Wealth managers must sharpen their game

To truly capitalise on the market opportunity, wealth managers need to focus on quality of advice, innovation in product design and ease of execution

Asia is now the epicentre of growth in global wealth, with India and Indonesia rapidly adding to the ranks of ultra-high-net-worth individuals (UHNWI). There are an estimated 500,000-plus UHNWIs globally, nearly 7,000 of whom are in India. In terms of numbers, we now stand close to where China was back in 2014, when it was approximately 8,500.

This number in China has now increased to over 70,000, testifying to the rapid pace at which wealth has grown in Asian countries. And much of the wealth creation in China has happened in new-age sectors, allowing us to draw parallels with our own homegrown unicorns which are contributing to the rapid growth of the wealthy.

With the number of UHNWIs in India expected to grow by 65 per cent in the next five years, the opportunity for wealth management firms to demonstrate massive growth is very real. 

The Indian wealth management industry is not only seeing a rapid change in the sources of wealth creation, but is also witnessing a generational shift, as newly-minted UHNWIs tend to be a lot younger with their own set of expectations from their wealth managers. To truly capitalise on the market opportunity, wealth management firms will need to solve for quality of advice, innovation in product design, and ease of execution. 

To make the right investment choices, wealth management clients should be presented with the multiplicity of opportunities that exist in the market. Investment options are no longer limited to mutual funds, bonds and direct equity, but have expanded to include many more alternate asset classes and structured products designed to meet the needs of more sophisticated and informed investors.

As an example, with the massive influx of equity into the startup ecosystem, venture debt will emerge as an exciting investment option for clients looking to participate in the startup story in a more risk-conscious manner. At the same time, the market is also flooded with offerings in completely new asset classes such as crypto-currencies and non-fungible tokens, with investors being influenced often by uninformed social media analysis. It becomes imperative, then, for credible wealth management players to help clients make sense of what is right for them and their family’s future.  

UHNWI clients have come to expect customised solutions, whether for estate planning or designing a bespoke investment portfolio, or family office services. Very often, the line between a UHNWI client and his or her micro, small and medium enterprise becomes blurred, which makes it imperative for the advisor to come up with nimble and tailor-made solutions — like, for example, investment banking or capital-raising.

Wealth management, especially in the HNWI and UHNWI space, is probably one of the few businesses in financial services where the personal touch remains very important. Technology today plays a crucial enabling role in aiding customer portfolio management, risk reporting and seamless execution. However, deep customer engagement and quality advice have and will always come from a relationship manager (RM). Firms that are able to digitally empower RMs with the necessary tools and are able to strike the right balance between technology and the power of the human touch will emerge as clear winners. 

As the industry navigates the changing landscape and prepares for a bright future, the well-being of customers should be front and centre. The Indian regulatory landscape will no doubt follow a similar trajectory with the customer’s well-being as its focus. Wealth management firms should proactively embrace the highest possible standards to ensure long-term protection of client wealth.

The Indian wealth management industry is well-positioned to channelise investments that can ensure both wealth preservation and growth. It is on the cusp of explosive growth that must be firmly anchored to positive client outcomes, to ensure long-term success.

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The writer is the founder and Chief Executive Officer of InCred