• www.tataaig.com

80