Indian wealth managers rush in as foreign players exit

Domestic wealth management companies are hoping to and trying to fill the gap left by the retreat of foreign wealth managers in India.

In the past year, the wealth management arms of IIFL, ASK Group, Anand Rathi, and Centrum have been expanding by adding advisors. This is despite the volatility in Indian equities and the underperformance of asset classes such as real estate or gold.

EYE THE PIE

• Domestic wealth management arms of IIFL, ASK Group, Anand Rathi, and Centrum are expanding
• Many foreign players have either scaled down or sold their wealth businesses in the past few years
• Domestic players want to tap the ultra-rich and cater to promoters who have sold their stakes
• The total wealth held by individuals in India grew 8.9% to Rs 280 lakh crore in FY15 over the previous year
• Wealth managers are currently selling mutual funds, private equity funds, real estate funds, and tax-free bonds

“Many foreign players have either scaled down or sold their wealth businesses in the past few years, owing to the challenges in their overseas markets. This is a good opportunity for Indian firms to capture market share,” said Rajesh Saluja, managing director, ASK Wealth Advisors. “With foreign players slowing down, we are cornering some of their business and acquiring talent from them,” added Karan Bhagat, chief executive officer at IIFL Wealth Management.

IIFL has increased its advisor count by roughly 20 per cent in the past year, recruiting senior executives from foreign entities such as Citibank, Morgan Stanley and Standard Chartered. Anand Rathi has more than doubled its advisor count to 125 from 60 in the year and set up new branches at Jaipur and Dubai. ASK plans to add 15 advisors over the next few months to its current tally of 30.

Experts say a lot of new wealth is being generated by promoters selling their stake. This is a good opportunity to cater to this underserved ultra-high net worth segment. “Given the kind of volatility and uncertainty in the global markets, we see a space for advisors. As long as the economy continues to do well and people generate wealth, there will be opportunities for wealth managers,” said Bhagat. Wealth managers are selling mutual funds, private equity funds, real estate funds, non-convertible debentures, portfolio management services, structured products and tax-free bonds to customers. In the past year, the benchmark BSE Sensex has slid 20 per cent, while real estate prices have remained flat or slid in some cities. In rupee terms, gold prices have slid 6.5 per cent in calendar year 2015 and 8.6 per cent in CY2014. “This is a good time to acquire customers. In a bull market, clients are blinded by portfolio returns and do not pay heed to the quality of advice being offered and risk management processes being adhered to,” said Amit Rathi, managing director, Anand Rathi Financial Services.

Last year, RBS sold its Indian wealth management business to Sanctum Wealth, a company led by Shiv Gupta and backed by a clutch of venture capital investors. HSBC shut its private banking business in India, through which it provided asset management services to wealthy individuals. UBS and Morgan Stanley exited their wealth business in 2014. A few years earlier, Credit Suisse scaled down its Indian wealth management operations and DSP Merrill Lynch sold its domestic wealth management business to Swiss banking group Julius Baer.

The total wealth held by individuals in India grew by 8.9 per cent to Rs 280 lakh crore in FY15 over the previous year, with wealth in financial assets growing in double digits and that in physical assets experiencing a fall, according to a recent report by Karvy Private Wealth. Individual wealth in financial assets rose from Rs 134.7 lakh crore in FY14 to Rs 160.5 lakh crore, growth of 19 per cent. This figure is expected to double to Rs 326 lakh crore in the next five years.