First Four Chapters PDF

# Chapter 1 - Why Customer Value Enhancement (CVE)? The Customer Value Enhancement (CVE) department, formerly known as the Marketing and Cross Selling Department, was formed in January 2003 to increase non-interest income for branches by cross-selling various insurance, mutual funds, and other pro...

# Chapter 1 - Why Customer Value Enhancement (CVE)? The Customer Value Enhancement (CVE) department, formerly known as the Marketing and Cross Selling Department, was formed in January 2003 to increase non-interest income for branches by cross-selling various insurance, mutual funds, and other products beneficial to customers. - The Marketing and Cross Selling Department was renamed to Customer Value Enhancement Business Unit effective September 6, 2018. - The department was merged into the Resources, CVE, and Wealth Management Business Unit on January 8, 2021. - Initially, the Marketing and Cross Selling department only served customers in the NBG group. - In April 2008, it was formally extended to cover units in the Corporate Accounts Group, and Mid-Corporate Group. The goal of the CVE department is to grow the cross-selling business and fee-based income generated by branches. The department leverages the bank's connections with various large entities to establish and increase cross-selling of retail products to the constituents of these units, such as: - Owners - Promoters - Directors - Employees - Related vendors - Dealers The goal is to make the bank a one-stop shop for financial services, investment products, and customer loyalty/stickiness. **SBI has partnered with the following companies for the distribution of their products and has obtained a license from PFRDA to distribute the National Pension System (NPS):** - SBI Life Insurance Company Ltd - SBI General Insurance Company Ltd - SBI Funds Management Limited - SBI Cards and Payment Services Ltd. - SBICAP Securities Limited # Chapter 2 - Various Subsidiaries of State Bank of India ## SBI Life Insurance Co. Ltd. The state bank of India collaborates with SBI Life Insurance Company Ltd. to sell life insurance products. SBI Life Insurance was started as a joint venture between the State Bank of India and BNP Paribas Cardif. - SBI owns 55.42% of the total capital. - Public and other entities own 44.58% of the total capital. - The bank has been the corporate agent of SBI Life since 2001. - Individual policies are marketed by employees licensed by IRDAI, also known as “Certified Insurance Facilitators” (CIFs). - Group products are sold by any teller of the branches. ## SBI General Insurance Co. Ltd. The state bank of India collaborates with SBI General Insurance Company Ltd. for general and health insurance. - SBI owns 69.11% of the total capital. - This agreement was established September 14th, 2010. - Individual general insurance products are only sold by trained and qualified employees of the bank, called "Specified Persons", and group products are sold by any teller of the branches. ## Mutual Funds: SBI has partnerships with the following Asset Management Companies for the distribution of their Mutual Fund schemes: - **SBI Funds Management Limited:** SBI holds 62.21% and Amundi holds 36.54% stake in the company. - UTI Asset Management Company Pvt. Ltd. - HSBC Asset Management (India) Privet Limited. - Tata Asset Management Limited. - Franklin Templeton Asset Management Company Pvt. Ltd. - ICICI Prudential Asset Management Company Ltd. - HDFC Asset Management Company Limited. ## SBI Cards and Payment Services Ltd. (SBI Card) A leading credit card issuer in India, SBI Card is a subsidiary of the State Bank of India, the country's oldest and largest bank. - SBI holds 68.63% of the total capital. - SBI Card offers a variety of credit card portfolios to individual cardholders and corporate clients. - These include: - Lifestyle - Rewards - Travel - Fuel - Banking partnerships - Corporate cards SBICAP Securities Limited, also known as SBI Securities, is a one-stop shop for all investments. - Their primary business is equity & derivative brokering. - They also distribute mutual funds, retail insurance, fixed income products, and NPS. - They source home and car loans for State Bank of India. # Chapter 3 - Creating Business Opportunities ## Customer Outreach Customer outreach is the process of using various modes of communication to enhance relationships with customers. This can be done through: - Social media - Emails - Review sites - Personal interactions Positive customer outreach enhances the reputation of a business and vice-versa. First impressions are paramount for new customers. - Customer outreach is critical to increasing wallet share in cross-selling business. **To increase cross-selling business:** - **Make sure your customers know about other products and services you provide.** If not, you cannot expect them to know. - **Suggest only relevant products and services.** Customers should appreciate the products and services they are offered. - **Recommend the product at the right time.** The timing of cross-selling can affect a customer's willingness to purchase. - **Up-sells and cross-sells should be recommendations only.** Avoid pushing products or services on unwilling customers. - **Analyze the drivers of cross-selling.** - Analyze your organization’s cross-selling ratio over time. - Identify any factors that are impacting this trend. For example: - **New customer acquisition:** Customer acquisition rates can negatively impact a cross-selling ratio if your team isn't trained to cross-sell these customers. - **New customer cross-selling:** If a new customer isn't presented with multiple offers during the onboarding process, you are missing an opportunity. - **Existing customer attrition:** Attrition rates negatively impact a cross-selling ratio. - **Existing customer cross-selling:** Create a proactive and structured cross-selling strategy that ensures the right customers are approached at the right time with the right offers to promote customer loyalty and mitigate attrition. - **Provide metrics for employees to measure performance.** - This helps track employee engagement and the success of your process. - Setting standards for employees on a customer level can improve cross-selling. - **Identify and share branch-level best practices.** - Measure and analyze variations between branches. - Focus on best practices that are controllable and can be shared. - **Improve the cross-sell communication process.** - The quality of communication is critical to the overall success of your process. - Focus on customer engagement and all channels of communication. - **Implement a short-cycle sales management process.** - Create an environment that fosters continuous improvement. - Utilize tactics like daily huddles and weekly monitoring. - Use the right methods to ensure accountability and focus on the individual level with regard to both actions and outcomes. - **Recognize and reward.** - Keep the recognition and reward system simple and frequent. - Recognize and reward all activities and behaviors that drive cross-selling. - Consider alternative rewards beyond financial compensation. **Increasing Products Offered Per Customer** Marketers should pivot the focus of cross-selling from being bank-centric to customer-centric. Focusing on the customer experience allows you to deliver more than what is expected. - This leads to customer loyalty, higher cross-selling, less attrition, and higher sales and profits. - It reinforces the idea that the key benefit from cross-selling is that it helps customers get all their needs fulfilled in one place. **The most important driver of customer loyalty is customer empathy and trust.** Make sure that cross-selling executives are playing the role of advisors instead of marketing agents to avoid conflicts of interest. Ultimately, the goal is to shift from product-focused banking to customer-focused banking and increase the number of products that each customer subscribes to. # Chapter 4 - Personal Financial Planning ## 1. What is Financial Planning? Financial planning is a critical part of managing your finances. It is necessary to invest your finances to work for you instead of working for money all your life. - **Definition:** Financial planning is the process of identifying one's life goals, translating them into financial goals, managing finances in a way that helps you achieve those goals. - It is a roadmap to reach your financial needs. - It involves assessing your net worth, planning for the future, and strategically managing finances. - It helps you turn your goals into reality. - It is a road map for your personal finances that considers your current and future needs, your risk profile, and your income. - It helps you build a life with less worry by setting priorities and working steadily to achieve your goals. **Financial planning is a crucial component of achieving the various life goals that you set for yourself. These goals can be categorized as follows:** - **Short-term goals:** Buying an LCD TV or taking a family vacation. - **Medium-term goals:** Buying a house or taking a vacation abroad. - **Long-term goals:** Covering the education or marriage of children or planning for retirement. ## Individual's Life Cycle The individual's life cycle can be thought of as stages. - These stages illustrate the roles you are expected to play in your life. - This includes your transition from a learner to an earner to a provider. - Eventually, you will move to empty nester status and finally to the retirement stage. **These stages, broken down by age, are as follows:** - **Learner (till age 20-25):** The learner stage focuses on building a productive future by enhancing knowledge and skills. Focus is on the value of human capital, and thus funds are dedicated to education. Meeting high costs like obtaining an MBA are typical of this stage. - **Earner (from 25 onwards):** The earner stage is when you are employed. You can meet your own needs, and you may also be able to spare some surplus savings. You will likely start to save and invest during this phase. - **Partner (on getting married at say 28-30):** This is the phase when one is married and starts a family. Focus is on raising a family and meeting a host of concerns like purchasing a house, a car, and consumer durables, as well as planning for the children's future. - **Parent (say 28 to 35):** The parent stage is when you are raising children, meeting health and education needs, such as getting your children into good schools. - **Provider (say age 35 to 55):** The provider stage is when your children are teenagers. There are many concerns in this stage related to the costs of education. You must also plan for weddings, which are expensive events in many cultures. - **Empty Nester (age 55 to 65):** When your children have moved out and left the nest, you have entered the empty nester phase. You can manage your finances more freely. You may be able to liquidate your liabilities, like home and mortgage loans. This phase involves setting up a funds pool for retirement and focusing on health protection while your income is still secure. - **Retirement - the twilight years (age 60 and beyond):** This phase is when you stop actively working, and you rely on your savings. The focus is on securing your needs and the needs of your spouse. You will focus on addressing these needs and living until the end of your life. - **Student Phase:** This is the preparatory phase for your career. - **Working Phase:** The working phase is when you earn money. You will save and invest funds during this phase. - **Retirement Phase:** This is the final phase of life, where you will rely on your savings and assets. ## Why Does One Need to Save and Purchase Various Financial Assets? Saving and purchasing financial assets are necessary to meet the needs for each stage of your life. Saving is a composite of two decisions: - **Postponement of consumption:** This involves allocating resources between present and future consumption. - **Parting with liquidity:** This involves exchanging a liquid asset for a less liquid asset. An example is purchasing a life insurance policy which is less liquid than the money you are giving up. ## Life Stages Here are the stages of one's life and the related needs that each stage brings: | Stage | Needs | |:---|:---| | Childhood stage | One is a student or learner | | Young unmarried stage| One has begun to earn a livelihood but is single. | | Young married stage| One has become a partner or spouse. | | Married with young children stage | One has become a parent. | | Married with older children stage| One has become a provider who has to take care of education and other needs of children who are growing older| | Post family/Pre-Retirement stage | When the children may have become independent and left the house, just as birds leaving an empty nest behind.| | Retirement stage| One passes through the twilight years of one's life. | <br> ## Individual Needs The individual needs that arise during the course of life give rise to three types of financial products. These products address the following concerns: - **Enabling future transactions.** - **Specific transaction needs:** This category involves dealing with events that require a commitment of resources. - **General transaction needs:** This category involves money set aside from current consumer habits instead of being tied to a specific purpose. - **Meeting contingencies:** This category concerns the ability to meet unforeseen life events, such as death, disability, unemployment, or natural disasters. - **Wealth accumulation:** This category is characterized by the desire to invest in a way that yields a higher return. It involves committing money for making more money. ## Risk Profile and Investments Your risk profile changes as you move through the life cycle, from young earner to middle ages and then towards the final years of your work life. - **Young erners:** Have a higher risk tolerance. - They are willing to take risks to build wealth. - **Older individuals:** Tend to be more conservative with their investments and focus on securing their wealth. -As you age, the following changes in the investment approach are typical: - **Risk Profile/Investment Style**: If your risk profile moves from **Aggressive** to **Progressive**, the investment style should shift from **Accumulation** to **Consolidation**. - **Risk Profile/Investment Style**: If your risk profile moves from **Secured** to **Conservative**, the investment style should shift from **Spending** to **Gifting**. ## Financial Planning **Financial planning is a process in which a client's current and future needs are considered.** - It involves evaluating the individual's risk profile and income, and charting out a road map for meeting anticipated and unforeseen needs. - It involves recommending appropriate financial products. **Financial planning includes the following elements:** 1. **Investing:** Allocating assets based on one's risk-taking appetite. 2. **Risk management:** Assessing and minimizing risk. 3. **Retirement Planning:** Planning for the retirement stage. 4. **Tax and estate planning:** Ensuring a smooth transition of estate upon one's demise. 5. **Financing one's needs:** Planning to meet one's needs at each life stage. **Financial Planning Involves 360 Degrees of Planning:** ## Role of Financial Planning Financial planning is a multi-faceted process. **There are many reasons why it has become even more vital over time.** - The simple financial planning tools of the past are less relevant today. - The breakdown of joint families means that more people are responsible for their own finances. - The availability of more investment options makes planning more important. - Changing lifestyles, instant gratification, and high levels of debt make it even more important. - Inflation can erode the purchasing power of your savings. - Financial planning is essential to protect you from unexpected expenses, medical emergencies, insurance needs, and tax needs. - Financial planning is also necessary to ensure that your financial goals are met during retirement and that your estate is smoothly passed on to your heirs. ## When is the Right Time to Start Financial Planning? The best time to start financial planning is early. - That will allow your investments to grow over a longer period of time. - The longer your financial planning horizon, the better. - It is never too early to begin financial planning. - This is true for everyone, regardless of their financial situation or age. **Financial planning offers the following benefits:** - **Achieving personal goals:** Financial planning can help you meet your goals. - **Making disciplined financial decisions:** Financial planning encourages a disciplined approach to managing finances. - **Investing wisely:** Financial planning can help you invest wisely. ## Financial Planning - Types **There are many types of financial planning exercises that you can do, each one addressing a specific area of concern.** - **Cash planning:** This focuses on managing income and expenses carefully. - **Insurance planning:** This involves protecting your assets and yourself from unexpected risks. - **Investment planning:** This focuses on determining the best way to invest your money. - **Retirement Planning:** This focuses on ensuring that you have enough money to meet your needs during retirement. - **Estate Planning:** This focuses on the smooth transition of your assets after your death. - **Tax planning:** This focuses on minimizing your tax liabilities. <start_of_image> Diagrams for visual understanding are not possible as they require the image to be present.