Corrections help adjust stretched equity valuations: Oisharya Das

The domestic wealth management industry is undergoing significant changes due to global uncertainty, market fluctuations, rising competition, and evolving client needs, says OISHARYA DAS, chief executive officer — private banking, Kotak Mahindra Bank. In an email interview with Samie Modak, Das discusses how these changes are influencing business strategies, client relationships, and investment approaches. Edited excerpts:

 

How has the market fall impacted the business and client sentiment?

  Certainly, business sentiment has been impacted by global uncertainties and a minor macro slowdown in India. However, we remain convinced about India’s growth prospects. These kinds of corrections are necessary for healthy and sustainable growth. Equity valuations for a lot of companies were stretched, and these intermittent corrections help to adjust that. Moreover, clients, particularly ultra-high-net-worth individuals (UHNWIs), are patient investors and are not perturbed by market volatility, as they have gone through multiple market cycles.

 

What asset classes look the most promising at this juncture? How does one go about investing now?

  We are in unprecedented times where geopolitical considerations are superseding financial considerations of investments. The emergence of a multipolar world calls for extreme caution, and currently, the benefit of diversification is immense as asset class correlations have broken down like never before. Gold is a natural hedge, and clients have allocated a portion of their portfolio to this asset class. As for equities, they have outperformed most of the other asset classes over a longer horizon and still remain one of the preferred asset classes for UHNWIs.

 

How has the domestic wealth management ecosystem developed after the pandemic? 

The wealth management industry in India is undergoing a significant transformation, with a notable increase in the wealth of HNWIs and mass affluent individuals, driving demand for wealth management services. After the pandemic, there has been an increased focus on legacy preservation, with succession planning gaining centre stage in our discussions with clients. Holistic and proper planning, paired with a suitable structure, helps safeguard assets from risks and ensures smooth intergenerational transfer of wealth. The pandemic has accelerated the adoption of digital tools and platforms. Considering this, wealth management firms over the past few years have invested heavily in technology to enhance client engagement and hyperpersonalisation through generative artificial intelligence and also enhance productivity. The market has also seen the entry of financial technology (fintech) firms offering innovative solutions. Traditional wealth management firms are launching their technology platforms or partnering with or acquiring fintech companies to stay competitive. Moreover, clients are looking beyond domestic markets for investment opportunities. Global diversification strategies and investments in alternative asset classes are becoming more common.

 

How’s the competitive landscape evolving?

  A growing and diverse client base with higher expectations, technological advancements driving new ways of working, swift regulatory changes, and the emergence of new market entrants. The era of a one-size-fits-all model is over. The wealth management industry must evolve alongside this transformation, offering sophisticated investment solutions and propositions that appeal to a wide array of clients — from next-generation entrepreneurs in their 30s and 40s to legacy family business owners in their 60s and beyond.

 

What are the key challenges for the industry? 

The wealth management industry in India is facing several challenges, from rising competition to regulatory changes. With more players, both global and domestic, entering the market and enhancing their value propositions for UHNW clients, competition has intensified, leading to higher pressure on fees and services. Clients are more fee-conscious, and margins are shrinking. One of the most pressing challenges in the industry is the talent shortage. The talent pool seems to be limited, and an approach to formal training for private bankers remains underdeveloped.

 

What are the key regulatory changes impacting the industry?

  Regulatory bodies have introduced new guidelines to enhance transparency and investor protection. These changes have driven firms to adopt more robust compliance frameworks. The investment advisory regulations of the Securities and Exchange Board of India (Sebi) are a classic example of this progressive mindset of the regulator. Another key example of this is the regulator understanding the changing dynamics of the Indian investor, who is now increasingly looking to diversify his investments outside India using the Reserve Bank of India’s Liberalised Remittance Scheme guidelines. The regulator has allowed registered investment advisors, as part of comprehensive financial planning, to offer investment advice related to products or services not under the purview of Sebi.

 

Which models do most wealth management firms follow — distribution or advisory?

  The industry thus far has seen the distribution model being more prevalent. Over the past few years, advisory has also gained prominence, and we as a firm have the appropriate infrastructure to offer both these models to our customer base.

 

THE END OF ONE-SIZE-FITS-ALL WEALTH MANAGEMENT

 

*   Rising expectations from a diverse client base

 

*  Technology driving innovation in wealth management

 

*  Regulatory shifts requiring rapid adaptation

 

*  New market entrants intensifying competition

 

*  Tailored solutions for both young entrepreneurs and legacy business owners

  (Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd)