The last couple of years have been nerve-racking for Sudeep Neogie (name changed on request), who runs a restaurant, a travel agency firm and an electronic goods dealership for a large multi-national corporation in Durgapur, West Bengal.
While his business ventures continue to run profitably, Neogie is worried about his personal investments, thanks to the volatility in the domestic share market. So far, Neogie has been taking investment decisions on his own, with a little guidance from his childhood friend who runs a franchise for a stock broking firm.
“I think it's about time I take some expert advice,” says Neogie, who mostly invests in shares and keeps the rest of his funds in fixed deposits with banks.
It's prospective customers like Neogie that wealth management firms are zeroing on. The changing attitude of these wealthy individuals in non-metropolitan cities and their willingness to consult a professional manager for investments is paving the way for these firms to enter these markets.
“Earlier, people asked why should they spend on managing their own funds. But this attitude is now changing,” said a senior official in-charge of wealth management operations of a foreign bank in India.
Wealth managers have started exploring business opportunities in smaller towns, since the affluent population in Tier-II cities is on the rise, and the competition in metropolitan cities has intensified. In some cases, these firms have also trimmed their minimum net worth criteria to secure new clients in non-metropolitan cities.
“We are flexible in deciding the threshold for our retail wealth management clients in smaller towns. In smaller towns, the minimum net worth requirement may vary, depending on the client's profile,” said Sonali Panda, head (wealth management business), ING Vysya Bank.
“The products are also a little different and simpler in nature. We are very careful in selling complex investment products in these markets,” she added.
Typically, in metro centres, an individual needs to have assets worth Rs 100,000 with ING Vysya Bank to avail of the bank's wealth management services. However, in Tier-II locations, the threshold can even be Rs 60,000-65,000 in the initial years.
Industry players said the number of mass affluent in India had expanded significantly in the last few years, owing to the robust economic growth. This has created business opportunities for banks and wealth management firms.
According to Credit Suisse, India's total wealth between January 2010 and June 2011 increased by $1.3 trillion, and it is the sixth-highest contributor to the growth in global wealth.
“Clearly, the trend around more wealth being generated in Tier-II cities is real. At some level, competition is also a driving factor,” said Vishal Kapoor, general manager (wealth management business), Standard Chartered Bank, India.
He, however, added even in metro cities, there was still room for growth, since the number of wealthy individuals here was also on the rise.
According to a recent report on wealth creation in India by Kotak Mahindra Bank and Crisil, the total net worth of Indian ultra high net worth households is expected to reach Rs 235 trillion in 2015-16, from an estimated Rs 45 trillion in 2010-11.
According to Rohit Bhuta, chief executive of Religare Macquarie Private Wealth, the uncertain economic environment and volatility in local share markets have persuaded many wealthy individuals to appoint professional managers to manage their assets.
“In an uncertain economic situation, asset allocation and investment diversification are extremely critical. Professional managers can provide guidance on investment decisions. With the volatility in share markets, there is now a greater need for managing wealth wisely,” he said.
Religare Macquarie Private Wealth has set up wealth desks in non-metropolitan centres like Surat, Coimbatore and Bhubaneswar.
