The report shows that the number of ultra HNHs has grown to 1.17 lakh in 2013-14, accounting for about 0.05% of Indian households. This in turn reflects an accumulated net worth of Rs. 104 lakh crore. The report projects that the average net worth of UHNHs is expected to increase to Rs. 408 lakh crore in 2018-19 from Rs. 104 lakh crore in 2013-14. (The report classified an ultra-high net worth household which has a minimum net worth of Rs. 25 crore, mapped over 10 years.)
While the number of ultra-high net worth households grew by 24% over the last four years, the accumulated wealth of these households grew by a whopping 32% year-on-year during this period.
Where do they stay?
There is a rising trend in the number of UHNHs from non-metro locations. While the four metros (Mumbai, Delhi, Chennai and Kolkata) account for 55% of the UHNHs population, the contribution from non-metros accounts for 45%. The next top 6 cities (Bengaluru, Ahmedabad, Pune, Nagpur, Hyderabad and Ludhiana) account for 16% of UHNH population while the remaining 29% are situated in rest of India.
“India’s rich, households worth over Rs 25 crore – are happier than they’ve been in a long time. They see recent changes in the government and in the economy validating the aspirations of people like themselves – who create capital or inherit it. Remarkably, almost half of this hallowed and happy lot comes from non-metros,” said C Jayaram, Joint Managing Director, Kotak Mahindra Bank in the report.
Types of ultra HNIs
The report shows that entrepreneurs and professionals have emerged as the primary segment of ultra HNIs.
Broadly, there are three category of UNHIs – entrepreneurs, inheritors and professionals. Within this, there are 6 types of UNHIs (Opportunistic entrepreneurs, diversified investors, asset creators, new-generation entrepreneurs, wealth creators and focused entrepreneurs).
Let’s look at the peculiar traits of each of these UNHIs.
Opportunistic Entrepreneurs
Opportunistic entrepreneurs build businesses with an objective to capitalize on profitable businesses. They stay in a nuclear family and like investing in alternate assets.
Diversified Investors
They are entrepreneurs who have created wealth by diversifying into various investments. They are disciplined in their investment approach, stay in smaller apartments and prefer investing in equity and real estate.
Asset Creators
Asset creators are successful professionals who have invested high proportion of their income in real estate.
New Generation Entrepreneurs
They are successful entrepreneurs who have inherited and expanded the family legacy. They spend significant time at work and are opportunistic in their investment approach.
Wealth Creators
Wealth creators are entrepreneurs/inheritors who have exited stream of business at a premium and diversified into investments. They are in their early 30s and like to invest in balanced portfolio comprising debt and equity.
Focused Entrepreneurs
They are self-made entrepreneurs who have worked the hard way up in building their businesses. They stay in bungalow/villa and prefer to invest in active and diversified portfolio.
How the UHNIs invest
Interestingly, the report says that despite the general perception that ultra HNIs are prone to taking risks, they are generally risk-averse and this aversion to risk increases with their wealth.
Whom do they consult while making investment decision?
Entrepreneurs
Only 4% of entrepreneurs rely on financial advisor or wealth manager for making investment decision. They largely rely on family and friends.
Inheritor
55% of inheritors are self-decision makers when it comes to investing while 28% rely on family and friends.
Professionals
Vast majority of professionals (75%) are self-decision makers. Only 6% take the help of a wealth manager.
Overall, 65% of UHNIs are self-decision makers. 21% of UHNIs rely on family and friends, 7% consult their CAs, 6% consult their wealth manager and the remaining 1% consult a lawyer while making investment.
