Local wealth managers push to grow as foreign rivals struggle

India's homegrown wealth managers are hiring more staff and expanding in smaller cities, seeking to attract rising numbers of newly minted millionaires as high costs and regulatory restrictions drive some global rivals to scale down.

India last year was the world's fastest growing wealth management market, according to a CapGemini and RBC Wealth Management study published in June, spurred largely by rising personal income as well as a boom in e-commerce start-ups that has also attracted foreign investors such as Japan's SoftBank Corp and Singapore's Temasek Holdings.

To take advantage of this growth, local firms such as IIFL Wealth Management and Kotak Wealth Management, which have long dominated the industry, said they plan to add more branches and bankers within months.

New players are also set to break in, with the State Bank of India saying it plans start offering wealth management services this year for the first time.

"The business itself is pretty robust and growing well," said Rajesh Iyer, head of investments at Kotak Wealth, which estimates the combined net worth of wealthy Indians to triple to about $6 trillion in the next five years.

IIFL Wealth, which manages assets worth about $12 billion, plans to increase the number of its client-facing staff to 200 from 160 in the next couple of months, said Executive Director Yatin Shah.

Local flexibility

IIFL and Kotak are among the top three wealth managers in India in terms of assets under management, outperforming the local units of banks such as Barclays, Julius Baer and Deutsche Bank, several bankers said.

These local firms already control some 75 per cent of the market, industry executives say, and their expansion plans will put more pressure on the global banks, which are already struggling with higher wages and a narrower client base. Some banks, like Royal Bank of Scotland, are also selling their onshore India private banking units as part of a global restructuring.

Earlier this year, bankers and consultants had told Reuters foreign private banks would hire wealth managers and increase their headcount by a fifth, compared with a 10-15 per cent fall over the past two years, to cash in on the Internet start-up boom and signs of an economic revival.

Many of these global banks, however, have struggled to compete with the locals firms, which typically have a lower investment threshold and can tap clients from their offices in smaller cities such as Ahmedabad, Vadodara and Chandigarh, places global banks can't set up a cost-effective presence.

Local firms are also not subject to the same stringent global regulations of international private banks, which allows them to invest their clients' money into sectors such as real estate, where the rules remain obscure by global standards.

"As a foreign bank, I have to take approval not just from the local regulators but also from the regulators back home," said the country head of a European private bank who declined to be named because he is not authorised to speak to the media.