Nikhil Kapadia of Avendus Capital discusses some of the unique cultural and other characteristics of HNW clients in India.
Date: June 2011
This means being patient, transparent and taking the extra step to explain to the client a particular product or its application. As a result, it is a question of good relationship management, he explained.
Such intimacy between an adviser and a client will also develop as a result of repeated meetings to show, for example, how a recommendation has performed – regardless of whether the client invested in it.
Catering effectively to Indian clients also relates to offering them specific areas of expertise, added Kapadia. For example, in terms of taxation, he said most wealth advisory firms don’t offer tax advice, but by being able to discuss potential issues with clients and advise them on how to address these, it can become a point of differentiation.
Proper wealth management in India
Kapadia said a challenge in India relates to the fact that a lot of terminology in relation to private banking and wealth management is abused.
For example, a customer with as little as US$100,000 might be called a private client, so is given access to a gold or platinum credit card.
Yet customers at a much higher level, for example US$5 million-plus, and who are generating wealth from their businesses, might get offered the same product platform in terms of equities and mutual funds.
It is important, therefore, to be able to talk about things like ring-fencing wealth and succession planning, said Kapadia, explaining that such solutions interest clients because nobody is talking to them about these things.
For instance, it might be possible to do this via an insurance policy to ensure an equitable distribution of wealth, rather than result in break-ups in families.
The Indian market therefore needs to focus on value-added wealth management services, said Kapadia, especially in response to increasing demands from clients for more solutions, transparency, fair pricing and good service.
Fee structures
A problem in the Indian market to date has been the lack of transparency in terms of what wealth providers charge clients, said Kapadia, with products with embedded commissions being common.
Avendus Capital is transparent with its clients, he said, which means sitting down with them and explaining how much they have made from the client in a year in the context of comparing this with how much the firm has made for the client over that period.
The firm has also empowered customers to choose their pricing model explained Kapadia. So if they want to pay the firm a fee based on assets under advice, then that is fine. Or they can pay commissions per transaction. Or they can choose a performance-based model if the firm delivers a certain performance beyond a threshold.
Typically, he added, the Indian market hasn’t offered such variety or empowerment for customers to choose their pricing models.
