India – historically opaque and challenging for wealth managers to navigate – is (once again) becoming a lucrative stomping ground for those wishing to service the growing number of high net worth (HNW) individuals in the market.
Fastest growing wealth management market
Traditionally, Indian HNWs deliberately avoid doing anything that might see them lose control over their assets, keeping wealth related matters ‘in the family’ and in mostly liquid assets. Today however, that’s changing as a new wave of trust encourages HNWs to become more inclined to delegate to professionals outside the familial circles.
Last year, spurred by a boom in rising personal incomes and e-commerce start-ups attracting foreign investors, India became the world’s fastest growing wealth management market. With approximately 200,000 HNWs holding USD797 billion of assets, this wealth creation trajectory is expected to continue – with some estimates suggesting their combined net worth could reach as much as USD6 trillion in the next five years.
Time and place for everything
However, there are several nuances that continue to make India a particularly challenging ecosystem, especially for international players.
The struggle is largely twofold – location and regulation. On the one hand, home-grown wealth managers control up to 75% of the market, typically have lower investment thresholds for clients, and can prospect (and service) these from their smaller national offices across the country i.e. places global banks can’t financially justify setting up shop in.
On the other hand, international banks face stricter compliance, regulation and controls; which mean local firms may get the upper hand when it comes to investing clients’ money into sectors where rules remain opaque by global standards.
The opportunity in every challenge
And yet, out of these challenges – shoots of optimism grow. The attitudes of Indian HNWs are going through a rapid evolution – a catalyst for which has, perhaps unsurprisingly, been positive customer experience and consequently growing trust towards advisors.
This transformation means Indian HNWs are now more likely to view their relationship managers through a favourable lens than many of their APAC counterparts, and therefore also more willing to delegate a larger share of wallet.
In a global study conducted by Scorpio Partnership, more than half of Indian HNWs surveyed perceive their RMs as being knowledgeable; almost twice that of their Chinese counterparts (Figure 1). This sanguine perspective is also reflected in the way Indian HNWs are choosing to manage their finances, with as many as two out of three handing over all investment responsibility to their financial advisors (see Figure 2).
Figure 1: Sentiment regarding Relationship Manager(s)
Figure 2: Dependence on wealth managers for Investments
While supply side challenges are likely to remain for both local and international players, HNWs appetite for knowledgeable and trustworthy financial advice will only continue to grow. To capitalise on these shifting attitudes those wishing to stay in the game will therefore need to think carefully about their strategies and consider greater investment in localised talent to avoid the pitfalls experienced by some of its neighbours (see earlier article here).
News from the world of wealth:
Royal Bank of Canada thinks about an Asian exit – finews.asia
Fidelity cut trading fees to just $4.95 and Schwab answer – WealthManagement.com
JP Morgan Wealth Management Head see tough times ahead for Robos – Financial Times
Thought of the week:
“Tradition wears a snowy beard, romance is always young.” – John Greenleaf Whittier (American Quaker poet and advocate of the abolition of slavery in the United States).
“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” ― Winston Churchill
Author: Nikhil Dama, Manager at Scorpio Partnership
Expertise: Nik is engaged with project management, analytics and reporting across a multiple of client satisfaction, engagement and Thought Leadership insight work.
Background: Nik joined Scorpio from the investment team of a private family office in 2014. Nik holds a Bachelor’s of Science degree in Economics from the London School of Economics & Political Science, Nik spends his weekends rooting for a variety of sporting teams and sampling an array of foreign cuisines.