Leaving the effects of the global downturn behind, the wealth management business in India is once again looking up. A buoyant equity market coupled with economic recovery has led to fresh hiring by many large and mid-size wealth management outfits.
Typically, wealth management services provide individuals with financial solutions across different asset classes. Over the last 5-6 years, rising disposable incomes and spending power have turned the spotlight on this ind-ustry. Last year, though, was particularly bad due to the massive erosion of HNI (high networth individual) wealth.
According to the latest Capgemini and Merrill Lynch Wealth Management study—Asia-Pacific Wealth Report—the number of HNIs in India dropped to 84,000 in 2008 from 1.23 lakh in the previous year. “This happened because a lot of panicky HNIs withdrew their invested money at a discounted price. However, over the last six months, the situation has improved significantly,” says Vikas Agnihotri, CEO, Religare Macquarie Wealth Management, who is planning to hire 50 relationship managers by March.
For wealth managers, the number of potential clients and the size of wealth to be managed are both expected to grow four times through 2012, says the report. In India, the wealth management service providers are catering to three segments: the affluent (investible surplus of Rs 25 lakh); the HNIs (Rs 2.4 crore); and the ultra-HNIs (Rs 19.2 crore).
Over the last 5 years, the wealth management services business has expanded at a clip in excess of 30 per cent. That will slow to 25 per cent annually in the next 5-6 years, the industry estimates, but still present a huge demand-supply gap in terms of talent.
A large number of wealth managers are reducing their entry ticket size in order to service a wider client base. “While both high-end and lowend are growing, the lower rung of the pyramid is growing much faster due to bigger pool of clients,” says Firoze Patel, Senior Client Partner (Financial Services), Korn/Ferry International.
Fresh growth for this industry is likely to come from the launch of new products and buoyant market conditions. “About 2-3 years ago when markets were doing excellently, wealth managers were selling products on the basis of one-month, threemonth returns. Today, companies are hiring professionals with product knowledge, and those who can manage relationships. There is a clear shift from the product-push approach earlier to an advisory-led model,” says Agnihotri.