Role of Chartered Accountants In Capital Markets

1. Role of Chartered Accountants In Capital Markets By Shubha Ganesh April 2007

2. In 2006 • The Rs 150,000 crores (Rs 1,500 billion) invested by Indian investors in real estate yielded 50% plus capital appreciation on average. • Commercial and retail rentals gave 40 % plus returns.

3. In 2006 • The Rs 358,000 crores (Rs 3,580 billion) incrementallyinvested in Bank deposits on average earned 7 % to 8 % returns • An additional Rs 74,000 crores (Rs 740 billion) went into demand deposits at 3.5 % to zero % returns, a 25 per cent growth over the 2005 number.

4. In 2006 • The Rs 45,000 crores (Rs 450 billion) invested in gold saw an appreciation of around 35 % on average • The Rs 37,000 crores (Rs 370 billion) raised by new equity mutual funds • Total mutual fund equity assets moving to Rs 125,000 crores (Rs 1250 billion). The range of equity fundsreturns was30 to 60 % over the year.

5. In 2006 • Other commodities too gave strong returns, with silver up 58 % over last year's average prices. • Lead, nickel, zinc, copper too hit multiple year highs, as did most soft commodities like wheat, corn and other agricultural commodities. • Cash with the public and small savings both showed declining shares in the investments by Indian investors.

6. In 2007 • Indians are saving 29 per cent of the GDP at present. • The younger generation Indians are earning more and saving more • All these savings have to be invested and managed

7. The Tool • Financial Planning, Investment planning and wealth creation all talk about managing savings • Financial Planning is a broader concept • Taxation is a sub-sect

8. The Managers? • CFP are new professionals who are into Financial Planning • The latest entrants are Banks and NBFCs • They advise people on all types of investments including taxes and estate planning • Not compulsory yet

9. Are they Intruders? • Does this step into our tax consultancy ? • Is it under threat? • Should we limit ourselves to taxes and tax planning?

10. We can do it • Is it not possible to perform this function with little expertise? • Why should we not include investment advisory in our portfolio of services?

11. Why Us? • NBFCs and banks tend to advise clients to buy the products on which they get the best commission • Chartered Accountants with their accounting background and independence and trustworthiness are best suited to take on this role

12. The big picture • Enlarge practice by giving the larger service • Formalize what is being done informally • Better Income

13. Learning Goals of this session • Financial Planning • Applicability to Practice • Applicability to self/Personal life

14. The Pathfinder • Financial planning is the process of meeting a person's life goals through the proper management of their finances. • Financial planning is all about taking charge of circumstances

15. 6 Steps of Financial Planning

16. Overall Plan • Develop an overall investment plan with proper investment portfolio that supports our goals, while staying within your investment time horizon and risk tolerance.

17. Step 2 By ___________, I will have obtained Rs.______. Step 3 I have Rs.__________ available to invest. Date _____________ Step 9 Continue evaluating choices. Step 4 Possible investment alternatives: 1._________________ 2._________________ 3._________________ 4._________________ Step 8 Final decision 1._______________ 2._______________ Step 6 Projected return on each alternative 1.__________ 2.__________ 3.__________ 4.__________ Step 5 Risk factors for each alternative 1.____________________ 2.____________________ 3.____________________ 4.____________________ Step 7 Investment decision 1._______________ 2._______________ 3._______________ Steps to Create a Personal Investing Plan Step 1 My investment goals are: ____________________ ____________________

18. Financial goals • Needs- absolute necessities • Wants- desires

19. Risk management There is risk of loss of both life and property. Life insurance can be used to protect a family against the risk of premature death. Disability insurance can protect against the loss of a persons ability to earn a living. Property and causality insurance can protect our worldly goods against accident and such perils as fire, flood, earthquake and theft.

20. Tax Planning

21. Retirement Planning

22. High risk CommoditiesJunk bondsOptions High Quality Rentalproperty Stocks Mutual funds Government Corporatebonds Utility stocks Securities Lowrisk MoneyMarket Savings Accounts CDs Cash Investment Pyramid

23. Choosing investments • Risk tolerance • Time horizon • Diversification • Asset allocation

24. Asset Allocation • Asset allocation refers to the strategy of dividing your total investment portfolio among various asset classes, such as stocks, bonds and money market securities.

25. Asset Allocation Plan • Determining the proportion of investments in each of the three basic asset classes. • aggressive, • moderate • and conservative.

26. Asset Allocation Goal • Maximize return for your chosen level of risk, or • Minimize risk given a certain expected level of return.

27. The Right Fit • To make the asset allocation process easier for clients, many investment companies create a series of model portfolios, each comprising different proportions of asset classes

28. Risk Profile and Investing

29. Financial Planning is finally balancing the KNOWNS subject to the UNKNOWNS

30. Thank You