Course: Marketing of Financial Services

Internal Assignment Applicable for December 2022 Examination

Question No.1:
Explain the concept of Online Marketing of financial services. How is it changing
theway financial services are sold in India?
Answer:
With the advent of the computer technology and internet, people are spending
more time interacting online than in person. Further, people are deciding on
their buying decisions with the help of online recommendations and reviews as
they find it unbiased than the marketing on the traditional platforms. Thus, it is
more and more important for companies to build a presence online to tap into
newer generations. This has opened a new door of opportunity to all the
industries to engage with the target audience in more creative ways.
The concept of online marketing of financial services is to market relevant
products to the target customers in a concise effective and attractive way by
using social media promotions, targeted creative ads, website and through
promoting positive user experiences.
Technology plays a major role in highlighting one service from the other. The
target customer online is more techno-savvy than the offline customer and has
more options to choose from as there are no geographical limitations. This has
brought a level playing field among all the players in the financial services
market. The companies can’t just promote their product features but have to
build websites and features that are free of bugs and deliver services in swift
and seamless manner.
Online marketing has helped the companies to bring the cost of customer
acquisition down and has enabled them to design better and more innovative
products which can be targeted at niche consumers through targeted reach
without the limitations of huge ad spends. Internet has also enabled the
companies to capitalize on positive customer experiences through word-of-
mouth marketing that has gained huge reach through forums and social media
without physical boundaries.
Thus, it can be concluded that online marketing of financial services has opened
up a huge market for the companies in India. India is a vast country with huge
 Course: Marketing of Financial Services
Internal Assignment Applicable for December 2022 Examination
population, but the recent digital revolution has brought more consumers online
than one can reach through offline promotions to promote their services. This
has also given the companies huge reach to tap untapped customers by utilising
the advantages of technology. But this also makes them vulnerable to bad
publicity if the services are deficient or misleading. The new era of social media
gives unprecedented reach and access for even ordinary public which was not
possible before. Therefore, it is equally important to provide delightful service
experience to the customers once the product is sold.

Question no.2:
One of your clients wants to apply for a Home Loan in the next 12 to 18 months.
Few months back the client had lost his job and delayed his car loan repayments.
The client is worried that this may impact his credit score maintained by Credit
Bureaus. Suggest a roadmap to your client to improve his credit score.
Answer:
Credit bureaus have made it considerably easy for banks to identify the analyse
the credit worthiness of the loan applicants and has revolutionized the lending
market. Nowadays, interest rates for all retails loans are linked directly with the
credit score of the loan applicant more than anything else. Thus, it is becoming
more important with each passing day to be aware of your credit score and
maintain it to get access to credit in the future.
Loan defaults are not always voluntary as there can be many valid scenarios
which may result in default of loan obligations. Though a negative remark,
delayed payments and resulting lower credit score can be rebuilt again through
thoughtful actions. There are a few ways, in which this can be done:
1. By repaying all the overdues and ensuring timely repayments of all his
financial obligations. If the instalments continued to be delayed, this will
further affect the credit score to go down.
2. By closing taking few smaller loans and closing them in full through
regular and timely repayment. Higher positive credit history will boost
the credit worthiness of the applicant. But it should also be noted that
 Course: Marketing of Financial Services
Internal Assignment Applicable for December 2022 Examination
huge amounts of debt at a time will have an adverse effect on the credit
score.
3. By keeping the ratio of secured and unsecured loans healthy as high
amount of unsecured loans will also have a negative impact on the credit
score.
4. By judicious usage of credit cards by not utilising the full limit. It should
be ensured that the credit card bills are paid in full on each due date and
the limit utilised should be well within the sanctioned limit.
5. By keeping a check on the accounts to which he has given guarantee to
and has joined as co-applicant. As any default in those accounts also
reflects adversely on your credit score.
These are the few ways through which he can improve his credit score in the
next 12 months to avail the planned housing loan with lower interests and
without any hassles.

Question no.3:
You are a Financial Planner. Your clients Ameet (aged 33 years) and Supriya
(aged 31 years), have a daughter Rima (aged 3 years) require your help to make
few financial decisions. (You can make any assumptions to further build up your
case.)
a. Ameet wants to buy a Life Insurance cover within a limited budget. He is
confused whether he should buy a ULIP or a Term Plan. Recommend the product
best suited for him giving valid reasons.
Answer:
ULIP or Unit Linked Insurance Plan is a hybrid of both insurance and mutual fund.
Whereas term insurance is pure insurance product where in a specific premium
is paid for a specific cover. It should be noted that part of the amount invested
in a ULIP plan will be invested in the market and part of it is taken for the
insurance cover premium. While it is better to invest in ULIP when compared to
traditional moneyback policies, investing in ULIP alone for a young family will
not give sufficient life cover in an unfortunate event as to get a large cover, the
 Course: Marketing of Financial Services
Internal Assignment Applicable for December 2022 Examination
premiums along with the investment amount will be very high and out of reach
for the most middleclass families.
In this scenario, I would recommend Ameet to invest in a good term plan
covering the future earning of atleast 10 years considering the young age of the
family as it can give sufficient cover to the family at a reasonable cost. He can
keep his investment separate according to the risk appetite and financial goals.
b. Ameet and Supriya want to invest for their daughter Rima’s higher education
for the
long term (over 15 to 17 years). They want to know whether they should make
lump
sum equity mutual fund investments or invest in SIPs of Equity MFs.
Answer: Investing in mutual funds for long term is great option for saving for the
future and get good appreciation in the investment. There are many different
types of mutual funds and many companies offering various products.
Investment in mutual funds can be done as a lumpsum or through SIPs i.e.
systematic investment plans. Investing as a lumpsum should be done by doing
sufficient research and planning as investing in the markets when they are at the
peak of their boom will give you less or even negative returns for considerable
term as opposed to investing when the markets are at the bottom. However, it
is very difficult to know when the market is at the bottom and when it is not
without sufficient research and experience.
Since Ameet and Supriya are planning for saving for the higher education of their
daughter who is still 3 years old and assuming that neither of them have any
deep knowledge in stock market investments, nor a huge amount to invest, I
would recommend them to invest in SIP regularly as investing regularly will
average out the highs and lows of the market to give good return on their
investment in the long term.