A recent report published by NW Wealth titled ‘The India Wealth Report’ found that the Indian wealth managers manage just 4% of HNIs wealth.
The report said, “At the end of 2017, locally based wealth managers i.e. private banks and family offices together managed around US$156 billion in Indian HNWI funds. This includes around US$40 billion that is managed by local family offices.”
Of the total Indian assets of US$8.20 trillion (as of December 2017), about 48%, that is US$3.90 trillion, is in the hands of 3.30 lakh HNIs.
Of this US$3.90 trillion, wealth managers manage close to US$156 billion i.e. 4% of the total HNIs wealth, which is well below the worldwide average of around 25%. This shows that there is strong scope for growth in this sector going forward, said the report.
We spoke to a few experts to understand the reason for this and what needs to be done to increase the share managed by wealth managers.
Anupam Guha, Head - Private Wealth and Equity Advisory Group at ICICI Securities Ltd. believes that the low penetration could be because of shortage of talent in wealth management industry. “While the wealth is dispersed across India, the wealth management offices are centred in metros. The industry needs to create a new set of wealth managers, train and mentor them to help them cater to the needs of the increasing wealthy population.”
He further adds that technology will play a crucial role in the coming years. “Firms need to use technology to provide customised solutions for clients. Moreover, technology can provide a platform for the ‘do-it-yourself’ clients who want execution ease.”
Sandeep Jethwani, Managing Partner & Head - Advisory, IIFL Investment Managers is positive about the industry’s growth. “In developed markets, 35%-45% of HNI wealth is managed under advisory or discretionary services. Over the next decade, we expect to see about one-third of HNI portfolios moving to wealth mangers,” says Sandeep.
Abizer Diwanji, Partner and National Leader - Financial Services, EY India mentions that HNIs invest a major portion of their wealth in their own businesses. Another factor could be that many HNIs prefer investing their money in overseas markets, said Abizer.
Despite wealth management companies managing just a small share of HNI and UHNI wealth, Abizer is quite bullish on the growth prospects of the industry. "However, if you look at the upper middle class section, many of them invest through wealth managers and financial advisors. This upper middle class would soon become HNIs.”
Lovaii Navlakhi of International Money Matters believes that many HNIs want to have a better control over their finances. This influences their decision to invest by themselves. "They feel confident and well versed with the markets and hence, choose to invest independently," he adds.
Talking about the overall scope of the wealth management industry, he seemed quite positive. "Earlier bank deposits and real estate were the default investment options for HNIs. However, with low interest rates, slump in real estate prices and low rental yields, investors are understanding the importance of having a professional advisor who can guide them on the optimum asset allocation," he said.