Decoding India's evolving wealth management landscape

Neeraj SinhaUpdated: Wednesday, April 06, 2022, 09:06 PM IST
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The pandemic has led to the rise of digital relationship-enabled wealth models that provide virtual advisory with real-time information and these digital relationships are here to stay. /Representative image |

Change is the only constant. Over the years, India’s wealth management ecosystem too, has witnessed a massive transformation. Traditionally, wealth management operates under a highly relationship-driven business model, whereby firms that invest more time, engage better with and deliver on their client expectations would see higher levels of success. However, the pandemic has led to the rise of digital relationship enabled wealth models that provide virtual advisory with real-time information and these digital relationships are here to stay. In fact, maintaining digital engagement channels with clients would play a key role in determining the winners in the wealth space.

A Deloitte study reveals that 38 percent of wealth managers from digitally advanced firms were optimistic of greater revenue streams in 2022, compared to 13% of those who had limited digital client interaction.

Goal setting as the starting point

With intense competition and margins pressure, client-centricity is being accorded the highest priority. This translates into a greater focus on customization and responsible goal-based wealth advisory, rather than being restricted to mere distribution of financial products. Wealth players are rethinking their products strategy for their clients and considering the cash flows angle along with the risk-adjusted returns. Another marked trend is the emphasis on asset diversification across financial and physical assets, along with recommendations to clients to hold foreign assets as part of the investment portfolio.

Wealth as an estate planning tool

A BCG report predicts that India’s financial wealth grew by 11 percent p.a. between 2015-2020 to touch $3.4 trillion and would soar by 10 percent p.a. to cross $5.5 trillion by 2025. Along with a surge in financial wealth in India, the demand for wealth management services especially towards estate planning has grown. A higher number of affluent individuals and family offices are seeking wealth solutions that facilitate the smooth passage of family wealth and heirloom to successive generations.

Next-gen wealth strategies

Traditionally retirees have commanded a sizeable share of the wealth management audience. Besides the traditional asset allocations of equity, debt and hybrid, younger UHNWIs and HNWIs are seeking alternative investments comprising REITs (Real Estate Investment Trusts), AIFs (Alternative Investment Funds), derivatives, private markets, venture capital and the likes.

With a significant number of younger wealthy demographics in the age groups of 20-40 years, wealth managers need to rethink their approach while rebalancing portfolios. These investors are characterized by having a relatively higher risk appetite, longer investment horizon and are keen to explore investment opportunities that generate returns and bring positive socio-economic impact.

Wealth-tech making waves

Be it advanced forecasting tools, predictive analysis, simulation models, scenario construction or deep insights into financial performance, macro themes, investment opportunities and risk metrics, today’s wealth manager has a plethora of powerful tech-enabled arsenal at his disposal to aid him in navigating the investment maze.

For example, by deploying ML (Machine Learning) and data analytics, wealth managers can create intelligent investment portfolios attuned to client-specific goals, based on past investor trading history. The tech explosion has resulted in the emergence of wealthtech firms, that make use of automation capabilities, robo-advisory and algorithm-based systems to minimize human bias while investing.

Reimagining future of wealth management

A recent McKinsey study reveals that 15 percent-20 percent of personal financial assets in Asia are currently managed by wealth professionals. This presents a huge business opportunity for wealth management firms, waiting to be tapped. Future ready wealth management firms that constantly innovate, adopt digital-first strategies and provide personalised services to clients, aligned to the ever-changing investment dynamics would stay ahead of the curve.

(Neeraj Sinha is Head - Consumer & Retail Banking at SBM Bank (India). Views expressed are personal)

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