01 Dec 2011


Wealth Management in India

Sitting towards the end of 2011, it would be fair to assume that Wealth Management is a profession of the new millennium for India as 11 years back no one in this country including myself would have thought that this could be a career of choice.

Rohit Sarin

With the dawn of liberalization initiated by the Narasimha Rao Government in 1991 roots of wealth creation through private enterprise were set. Before that private wealth was the preserve of the limited number of top business families of India which thrived in the comfort of closed economy through license permit Raj. However, the last decade of the 20th century in India laid the foundation for the directional change where wealth creation became a function of not just managing the system but individual enterprise, excellence and aspiration.

Accordingly, the first decade of the 21st century in India has seen a flurry of entrepreneurial activity both within and outside the traditional business families network. This is evident from some 50 bn USD of private capital being invested in the Indian businesses over just last 5 years. This has created an ever growing socio-economic segment of HNIs or high net worth individuals as they are called or wealthy families as I would prefer to call them. Today this segments is growing the fastest in India even galloping ahead of China and other BRICS countries which has created a new generation industry of wealth management which is one of the fastest growing industries in India and possibly could be the most sought after career after Bollywood and Cricket!

However, as it happens in the lifecycle of any industry wealth management industry in India too while growing at a fast pace is evolving pretty rapidly. While some bits of it has been spurred by the changing regulatory framework the rest is being churned by the increasingly competitive landscape. Its future and growth rate has attracted the whole world with practically every big name worth its salt opening its wealth management set-up in India over last few years. There has been a proliferation amongst Indian houses too to expand into wealth management as an extension of their existing business lines in other financial services like investment banking, broking and banking.

Last 5 years have seen some 20 new players enter the organized segment of the industry and currently some 40 active players vie for a small but growing pie of 50 bn USD of AUM or asset under management with an average of just about a billion USD per player while the range could be 250 mn to 3 bn USD from possibly the smallest to the largest player. However, this 50 bn USD of managed wealth currently is understood to be a small portion of the estimated private wealth of 500 bn USD most of which continues to remain embedded in the equity in businesses and strategic physical assets like real estate. As Indian economy matures and scales, not only the total pie of 500 bn USD is expected to expand but the share of the managed wealth in the same is going to shoot up and could grow 4 times over next 5 years to 200 bn. Couple this with a natural consolidation on account of hyper competition this increased pie could be shared between lesser number of players than 40 now which means survivors could scale their businesses 5-6 times over next 5 years with average size of the business per player could rise from 1 bn USD now to 5-6 bn USD.

While the big picture and the trajectory of the industry at large looks very promising but one thing which'll separate the winners from the losers here would be talent. Like any other young industry of new millennium wealth management too is currently plagued with acute paucity of human capital. Players which would be able to attract and retain quality talent would get ahead while it'll become difficult for others to sustain over time. In this context, players who have been around for a longer period of time would find it relatively easier to win this war for talent. Smarter wealth managers in the industry are realizing fast that to align themselves with quality wealth platform which are there for the long haul could be the single biggest contributor towards building a steady long term wealth career. New entrants into the industry will have to invest much higher to build teams faster which would have to practically start from scratch as movement of clients and assets has come down to 20-25% for the brightest in the industry. However, unless the industry is able to focus its effort on the vision of building the pool of quality wealth managers right from grooming fresh talent from campuses the overall fortunes of the industry would remain under realized.

Wealth management is a sunrise industry and profession for the new millennium in India and has reached at an inflexion point of growth for long term players. This could be just a beginning of the best which is yet to come in this industry.

By: Rohit Sarin

Reach at: rohitsarin@clientassociates.com

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