Ganesh Murthy, CFO, Dell Services
The Indian Wealth Management market is on a sustained path of growth, given India’s long-term economic prospects, positive demographics, rising income levels and current low penetration. India is currently ranked among the Top 10 nations in terms of total private wealth held as per Capgemini’s World Wealth report. The aggregate wealth held by Indian High Net worth Individuals (HNI)
(i.e. individuals with investable assets of $ 1 million or more) is expected to grow at a CAGR of 27 percent over next five years to approximately Rs. 400 Trillion.
This, combined with robust GDP estimate by IMF of 7.5 percent in 2016 and 2017 and growing allocation to financial assets by HNIs, augurs well for the Indian Wealth management industry.
Importance of Wealth Management in India:
Although 8 percent of the total population in India represent 45 percent of the total wealth, only 20 percent wealthy families take advice from wealth managers. However, this number is growing steadily as more and more client seek advice for:
1) Asset Management
2) Financial Planning (specific short term and long term goals)
3) Tax Planning
4) Estate Planning
Around 69 percent of total HNI population in India is below the age of 55 years. This population seek a wealth manager as they neither have the expertise nor the time to monitor their investments.
Evolving landscape of the Wealth Management industry in India:
With the growing population of HNIs outside of tier 1 cities, penetration and access to services becomes a growing challenge. With technology being the prime driver of businesses, there is lesser and lesser affinity to be tied down to a specific geographic location. This has made use of technology to deliver solutions to HNIs a very important part of the offering as the cost of delivering service in tier 2 and tier 3 locations is becoming difficult. Slowly and steadily Wealth Management firms are finding technology solutions for offering advice by use of Robo advisors. These computer driven asset allocation models can do the mundane jobs of basic asset allocation with ease. However, for high involvement solutions like tax minimizing strategies, estate planning etc. will continue to be done with human intervention. In terms of offerings, Family Office solutions and Estate Planning is increasingly in demand as more and more family run businesses see the next generation wanting to start afresh and not necessarily continue with the traditional family business.
Another aspect of note is the emergence of the mass affluent. With increasing urbanisation and organised jobs (IT being the leader in this aspect), more and more families are able to generate surplus income and would like to channelize this into productive investments and not just savings
Future scope for Wealth Management in India:
Wealth management industry in India is still in a very nascent stage. The industry is slowly and gradually moving from a one size fits all models to a more customized offering. This is supplemented by technology to take care of the non-core activities. As high as 25.5 percent HNI population in Asia pacific (ex Japan) is using credit to enhance their returns. Hence, there is increased thrust on lending and credit solutions for HNIs. The thrust on customization, technology dependence, need for lending solutions and rising awareness and thrust on financial assets as against physical assets is creating large opportunities for the Wealth Management industry in India. As investors and products evolve over time, the industry
can position itself to be able to serve specific needs of clients across situations.
What success can a Wealth Management bring in to an organization and how relevant is its role?
The whole concept of Wealth Management is ever changing. Clients' expectations are ever changing and the ability to deliver differentiated service is continuously diminishing. Having said that, the key differentiated service is provided by engagement with organisations and HNIs at various levels. Organisations and HNIs constantly want to focus more on their respective areas of expertise while leaving activities like Financial Planning, Tax Planning etc. to the experts. Organisations want one view of their investments; want higher customized offerings and need easy access to credit and many such differentiated offerings. Wealth Management firms with their ability to provide one stop shop for all these requirements save a lot of cost, time and energy for their clients.