Since the announcement of LTCG tax on Equity, the markets have not quite settled, and so the investors. You must have been pestered with questions by now, “Do I have to pay a tax on my Investment now?” “You said I'll get tax free Returns?” “Should I sell my investment, so that I don't have to pay any tax?”, and the like. The minds are blocked by perceptions because every newspaper and TV channel has a different story to narrate, which is also the primary factor behind the hype.

How do you answer the questions, and explain the impact of the announcement on the investor's investment is the major challenge at this point of time. It is crucial to give a satisfactory response and demystify the investor' apprehensions,

What's the New Law

Long Term Capital Gains (Investment period > 1 year) of above Rs 1 Lakh from Equity stocks and Equity Mutual Funds, will now be taxed at 10%, which was fully exempt earlier. However, the gains made until 31^st Jan 2018 will be grandfathered, meaning the capital gains made on the investment until 31^st Jan 2018 will be exempt.

Tax Calculation: Amongst the most asked questions by clients at this point, is the tax calculation part. How will the grandfathering work? How much tax will be due on existing equity investments? How about new investments?, etc.

We have the following illustration, which shows the LTCG tax impact on an investment made in an Equity Mutual Fund on different dates, this will help you in solving a lot of queries:

Assumptions:

Investment Value on 31^st Jan 2018 (Grandfathering Date): Rs 5 Lakhs

Redemption Date: 1^st May 2019; Value on Redemption Date: Rs 620,000

So, the above table shows that investors do not have to worry about the gains they have made historically, since all gains made prior to 31^st Jan 2018 are tax free. As we see in the table above, in the first case, on a total gain of Rs 210,000 made over 2 years, the tax liability comes to just Rs 2,000. Also, long term capital gains made after the grandfathering date, upto Rs. 1 lakh, will be exempt.

Focus should be on the Goal: Further, it's not just about tax, the investors must realize that they invested in Equity Mutual Funds with a goal in mind. If they are being skeptical about their investment, ask them if they have fulfilled the goal, if not, how do they plan to provide for the goal? Urge your investors to not go astray. If their goals are still far way, they don't need to worry about tax, rather they should stick to their investments.

Another stance of volatility: You might have nervous investors, especially the ones who may have lately started an SIP, they might not be able to digest the falling NAV's for they aren't yet accustomed to the ups and downs of the market. These investors must be reminded of the inherent volatile nature of Equity markets, you have more than a three decade history packed with instances where markets have dwindled to some news or the other, like this time it's LTCG tax, but it was only a temporary phase, because in all the cases, the markets regained, without fail.

Handholding: The investors need your support at this point of time, if their doubts remain unresolved, they might end up exiting equity and succumb to products which may not conform to their risk profile and investment needs. You lose a client and they might lose a good investment.

To conclude, the cause of the confusion and panic can be largely attributed to lack of clarity. The investors are not likely to go anywhere just for a 10% tax on returns, because there is no other asset class or investment product which can still match Equity, in terms of returns. However, it's important that the investors should not be left to themselves wondering about the connotations of the new tax, they should be explained the impact of the tax with concrete examples, plus they should be reminded of the rudiments, the reason behind investing is not tax saving, but creating wealth and fulfilling goals.

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The government is in preparations of announcing its financial budget for 2019-20 on 1^st February 2019. This year’s budget is of utmost importance as it is the last one before the general elections. The budget is likely to be presented by the railway and coal minister Piyush Goyal who has been given additional charge of the finance ministry as the Finance Minister Arun Jaitley is on a medical leave.

Since the budget comes at a time when the elections are just a few months away, as has been the convention, only an interim budget should be presented. The Economic Survey too would not be presented. However, the budget is keenly awaited as perhaps this is the last opportunity before the NDA government to make some key announcements before the general elections due by May.

Earlier the budget used to be announced on 28 February but now it has been moved to 1^st of February since last couple of years in order to provide adequate time for all allocations and plans to be made before the start of the fiscal year on 1^st of April. It also helps corporates and institutions prepare according to the changes announced in the budget for the coming financial year.

As advisors, it is important for us that we are aware of the details and changes in the budget and also understand a few important concepts from the budget. So let us refresh our basics regarding the budget.

• Union budget: The Union budget is a statement which shows the estimates of the government's revenue and expenditure for the coming financial year which begins on 1 April and end on 31 March. It is the most comprehensive report of the government’s finances in which revenues from all sources and outlays for all activities are consolidated for a particular financial year. It is important for everyone since it gives an idea of the government’s expenditure on various areas and sectors like n subsidies, infrastructure development, social welfare, etc. The government also defines tax rates, subsidy rates, and new policies in the budget.

• Annual Financial Statement (AFS): This is the most important document in the budget. Under Article 112 of the Constitution, the government has to present a statement of estimated revenue and expenditure for every fiscal. This statement is called the Annual Financial Statement.

• The AFS distinguishes the expenditure on revenue account from the expenditure on other accounts. The Revenue and the Capital sections together, therefore make the Union Budget. This document is divided into three sections – consolidated fund, contingency fund and public account. For each of these funds, the central government is required to present a statement of revenue and expenditure.

• Consolidated fund: The consolidated fund is the most important fund for the government. All the revenue for the government from taxes, public sector units, also the money borrowed and the receipts from loans given out by the government. Basically, all the money that will be received by the government will be moved to the consolidated fund. Any withdrawal from the fund has to be approved by the Parliament.

• Contingency fund: As indicated by the name, the fund is allocated for the purpose of meeting any unforeseen expenditure. The fund is generally a Rs 500 crore fund and is at the disposal of the President. Any expenses incurred from the fund has to be approved by the Parliament subsequently and the amount used is returned to the fund from the consolidated fund.

• Public account: The public account is an account which holds the public money. For example, money for provident fund accounts, money from small savings instrument or from other investments with the government. For the public fund, the government only acts as a banker. The money in public account does not belong to the government and has to be paid back to the people at some point in time. Expenditure from this fund is not required to be approved from the Parliament.

• Revenue Budget: The revenue budget comprises of revenue receipts of the government as well as its expenditure. Revenue receipts are divided into tax and non-tax revenue. Tax revenues constitute taxes like income tax, corporate tax, excise, customs, service and other duties that the Government levies. The non-tax revenue sources include interest on loans, dividend on investments. Broadly, the expenditure which does not result in creation of assets for the Government of India, is treated as revenue expenditure. All grants given to the State Governments/Union Territories and other parties are also treated as revenue expenditure even though some of the grants may be used for creation of capital assets.

• Capital Budget: Capital receipts and capital payments together constitute the Capital Budget. The capital receipts are loans raised by the Government from the public (as market loans), borrowings from the RBI and other parties through the sale of Treasury Bills, the loans received from foreign Governments and bodies, disinvestment receipts and recoveries of loans from State Governments and other parties. Capital payments consist of capital expenditure on acquisition /creation of assets, investments in shares, loans and advances granted by the government.

• Finance Bill: At the time of presentation of the AFS before the Parliament, a Finance Bill is also presented as per the Constitution, detailing the tax proposals in the Budget. It also contains other provisions relating to Budget that could be classified as Money Bill. A Finance Bill is a Money Bill.

• Fiscal Deficit: The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government. While calculating the total revenue, borrowings are not included. The government has to borrow money from the public to meet the shortfall by borrowing from the RBI or raising money from the capital markets by issuing different sovereign debt instruments.

• Revenue Deficit: It is the difference between revenue receipts and revenue expenditure. This deficit is the shortfall of the government’s current receipts over current expenditures. Ideally, the revenue deficit should be zero, however, generally that is not the case. The government has to borrow to meets its expenditure.

Sources: www.economictimes.com, www.timesofindia.indiatimes.com, www.indiabudget.gov.in

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Marketing is the life blood of business organisations, which is driven by customers. Marketing is a wide term and it includes all activities which ultimately will result in increasing your brand value and sales. Marketing, thus is not just about advertising or sales but it includes everything from acquisition to maintaining a customer.

The financial advisory / distribution business is one which needs to have a proper marketing plan. It is essential for any advisor to survive and grow in the present competitive market which is fast evolving. As advisors, marketing must be viewed as a must have strategic tool to grow business, and not a nice-to-have frill when you can afford it. If you feel you cannot afford spending much on marketing, perhaps that is exactly what your business needs!

In the financial advisory profession, one has to create a respectful 'image' in the minds of the customers. The customer too should feel that you are a 'premium' advisor who cares and works for them. Starting from client acquisition to client satisfaction, there are immense opportunities for the advisors to engage with the customer and create this brand / image for himself. Effective marketing also gives an opportunity to the advisor to retain, educate and update the client in the rapidly evolving industry. In this article, we are sharing a few essentials, which every advisor must be familiar with:

1. Message: One should be very clear and concise while conveying the idea or information about your product or your practice. The message should be in a format, medium, language, tone and form which is most suitable to your target customer. The message itself should be framed keeping in mind what appeals to the customer.
2. Clarity: You should be well versed with what you are talking about. Information backed by proper data and figures will help you better communicate and convince your clients. Always keep ready information and sales pitch and cases /examples handy when talking to the clients post marketing activity.
3. Storytelling: You can enhance your sales skills by quoting examples or narrating anecdotes of your clients, friends or relatives, who have made enormous returns by investing in mutual funds. Stories always have a better impact than simply reciting statements. However, one would need to be discreet / careful in sharing any confidential information.
4. Timely follow up: After any marketing activity, it is highly recommended that one does a follow up on the same. This will create importance of the message in the customer's mind and would also ensure higher success ratio. In absence of a proper follow up, marketing activities tend to fade away quickly in your customer's mind.
5. Selective: Do not market everything to every client. That would be a foolish strategy. Instead, try to create groups of customers having similar interests /profile and communicate ideas in a targeted manner. Keep a track of what you are marketing to which client. Clients would prefer and respond to communications which are timed / spaced adequately over time and are relevant to them. Do not repeatedly follow up or keep hammering any specific idea to clients.
6. Technology: Thankfully, technology has come to the rescue of the advisor in many ways, including marketing. Automated tools and solutions in CRM and many other modules have made life easy for advisors who are wiling to make use of it. Making technology your partner in marketing is something that every advisor must do to survive and grow in future.
7. Social Media: Having social media and digital presence is ubiquitous – all pervasive in the business today. It is where most of your existing clients are today and it would be wiser for you to use social media effectively to highlight your knowledge, services and also for promotion of new ideas. One has to be careful and alert though in managing social media accounts like Twitter and Facebook. Having a well managed and regularly updated website, is the first step in creating your digital existence.

Apart from the above seven essentials, one also has to ensure that the marketing activities are well directed to achieve something. Here is a list of some of the deliverables or results or benefits which one should aim for in any marketing activity...

• Branding: Creating a superior image / brand about you and your business. Helps create awareness about you and helps you differentiate from others.
• Creating Need: Creating a need /demand for your services and thus creating new clients and/or business opportunities in existing clients. This may include exploring clients for new sales opportunities.
• Communication: Important updates / information to clients on a regular basis to keep him informed. This will include regular operational updates as also business related alerts.
• Education: Helping spread information and awareness to educate clients on products, services, personal finance, etc.
• Seeking Information: Getting feedback /suggestions on your services /offerings or getting data / information from clients needed by you.
• Relationship building: Strengthening relationship with clients by expressing greetings, best wishes, etc. on events, festivals, etc.
• Gratification: Making the client feel happy and to express gratification on your behalf.

Conclusion:
Effective marketing will increasingly become more digital and essential in our industry. There are market forces which will make advisors focus on reducing costs and increasing volumes. On both fronts, effective use of technology will, to a large extent, determine how your business will survive and grow in future. Marketing, especially digital marketing, is slowly finding its way in the core planning equations of your business. The ones who are quick to respond are the ones who are standing in line to success.

About NJ:
We at NJ, are making constant efforts to help you meet your growing and evolving marketing challenges. NJ offers many tools and solutions which can help you do almost all marketing related activities which you can plan in business. Solutions like NJ BizMall, NJ Web Nest, NJ CRM, etc. can help you greatly transform your business. We hope you can explore these services and make full use of same.

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