WEALTH TALK SUMMARY - Five forces defining India’s wealth management evolution
Speaking at Hubbis’ Indian Wealth Management Forum 2017 in August – Shiv Gupta of Sanctum Wealth Management says the country’s wealth management industry’s evolution is likely to be influenced by these five forces.
According to Shiv Gupta, founder and chief executive officer of Sanctum Wealth Management, the opportunity in India is huge but the industry will need to build capacity to capture it more fully and quickly – apart from macro-economic factors, he identified five influences that will shape the growth trajectory of the industry and the players within it.
The first force is the intensity of competition – not just from incumbents, but also new entrants and substitutes. Taken together with other major changes underway, Gupta says wealth managers will need to be agile, and systematically identify and invest in capabilities that clients consider important and are willing to pay for: performance, engagement and experience.
The second force at play, explains Gupta, is people. Building an edge will depend on how firms manage their people agenda, he adds, particularly the imperative to train and develop people in a skill-scarce environment. It is estimated that India will have around 370,000 HNIs by 2020, which conservatively means that at least 7,500 wealth managers will be needed to service them and there are fewer than 1,500 right now. Given anecdotal evidence that suggests wealth firms’ outlays for training and professional development are less than a third of the country average for all firms, the challenge ahead is quite clear.
The third force, which is a big opportunity, is the expansion of product platforms driven by structural changes in the economy. This, predicts Gupta, would provide firms with an expanded toolkit for their clients through the growth of instruments like AIFs, REITs, and the broadening and deepening of capital markets including derivatives. Wealth managers need to equip themselves with the specialist capabilities and the delivery platforms to provide a wider range of solutions to clients on the back of this, he adds.
New technologies represent the fourth force, believes Gupta, and should be thought of as an opportunity as well as a threat. New tools and approaches involving data and analytics, and artificial intelligence, all have the potential to fundamentally alter the way wealth is managed – so incumbents need to invest in building awareness, experimenting and adopting new technologies and practices.
The fifth defining force for the industry is greater transparency and accountability, adds Gupta. Looking at recent actions on the part of global and domestic regulators, the direction of travel is clear – greater investor protection and higher standards of intermediary conduct. This is also what clients want where, often enough, they are willing to pay a premium for trust, he explains. Firms would do well to view practices that demonstrate transparency and accountability as routes to success rather than a set of compliance costs.
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