ABHIJIT BHAVE, chief executive officer of Karvy Private Wealth talks to Puneet Wadhwa on the key trends in the wealth management business in India and the road ahead for the industry. Edited excerpts:
Do you think the wealth management segment is getting overcrowded and the margins will get thinner going ahead?
India is on the growth trajectory where projections of a $10 trillion economy over eight years are being made. This leads to a lot of potential for wealth management companies to grow and the sector will not get saturated anytime soon. In the short-term, there may seem to be some overcrowding in this space. That said, there is huge potential to grow over the long term.
The margins will definitely get thinner going ahead but increase in the asset base in terms of volumes will bring profitability in the future rather than margins. One of the options that many wealth management companies would consider after regulatory clarity would be to go into the advisory model for long term sustainability of business.
Can you elaborate on the likely industry growth rate for the next three – five years?
Considering projections of at least a $5 trillion economy over the next three – five years and the increase and inclusion of a larger investor base across the length and breadth of India, a double digit growth in wealth management industry is very likely.
The wealth management business competes with banks as well. How do you maintain your leadership, profitability and growth strategy?
While a bank will provide comprehensive banking solutions where wealth management is a part of their services, we are specialists in only wealth management. We focus and position ourselves into offering the best in class investment products. By maintaining a diverse and all-inclusive category of products after strict due diligence and evaluation, we get the competitive edge in terms of investments.
How have the investing trends among the wealthy / high networth individuals changed over the last two - three years? What is the road ahead?
The wealthy have evolved a lot in the past two – three years, especially in terms of making learned decisions and considering the costs involved in the investments. The requirements have also evolved over time, where they are actively looking at absolute return strategies, venture capital (VC), private equity (PE) and international diversification. The merits of advisory models, succession and estate planning are also visible and exercised. Going ahead, we foresee a much deeper relationship between utra-high netwoth (UHNI) clients and wealth managers in the advisory role, where both would have higher levels of awareness and knowledge levels.
Over the last few years, avenues such as art, wines etc have emerged as investment options. Are the well-heeled in India looking that them?
Though these investment avenues sound glamorous and may seem attractive, we believe these avenues have yet not evolved in a structured way in India compared to the developed economies. The UHNI segment is definitely looking at these investment avenues, but not a lot of actual investments are happening. These investments are expensive to enter and the exits are uncertain. Though if the right one is picked up early, the returns can be astronomical.