India’s markets have witnessed a momentous 2018, characterised by mercuriality and punctuated with jolts like the abrupt resignation of Reserve Bank of India (RBI) governor Urjit Patel, the Sensex sinking into correction on the heels of a global selloff in October, and the liquidity crunch following the debt default of Infrastructure Leasing & Finance Services.
Despite sustaining the knock-on effects, the country’s wealth management industry has largely remained optimistic in times of policy uncertainty and economic volatility, kept buoyant by the surge in wealth creation and accumulation post-demonetisation. In review, Asian Private Banker looks at a few of this year’s top trends in India’s wealth management space.
Skyrocketing wealth and HNWI creation
Growing at a breakneck rate of more than 87% over a five-year period, India is set to see its high net worth (HNW) population amass INR 188 trillion (US$2.7trillion) of wealth by 2021, which, in addition to fast-growing HNWI numbers, bears staggering promise for the country’s wealth management industry.
“The Indian market remains underpenetrated as far as financial services are concerned and a large part of the population holds savings in gold and real estate,” Karan Bhagat, founder, managing director and CEO at IIFL Investment Managers, told Asian Private Banker in a recent interview. “As financialisation of savings increases, a lot of this will, directly and indirectly, aid financial services-related companies.”
Demographically, the historically entrenched gender gap in the country’s wealth creation space appears to have begun narrowing, with the proportion of women making up the Hurun India Rich List increasing from 4% in 2012 to 9% in 2017.
As HNW families gradually warm to the concept of professionalising wealth management, multi-family offices have noticed client conversations take on fresh nuances, with topics like succession planning and wealth structuring gaining nascent traction as wealth creators start considering intergenerational wealth transfer.
“The next generation is driven a lot more by business opportunities, so there is increasing conversation on opportunities not only from a wealth management perspective but from a business opportunity perspective,” said.
Anshu Kapoor, head of private wealth management at Edelweiss. “The acceptance of wider asset classes is gaining ground, including structured credit, distressed assets, and infrastructure assets. There is a newness in the way wealth is being allocated,” — Anshu Kapoor, head of Edelweiss PWM
WMs hire en masse as talent war intensifies
Brow-raising bulk hires have featured in India’s wealth management landscape as domestic players poached from their peers, seeking to galvanise not only their frontlines but the entirety of their service capabilities.
In the third quarter, ICICI lost 33 executives to WGC Wealth, following the latter’s recruitment of 40 relationship managers just two months prior. And earlier this month, a 15-person research team exited IIFL WM to join the ranks of Yes Securities.
Recruitment drives of such magnitude have added to headcount growth in the country, which saw its top 20 wealth managers increase relationship manager numbers by 57.3% year-on-year in 2017.
“We have seen multiple new players as well as the expansion in terms of existing players. Both these factors have brought in fresh talent to the market,” — Jaideep Hansraj, CEO, wealth management and
priority banking, Kotak Mahindra Bank
Foreign PBs eye both onshore and global Indian wealth
As globalisation continues to blur the lines between onshore and offshore Indian wealth, various international private banks have bolstered their management lineup with key strategic appointments for the South Asian market. Despite prior flip-flopping, the strategic hires signal their renewed ambitions to carve a larger wallet share by taking a two-pronged approach — banking both the Indian diaspora and the domestic market.
In December, Varun Chugh joined Citi Private Bank’s global India business as global market manager, while Puneet Sanwalka was appointed head of India onshore, completing the formation of Jyrki Rauhio’s South Asia leadership team.
Meanwhile, Standard Chartered Private Bank appointed at least 11 private bankers to its Global South Asian Community team in Singapore in August, angling to capture business from non-resident Indian families.
A true shift towards borderless wealth management in the country, however, is likely to be a long time in the making. Under the RBI’s Liberalised Remittance Scheme, domestic Indian investors are limited to investing a maximum of US$250,000 abroad.
Local WMs drum up on-the-ground capabilities
Not letting their guard down on the home front, domestic wealth managers have likewise sharpened their competitive edge by honing their local capabilities, particularly those pertaining to keeping abreast of local regulations and understanding the local culture.
With international banks making inroads into the Indian market, domestic players have likewise been engaging in cross-border expansion with NRI offerings. In April, Yes Bank received RBI approval to establish representative offices in London and Singapore, and Sanctum WM has articulated plans to set up offices in Singapore and Dubai.
With HNWIs articulating concerns over fee transparency, wealth managers have been placing increasing emphasis on the role of digital transformation in staying ahead of the competition. In September, IIFL Investment Managers rolled out the IIFL-ONE platform, which institutionalises a range of investment options for HNW clients under an all-in fee structure, and enables its migration to an advisory- and discretionary-led model from a brokerage-led one.
Further, cashed-up local players like IIFL WM have pursued accelerated growth through M&A, as demonstrated by its takeover of Chennai-based Wealth Advisors in one of India’s first few control transactions in the wealth management space, in order to boost its South India presence.
“Clients have become used to dealing with local players, whereas earlier, there would have been a premium placed on dealing with a foreign firm,” — Shiv Gupta, founder and CEO, Sanctum Wealth Management.
As the year draws to a close, what will the new year — a general election year for India — hold? “There is a growing respect for risk,” said Kapoor. “We’ve been through volatility and a lot of investors in India have become very returns-focused. So conversations around risk have not been happening as much.”
“We believe risk management will again come into the foreground, and that’s where we see a lot more conversation going forward.”
According to Asian Private Banker’s India 2017 AUM League Table, India’s rapidly growing wealth management space saw its top 20 private banks and wealth managers by AUM manage a total of US$169.3 billion in assets as at end-2017, 63.3% higher than 2016’s year-end figure.