Workshops by our College

Last month, International College of Financial Planning and International College of Fashion were invited to various colleges in Delhi & NCR; we were pleased to give a talk to help the youth choose their career wisely.

While International College of Financial Planning visited Pt. Jawahar Lal Nehru College in Faridabad, Agarwal College of Commerce in Ballabhgarh, Bharti College for Women in Janakpuri and Shyam Lal College in Shahdra to speak on various career opportunities in the financial sector to all their commerce students; International College of Fashion visited Janki Devi Memorial College, Rajinder Nagar, to give a talk on “Fashion Entrepreneurship- A Lucrative Career”.  Our prestigious members from the management Mr. Rishi Taparia, Head-Corporate Relations; Mr, Kushal Bhateja, CFA, FRM & Head of Academics at ICOFP and our fashion subject expert Mr Vinod Kaul, IIM A Alumni and Ex FDCI Director, spoke at length on trending careers in the finance fashion world and lucrative career opportunities, respectively. All the sessions were really engaging and students thronged the speaker after the sessions got over with their multiple queries.

Glimpses of UTI Mutual Funds IFAs Training at Radisson Green, Jaipur

On 8th Mar’19, ICoFP successfully conducted its One Day Training on ‘Retirement Planning’ for IFAs of UTI Mutual Funds at Jaipur.

The workshop was custom designed for Financial Advisors aiming to penetrate the retirement market.

The training received an outstanding response and a great feedback from the participants.

Our lead trainer Mr. Dinesh Gupta, a certified financial planners #CFPCM shared tools and techniques that would help IFAs rope in clients and close bigger, better cases by helping clients construct their very own retirement plans.

Behavioural Finance

Cognitive Biases:

Conservatism Bias

Conservatism bias is a belief perseverance bias in which peoplemaintain their prior views or forecasts by inadequately
incorporating new information. This bias has aspects of both
statistical and information-processing errors.

Example: suppose a trader receives some bad news regarding a
company’s earnings and that this news negatively contradicts
another earnings estimate issued the previous month.
Conservatism bias may cause the trader to under-react to the new information, maintaining impressions derived from the
previous estimate rather than acting on the updated information.

Illusion of control

Illusion control bias refers to people’s tendency to
believe that they have control or atleast can influence
the outcome of uncontrollable events.

Example: studies have demonstrated people think they
have more control over the outcome of a dice game if they
throw the dice themselves than if someone else throws the
dice for them, and they are less apt to sell a lottery ticket
they chose than a ticket chosen by someone else

 

Mental Accounting

Mental Accounting refers to the tendency people have to separate their money into different accounts based on miscellaneous subjective criteria, including the source of the money and the intended use for each account.
Example: A beer drinker will probably be willingto pay Rs. 500/- for a beer at an expensive resort. This consumption willbe put in ‘holiday mental account’. At the same time he might refuge paying Rs. 200/- for the same during grocery shopping because this expenditure is in ‘grocery shopping, mental account.

 

Framing Bias

The framing effect is an exampleof cognitive bias, in which people react to a particular choice in different ways depending on how it is presented.
Example: When given a fifty-fifty odd of either winning 100or 500 and a fifty fifty chance of losing either 100or 500. The people actually felt slightly positive when they lost 100because they avoided losing 500. But when they won 100they reported a feeling of dissatisfaction because they didn’t win 500. They felt good about losing 100because the gamble was framed in terms of losses and they felt bad about winning 100because the gamble was framed in terms of gains

 

Availability Bias

Availability bias is a cognitive bias that leads to decisions being based on information and events that are more recent, that were observed personally, and are more memorable. It operates on the notion that if something can be recalled, it must be important, or at least more important than alternative solutions which are not as
readily recalled.

Example: Deciding to continue smoking because you know a smoker who lived to be 100 would be a good example of Availability Bias. In this scenario, the story you can recall plays too big a role in your decision to continue smoking.

Emotional Biases:

Loss-Aversion Bias

Loss-aversion bias is a bias in which people tend to strongly prefer avoiding losses as opposed to achieving gains. Example: example of loss aversion theory can be seen in casinos around the world. There, fun-seekers and hardcore gamblers alike all follow the same pattern: The first round they play–be it
blackjack or slots–is to win. The second round? It’s to recoup losses.

 

Overconfidence Bias

Overconfidence bias is a bias in which people demonstrate unwarranted faith in their own intuitive reasoning, judgments, and/or cognitive abilities. This overconfidence may be the result of overestimating knowledge levels,
abilities, and access to information. Example: A person who thinks he has a photographic memory and a detailed understanding of a subject. The person could show his overconfidence by deciding not to study for a test that he has to take on the subject, thus doing poorly on the test due to lack of preparation.

 

Self-Control Bias

Bias in which people fail to act in pursuit of their long-term, overarching
goals because of a lack of self-discipline. There is an inherent conflict
between short-term satisfaction and achievement of some long-term
goals. Money is an area in which people are notorious for displaying a
lack of self-control.

Example: In the seminal work on self-control pre-school children were
presented with the simple marshmallow test, in which they could either
eat a small snack right away or wait 15 min and get a larger snack.
Around 67% of the children in the original study failed to resist
temptation and ate the small snack, indicating lower level of self-control

Status Quo Bias

Status Quo bias is an emotional bias in which people do nothing instead of making a change. People are generally more comfortable keeping things the same than with change and thus do not necessarily look for opportunities where change is beneficial. Given no apparent problem requiring a decision, the status quo is maintained.

Example: In Germany, a small town had to be relocated due to a mining project. Citizens were offered many plans for a new town, but citizens voted for a plan which closely resembled the old town with an inefficient serpentine look which had evolved for no rhyme or reason over the years.

Endowment Bias

Endowment Bias is an emotional bias in which people value an asset more when they hold rights to it than when they do not. Endowment bias is inconsistent with standard economic theory, which asserts that the price a
person is willing to pay for a good should equal the price at which that person would be willing to sell the same good. Example: An individual may have obtained a case of wine that, at the time, was of relatively low cost. If an
offer were made at a later date to acquire that wine for multiples of the original price, the endowment effect might compel the owner to refuse any and all offers, despite the potential monetary gains. There is a sense of personal welfare over actual wealth that is believed to drive such sentiment. So rather than take payment for the wine, the owner may choose to drink it themselves.

 

Vipul Bhatnagar,
MBA-FA(2017-19)

Mutual Fund – How To Invest In Mutual Funds In India

What does a mutual fund actually do?

A mutual fund gathers money from investors and parks this money into investments that an investor
wants. The main objective of Mutual Fund Company is investment of investor’s money.
Open-ended funds: These funds buy and sell units on a continuous basis and, hence, allow investors to
enter and exit as per their convenience. The units can be purchased and sold even after the initial offering
(NFO) period (in case of new funds). The units are bought and sold at the net asset value (NAV) declared
by the fund.
Closed-ended funds: The unit capital of closed-ended funds is fixed and they sell a specific number of
units. Unlike in open-ended funds, investors cannot buy the units of a closed-ended fund after its NFO
period is over. This means that new investors cannot enter, nor can existing investors exit till the term of
the scheme ends.

What you need to begin investing in mutual funds?

To begin investing, the first thing you need to do is to be “KYC compliant”. This is nothing but a
submission of your address proof, photographs, date of birth proof and definitely your PAN card. You can
directly approach brokers for investing in mutual funds or can directly approach the mutual fund house. It
is important to remember that you have to update your KYC each time you change your address.

What are the Types of mutual funds that you can invest in?

Equity related mutual funds, which put bulk of their money, as high as 80 per cent in shares. These are
risky. They not only give you high returns, but, you can also lose money.
Debt related mutual funds, unlike equity mutual funds, they out their money in safe instruments like
government securities.
Balanced funds, which put a little money in equities and little in debt.

The type of returns that you can get from mutual funds

There are two types of returns that you can get from a mutual fund. One is the capital appreciation and
the other is dividends. So, when you invest, you have to choose either a dividend plan or a growth
plan. Under the growth plan the money is not distributed like dividends, but is added back and the
scheme grows.

How are returns from mutual funds taxed in India?

Under the dividend distribution plan, the dividend earned by the investor is tax free in the hands of the
investor. In fact, this is same like equity shares where dividends are tax free, up to a sum of Rs 10 lakhs.
On the other hand if you go in for the growth plan, there is a capital gain that applies on the units that are
sold at a profit. Hence, it is always advisable to take a look at the option of dividend distribution. There is
no tax liability on equity mutual funds, if the same is sold before one year. However, there would be a tax
of 15 per cent if you sell your equity mutual fund before a period of one year.
Tax saving mutual fund are a good option to save tax. They offer tax savings under Sec 80C. You can
invest in them through the Equity Linked Saving Schemes (ELSS). The lock-in period here is 3 years and
the amount is invested in equities. The good thing is that the returns are tax free and you also gain by
way of Sec 80C benefits. You can also invest through ULIPs, whereby you would get the same tax
benefits, as well as insurance. The advantage of ULIPs over ELSS is that the former gives you insurance
and an option to invest in debt. In ELSS, mutual fund parks all their money in equity and related schemes.

A list of mutual funds in India

Most of the equity mutual funds give good returns when the markets are climbing. There are many mutual
funds in India. Some of the top Mutual Funds are SBI Mutual Fund, Reliance Mutual Fund, HDFC Mutual
Fund, ICICI Prudential, Birla Sunlife, Quantum Mutual Fund, DSP Black Rock Mutual Fund, Franklyn
India etc. Each fund runs a very wide range of mutual fund scheme that investors can choose from.

Important terms in a mutual fund

Expense ratio: This ratio is nothing but the expenses that a mutual fund house incurs on advertising and
selling, administrative costs to manage the fund etc. This is deducted from the investor’s returns.
Expense ratio= Expenses Incurred per Unit/Average NAV
Exit load: Amount received by the investor at the time of selling 1 unit or Amount paid by the company at
the time of repurchasing 1 unit.
Exit load= NAV (1- Exit load)
Entry load: Amount paid by the investor for purchasing 1 unit or Amount received by mutual fund
Company in selling 1 unit.
Entry load= NAV (1+ Entry load)
NAV: The net asset value is the rate at which an investor’s, buys and sell the units of a mutual fund. NAV
is calculated on daily basis while considering market value.
NAV= Total assets- total external liabilities/ Total number of units
Units refer to equity shares.
KIM (Key Information Memorandum): It is a document which states all the information relating to mutual
fund scheme. It is just like a prospectus.
NFO: NFO stands for New Fund Offer. It is just like an IPO (Initial Public Offer) in case of equity shares.

Ultimately, whether you invest in gold, bonds, fixed deposits or mutual funds, it is all about returns. I
believe equity mutual funds in the longer term have generated superior returns than bank deposits. If you
are a long term investor it beats returns from gold and real estate. The debt mutual funds tend to give you
returns almost similar to bank deposits and government securities.

Ankit Adlakha,
MBA-FA(2018-20)

Corporate Governance

Corporate governance can be defined as the system of internal controls and procedures by which individual companies are managed. It basically provides a framework for any company for dos and don’ts. It defines rights, roles and responsibilities of every individual in the organization.

These frameworks, however, could differ among countries and jurisdiction. The big picture is to consider the interest of all the stakeholders while running an organization.

Necessity of Corporate Governance

Weak corporate governance is found to be the most common reason behind any company failure. A lack of proper oversight by the board of directors, inadequate protection for the minority shareholders and incentives at companies which promote risk taking are some of the key drivers for company’s management to neglect corporate governance.

Poor corporate governance practices have resulted in several high-profile scandals and corporate bankruptcies over the past several decades. One of the examples of such poor corporate governance currently in the market is DHFL.

Dewan Housing Finance Ltd (DHFL) Scam

Investigative portal Cobrapost alleged a Rs 31,000-crore scam by the promoters of non-banking finance company Dewan Housing Finance Ltd DHFL, using bank loans, which it claimed routed through shell companies and passed on to the promoters. This money was then used to acquire assets overseas, including property, shares and a cricket team in Sri Lanka.

Details about the DHFL Scam (Source: Cobrapost)

• Created dozens of shell entities, largely with a nominal capital of Rs. 1 lakh, divided them into small groups of two–four companies, with a lot of them having the same/similar addresses and having the same set of initial directors, and on many occasions having the same group of auditors to mask the financial details

• Disbursed huge loans to these shell companies mostly without any security and/or collateral, and the proceeds  appear to have been used for creation of private assets both offshore and in India

• Disbursed loans amounting to thousands of crores to these shell companies in the name of secured loans against slum development projects without any due diligence or checking of collateral or maintaining adequate debt–equity ratio

• Disbursed loans in a single tranche, rather than following the established norm of disbursal in stages against progress of the project works

• Ensured that most of the shell companies hid the name of the lender DHFL, the terms of loan and terms of repayment in their financial statements to be submitted as required by the law

• Advanced monies to several companies (run from the same address) in Gujarat and Karnataka around state elections
Given donations in crores to the Bharatiya Janta Party (BJP)

• Been involved in illegal insider trading, and violation of Securities and Exchange Board of India (SEBI) takeover regulations, amounting to approximately Rs. 1,000 crore

• Created offshore assets of approximately Rs 4,000 crore

• Bought Wayamba, a Sri Lanka Premier League cricket team, by using loan money dubiously advanced by DHFL.

Scale of FraudTo just gauge the scale of fraud, DHFL’s net worth is Rs 8,795 crore with cash in hand of Rs. 2468.14 crore. It has, however, taken loans from banks and financial institutions to the tune of Rs 96,880 crore, including Rs. 31,312 crore in the form of non-convertible debentures, Rs. 36,963 crore from banks, Rs. 2,965 crore from external commercial borrowings, Rs. 2,848 crore from the National Housing Board (NHB), Rs. 9,225 crore in public deposits and Rs. 13,567 crore from other sources. Out of this sum, the company has disbursed Rs. 84,982 crores in loans and advances to other entities. According to the annual report, DHFL has secured loans from at least 36 banks.Consequences of Poor Corporate Governance Fundamentally DHFL was a good company, but due to management’s fraud and their poor corporate governance, there are huge losses not only to the public sector banks, such as State Bank of India and Bank of Baroda, with an exposure of over Rs. 11,000 crore and Rs. 4,000 crore, respectively, but also to the foreign banks, debenture holders, and to all the shareholders of DHFL. Also it will lead the entire capital market into utter shock and severe liquidity crunch, especially after what happens with IL&FS.Since there were also huge amounts of tax evasion by DHFL, the government is also at loss. The stock price of DHFL has fallen by more than 80% in last 6 months leading to the fall of market Capitalisation from Rs. 19,695 crore to Rs. 3,635 crore in the same period.

If such scams are not identified, resolved and persons responsible punished, will damage India’s prestige on the world stage. Investors and institutions will fear to invest in India.

More examples of Poor Corporate Governance

Recently there have been more such corporate governance issues. We can take again a very recent example of  Zee and Essel group chairman Subhash Chandra who acknowledged that he had committed mistakes and apologized to banks, non-banking finance companies, and mutual funds as he had not lived up to their expectations.

Subhash Chandra is the promoter of Zee Entertainment which is a profitable, high margin operating and a fast-growing mass media company. To boost the company growth further, the promoter started pledging Zee’s shares and took the loan to invest in various subsidiaries so as to generate more income sources apart from their core business. They invested zee’s money in various road projects, power projects, solar projects, etc. which are not at all related to the company’s core business. The same thing they have done with DishTV, which is already a debt-laden company. The promoters have pledged the companies share, invested it in non-core activities and now they are neither able to generate returns nor they are able to roll over the loans. The Essel group has to meet interest or principal obligations on borrowings against pledged shares till Sept. 30 otherwise, as per SEBI regulations, rating agencies will downgrade the Essel Group’s debt instrument. That would force mutual funds to write down the value of the investment and would set off another crisis for them after IL&FS. Shareholders have also taken the hit as the share price of both the DishTV and Zee Entertainment has fallen by approx 44% and 25% respectively in last one month.

Just because of the poor decision by the promoters, all the other stakeholders had to suffer and this is why good corporate governance is a very important aspect for all the stakeholders.

 Shivam Daga, 
MBA-FA(2018-20)

Arun Mani Tripathi

I am a subject matter specialist in International Derivatives and Portfolio Management and currently handling various independent national and international assignments.

My experience in risk management is over 6 years but prior to this I have worked in relative field and got exposure in management consulting and investment banking.

Though I started my career in banking and finance in the year 2010 handling client relationship in Kotak Mahindra Bank, soon in 2011, I moved to investment banking with a then upcoming Indian company ‘FIHL’ which was taking baby steps to enter in investment banking and managing premium investors who could act as angel investors in the time to come. I looked after the Asian (covering India and Singapore) market for them. After gaining exposure till the mid  of 2012, I expanded my career further in risk management and specialised in Derivatives Market and started with my own venture, RB Capital.

My international exposure in Derivatives and Portfolio Management has got built through various clients and different Financial markets. The major chunk of business comes from India, USA, London, UK and France. I further expanded my company RB Capital and started a joint venture with Greenbucks Securities Pvt. Ltd. in 2015

Managing capital market and derivatives is a challenging role. It is important to understand the entire financial system to make risk mitigation strategies, maximizing returns of your client and managing day to day operations. It requires an exquisite sense of timing and strategies. This is one of the major aspect that got to learn in my course at ICoFP.

I completed my master diploma from ICoFP in the year 2008-10 as a student in Post graduate diploma in Securities Analysis and Trading popularly known as ‘PGDSAT’. It was a wonderful experience with ICoFP. I got  my campus placement  in  ‘Kotak Mahindra Bank’  which helped me take the first step in  my career. Apart from the financial sector, I am now happy being a part of ICoFP as a visiting faculty at Sharegurukul as well.

 

INHOUSE WORKSHOP

International College of Financial Planning organized an in-house session on February 18th, 2019 at its ITO Campus inviting students from Shri Ram College of Commerce and Mata Sundri College on the topic “Trending Career Opportunities in Finance” by subject expert Mr. Kushal Bhateja, CFA, FRM and Academic Head @ ICOFP. It went out to be a full house with great learning experience for all the participants. A questionnaire round later summed up the session.

Faculty Development Program

In line with its mission to spread financial education in the country, ICoFP has taken a unique initiative in the form of ‘Faculty Development Program’. Aimed at empowering faculty members/teachers/lecturers to take more informed decisions and manage their finances more efficiently, the program was conducted on 16th Feb’19 by our team of expert trainers.

The session was led by Mr. Anil Chopra Group Director – Corporate Affairs who emphasized on the need of Goal Setting on Financial Planning followed by Mr. Kushal Bhateja who elaborated on various investment opportunities available in today’s market.

Mr. Dinesh Gupta, CFP and head of Financial Planning program at ICoFP, further expanded on how to create a balance of various assets under one’s portfolio to be able to meet the financial goals both short term as well as long term.

The session witnessed participation from faculty members from various colleges including PGDAV, Hansraj, Aurobindo and more. ICoFP looks forward to more such events.

UTI Mutual Fund (Chandigarh)

UTI Mutual Fund (Chandigarh)- IFAs Training- Retirement Planning (Mr. Dinesh Gupta & Mr. Awadhesh Singh)

ICoFP successfully conducted One Day Training on ‘Retirement Planning’ for IFAs of UTI Mutual Funds at Chandigarh on 23rd Mar’19.

The workshop was custom designed for Financial Advisors aiming to penetrate the retirement market.

The training was delivered by Mr. Dinesh Gupta & Mr. Awadhesh Singh. Mr. Ashok Kumar, Regional Head of UTI, welcomed the trainers & introduced the topics to IFAs. There were more than 50 IFAs who attended the event.

Our trainers who are certified financial planners #CFPCM shared tools and techniques that would help IFAs rope in clients and close bigger, better cases by helping clients construct their very own retirement plans.

It was a very informative & very interactive training session.

GUEST LECTURE AT NDIM:

A  1 hour 15 minutes guest lecture was organized by  New Delhi Institue of Management Studies at their premises, 50B&C Tughlakabad Extension on 7th February, 2019.The guest lecture was delivered by Mr. Anil Chopra (Group director Bajaj Capital). Prof Ruchi Arora from NDIM welcomed the students & introduced the topics to students.

There were more than 60 students of NDIM

What is Behavioral Finance & what are the Wealth Creation Strategies were presented

Some of the key points discussed during session were

  1. Set your financial goals
  2. Know your risk profile
  3. Create an investment plan
  4. Choose asset mix
  5. Choose investments
  6. Timely review of Investment plan

 

It was a very informative and very interactive session which was followed by facilitation of Mr. Anil Chopra.