Regulations are changing, and they keep changing – challenging many of our assumptions of business and forecasts too. Be it insurance, mutual funds or small savings, intermediaries have been facing unprecedented changes! Many of these have equally challenged the creators of these products too. Now that everybody has placed on record that margins have decreased, earnings have dropped, statistics of insurance and mutual fund sales seem to suggest further gloom in the days to come.
While on one hand we have these difficulties and obstacles, I have certainly seen that the serious intermediary looks at it as part of the steeple chase he has to run. The energy to keep moving forward, however tiring the hurdle may be, is amazing to see. The energy boosters seem to be coming from many macro factors too – that BRICS is the future and India is a key market for the next phase of global development, that Indian millionaires are increasing manifold and savings rates are very healthy even now. It is but logical that we could assume these savings can be suitably channeled to the right products that tap the capital markets.
What certainly seems to be niche today, and a major reason why I wanted to bring this out in this column, is the opportunity outside of India that is being tapped by our financial intermediaries. I have come across only a handful of advisors who are confident about their knowledge of markets outside India and by virtue of their willingness to go beyond their natural markets, have carved out a niche proposition for clients in the UK, USA, Middle East and Singapore.
Let us look at some of the very interesting opportunities that financial advisors and MDRT aspirants can tap into – not just for their own professional gains, but certainly as a major value add that their clients can benefit from.
First things first – the concept of diversification is a fundamental aspect of managing ones money. Given that, if we rise up from our day to day client portfolio management strategies and view it from a global perspective, bulk of our Indian investors has a huge single country risk in their portfolio! Yes, be it large, mid, small cap stocks, debt funds or cash – the maximum (if not full) exposure is to Indian markets! No wonder, we had many asset management companies file prospectus with SEBI for feeder funds and the Indian investor has therefore got an opportunity to diversify his investments to Brazil, China, other Emerging Markets and more recently, USA. However, what is notable is that RBI on the other hand has consistently kept increasing the limits on international investments by resident Indians – from a mere 25,000 USD to the current 200,000 USD per person, including minors (http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7047&Mode=0), per financial year – under the liberalized remittance scheme. The latest statistics (http://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/44AT_BUL120312.pdf) from RBI shows that Indian’s have wired out 1.16 Bn USD under this scheme. Of this, about 600 Mn USD (INR 3000 crores) is for investments in property, gilt, equity and debt outside India. Have you tapped this opportunity yet?
Those of you who have relatives or friends in UK would have somewhere come across QROPS – Qualifying Recognized Overseas Pension Schemes. Simply put, here is an opportunity to tap into pension investments of your friends, family from UK. Under QROPS, you can source investments into many schemes that you are already familiar with (http://www.hmrc.gov.uk/pensionschemes/qrops.pdf). And if you find hurdles in Indian schemes, there are QROPS dedicated platform services outside India that you can work with to provide this support to your clients. If you haven’t yet, what are you waiting for?
Singapore and Hong Kong have become financial centers of Asia and are increasingly looking towards giving the western centers tougher competition. Hong Kong is visibly a gateway to access Chinese markets. The interest in taking up official residence in Hong Kong is on the rise. To promote the same, the Hong Kong government had come up with the Capital Investment Entrant Scheme (CIES) (http://cies.hk/) wherein, if your client could invest HKD10 Mn (about INR 6 crores), he qualifies under the CIES for residential status in Hong Kong. This money can be invested into permissible investments and you can tie up with entities licensed by Hong Kong Securities and Futures Commission to facilitate the same under proper introducer arrangements. So, does this start ringing a bell on which business family you know that has interests in China?
Last but not the least is the NRI pie. Many of you do assist NRIs to invest in India. However, very few assist the NRIs with investments outside India (including in the country they stay). In this context, what is noteworthy is that money flowing into India from many of the middle and high networth clients is like the tip of the iceberg. A large part of their wealth finds its way in non-Indian currency investments. To play in this league, you will need to hone your skills to understanding international markets, currency movements and cross border tax regulations. But for many countries, like Singapore, there is zero capital gain tax. Ready to spread your wings?
The adage when in Rome be a Roman should guide you from a business perspective. Indian investors are beginning to recognize that financial planning, advisory and wealth management services are not free. But you must realize that in markets like UK, USA, Australia, Singapore, Hong Kong and even Middle East, the financial intermediation profession has certainly taken a different maturity curve with respect to fees for advice. This should make it lot easier for you to focus your conversation on value add to these clients rather than haggle with conversation on why pay fees!
