caught up with Watts to ask him about DSP Merrill Lynch's plans, the market slowdown and how it would affect its core businesses""wealth management and investment banking. You are the first Merrill Lynch executive to join as a president at DSP Merrill Lynch. What are the broad strategic changes that you are going to bring in?
Going back to 1997-98, we began to introduce changes in the organisational structure which is no different from that of other major banks. When we increased our stake two years ago, we introduced more technology and expertise into DSP. We have accomplished a great deal in the last two years. The difference now with my being here is that we will ensure that the strategy for India is integrated with the rest of the world.
One of the challenges for global firms is keeping their operations in different countries in perfect sync. In some markets, there was fragmentation on the ground but we haven't had that in India because we have operated until two years ago through DSP. We are public shareholders. We have an integrity about our business in India. Almost everyone here knows me. When global businessmen have issues about the business in India, I will be able to address their concerns.
Will there be some more Merrill men at the top?
There may be. But it is not as though we have a long list of appointments to be made. We have an international lawyer here and she has some recently as well because we have to reconcile the regulatory framework in India to the global framework in a way that takes growth forward.
My presence here will ensure a more frequent flow of visitors here either to help with transactions or to help build the businesses here. So it is all about transferring technology and expertise.
How will you strengthen your businesses like wealth management and private equity? Are there any products that Indian clients have not seen in a big way that may be coming?
The private client business growth has been very strong in the last few years and we expect that to continue. The products and services we have will continue to develop. But we have a lot of experience globally with private clients.
We understand the regulatory choices for development, what approaches have worked for individuals around the world and broadly speaking, Indian private clients don't look at anything else other than what global client do "" don't lose my money and make it grow over time prudently. We go to great lengths to satisfy our clients.
For example, the client service that we provide includes helping people educate their children about financial wealth. So it is a very engaged service.
Our best financial advisors become very close to their clients.
For a lot of the segments, it is top-end and so very expensive, so it doesn't make sense. In many parts of the world, where people have less money, we have a menu of choices because it is actually better service.
This business is going to grow very strongly in the next 5-10 years reflecting the changes in India. My role is to ensure that the totality of DSP Merrill Lynch is kept together across the full spectrum of services.
Are Indian clients tough to please given that there are so many family-owned businesses in India?
No, Indian clients are very strong people and that's what we want. There are a number of big companies with strong family ownership that introduces a different dimension in decision-making. The typical view in Western markets-based economy is to view family influences in a negative way. Actually I tend to view them in a positive way because strong family-owned companies are very engaged in their businesses. They make excellent clients too. I have seen public companies where the professional management may have made less rational arrangements and poor decisions.
How easy/difficult has it been for you to retain people given that a lot of local players are also entering wealth management?
As the historic leader in the market, naturally people come looking for talent.
I believe we have lost some people because of the attractiveness of some of the stock options. We don't really want to lock up our people.
We will of course not sit back and see our business deplete. Our headcount has actually gone up very strongly up in the last two years. So we are a bigger business than we were about two years ago. I hate losing anyone who can add value. That may be an area where I can contribute a great deal.
With the markets correcting and valuations looking more realistic, do you see more M&A deals happening now?
It is always this continued Yin and Yang in the financial markets. You got markets correcting and people start questioning valuations and you get corporate activity driven by those valuations and then you move into a different phase.
But then the valuations begin to look more reasonable. It is difficult to predict when and how partly because it also gets driven by sectoral opportunities in the world.
But generally speaking corporate balance sheets globally are not very geared. I think corporate activity will pick up as financing returns.
