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Trends & Issues


Anshul Agrawal
PGDM-BD 2009-


Indian Wealth Management – Trends & Issues

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Executive Summary

Wealth management industry in India is one of the sunrise industries

that have a promising future. With the growing individual income
levels and healthy spending outlook prevailing among families,
everyone is trying to balance their lifestyles as per their income

As corporate culture penetrating even in PSU banks and

undertakings, it is evident that the future of India lays in much more
robust and dynamic managerial talent of the country. The idea gains
strength with government banks and PSU’s on a hiring spree on day
1 of campus placements among top B-schools of India.

So with government tying hands with corporate India it is almost

certain that there will be disciplined increase in wealth creation for
the nation. So the core purpose of the paper is to understand the
current outlook of wealth management in India and roadmap into
the future.

In the annual survey done by Cap Gemini, SA and Merrill Lynch it

was found that ranks of millionaires grew 6% in the previous year,
because the number of richer people grew in India & China where
India is competing China. India & China posted the biggest gain in
millionaires advancing by 23% & 20% respectively.

When we are watching the world wide increase in number of

millionaires the facts collected by Cap Gemini, S.A. and Merrill Lynch
survey report. India has 23% growth in the last year. The biggest
Asian economy China stands on second position with 20%, west Asia
16%, United States 4% and United Kingdom (UK) 2%.

So we can understand that there are more opportunities in the

wealth management business in Asia especially in India.

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Wealth Management in India

In India wealth management sector is dominated by banks. In fact

Wealth management can be a synonym for the services offered by
banks to its HNI clients. Almost every bank weather Public sector like
State Bank of India or private sector like ICICI Bank; Indian Banks
like IDBI or MNC giants like deutsche bank; wealth management
forms an integral part of their offerings to their value clients.

In order to woo their clients banks often assign individual

relationship managers who acts as one point contact for all the
banking and wealth management needs of the customer. In order to
increase their share of wallet banks have widened their basket of
service offerings and have gone beyond mere banking.

Now Both Indian and Multi-national banks are offering host of

services and trying to change the customer experience in using
these services. The typical services provided by Banks in India to
their customers are

• Banking A/c (deposit based)

• Loans
o Home
o Car
o Personal
o Jewellery
o Education
• Overdraft
• Credit Cards
• Financial Planning
o Tax planning
o Estate Planning
o Retirement Planning
• Portfolio Management

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• Insurance
o Life
o Non-Life
• Foreign Exchange Services

And to make these services more accessible to the customers banks

are deploying following channels:

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The above figure clearly indicates the multitude of channels through
which banks provide their professional services to clients 24*7.

In terms of profitability Internet –banking is emerging as most cost-

effective platform for banks and is therefore seeing tremendous
promotional efforts on their part. Banks are providing a host of
discounts and rewards for using internet in payment of bills,
purchasing and transferring funds.

From customers point of view also internet banking and mobile

banking are the most accessible channels but since both of these
channel and their transactions are electronic in nature, reliability
remains a question in consumer’s mind.

Now despite a host of services that are offered by banks and multi-
channel network to deliver the services, what a wealthy individual
needs in a wealth management solution depends on their stage of
wealth-building/distribution, and specific on-going financial needs.

And what a wealthy individual wants in products and services is

often event-related, like retirement, care-giving, business liquidation
or generational wealth transfer, all of which must be considered.

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This can be a challenge for wealth managers who must profile their
wealthy clients and determine the best solution that will create a
satisfactory client experience and achieve profitability targets for
the firm. Each individual’s situation, while seemingly unique, can be
profiled for a class of products and services. For example, while
calculators and planning tools might work for a Mass Affluent
individual, a HNW individual will need more sophisticated tools, such
as separately managed accounts (SMA), asset modelling, risk
management, and tax and estate planning.

The right technology tool to support the client at the right time in
the client's wealth event cycle is important factor to consider since
their wealth status can quickly change due to wealth creating

Advantages of Wealth Management

1) Helpful In Tax Planning: The wealth management

professional always shows the good path to the customers and
provide the service of tax planning. How to minimize the tax and
save more money. The answer lies in complex section that are
even difficult to be understood by a common man. The problem
here is not that customer is avert of paying taxes but assessing &
paying right amount of tax is a tough job and requires a lot of
domain expertise.

2) Helpful in Selection of Investment Strategy: Another

advantage from the customer point of view is with the help of WM
Professional the customer can easily know about his/her risk
profile and risk appetite and accordingly formulate the investment
strategy and maximize return on investment by mitigating the
risk associated with the investments.

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3) Helpful in Estate Management: With the help of wealth
management professional we can also manage our estate. Estate
management is a task to provide objective administration of our
funds tailored to aim in responsible distribution and protection of
our overall estate.

4) Aid in Tracking Cash Flows: People who take assistance of

professional financial planners and wealth managers are more
justified in tracking their cash flows and hence are in a better
position to guide their investments into appropriate place.

5) Access to more sophisticated investment tools and

Strategies: - With professional wealth management in place
which is highly regulated by securities and exchanges boards of
India, client can choose to adopt a discretionary and non-
discretionary portfolio management service by a wealth manager.

Also while taking services of professional wealth managers;

customer has access to the more exotic investments like
derivatives, securitized bonds, private equity etc and technical
expertise required to manage these investment options.

6) Access to World Markets: - Wealth management aims at

maximisation of returns. And with economies going global,
investment options provided by banks are also becoming
borderless. It is now possible for an individual to invest his/her
money in global markets right at the convenience of a click.

Wealth Management Process

Wealth managers have become more active and professional when
it comes for managing the clients’ wealth. Nowadays Financial
planning has become a buzzword and is a handy tool for wealth
managers in better understanding of client and his/her expectation
from investments.

Wealth managers across India are following similar approach for

managing their clients wealth

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Recent Trends in Wealth Management

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Real Time

As wealthy customers demand more frequent and a higher quality of

guidance from their financial advisors, and become more active in
the investment processes and performance measurement of their
portfolios, the need for real-time access to information becomes
critical. Strong data management with highly integrated feeds from
internal and external data sources will be essential for the real-time
wealth management platform. Real-time securities pricing
information greatly enhances the effectiveness and value of risk
metrics and supports more informed, and better timed investment

Predictive Marketing
To grow the wealth management business profitably, wealth
managers must have CRM capabilities that are highly analytical in

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using customer data to draw sophisticated insight and predictions
around profiling and targeting profitable customer propositions.
Wealth managers need to customize offerings and deliver value
within efficient service models that balance costly resources against
a high quality customer experience. Feedback on marketing
campaigns, customer interactions, and customer transaction insights
is crucial to the continual improvement of the success of the CRM
analytics and predictive trending forecast.

Going forward, wealth managers will need to institutionalize their
knowledge about customers and their needs to allow for more timely
advice, more consistency of client servicing across advisors, and a
better customer experience in each of the access channels. More
institutionalized customer information will also support the
replacement of existing high-cost, decentralized delivery models
with lower-cost centralized virtual models, thereby making more
personal service available to more customers at a lower cost.

The cost of developing and maintaining wealth management
platforms and operations is a significant component of the overall
cost base of the wealth manager. In addition, there are many wealth
managers who are looking to develop integrated platforms with the
characteristics described above. Integrated platforms with
sophisticated wealth management functionality would take many
years to set up, and require an enormous investment, along with the
cost of maintaining them. Therefore, many wealth managers are
more aggressively outsourcing large portions of their middle and
back office technology and processes such as securities processing,
settlement, trust accounting, reconciliation, and performance
reporting. ASP models are also providing similar support in a more
standardized model to smaller wealth managers.

Web Services
Wealth managers and wealth management servicing providers are
making their platforms available to the wealthy end users and
Independent Financial Advisors (IFAs) through private-labelled-
hosted web services applications that allow an investor to directly
collaborate with an advisor. For example, advisors can use a third
party secure publishing platform which handles a variety of

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document formats such as HTML, Word, Excel and PDF, and is
integrated with the wealth management processing platform.

Need-Gaps in Wealth Management

 Range of Trading Options: The range of trading options

herein refers to the trading platform which banks and brokers
offer to their clients. In India leading brokers still offers age-old
BTST, AMO, and day stop-loss options through their terminals;
whereas customers expectations have gone much beyond.

For Instance if a investor from his analysis figures out that

share of ICICI Bank is going to fall to say 750/per share in
coming month. Now in order to buy the ICICI share at said price
he’ll be forced to track market on a daily basis as brokers in
India do not have GTM1 (Good Till Month) feature.

Therefore only options that remains with investor is to either

go through derivatives route (Future & Options) which is more
riskier or forget the deal.

 Lack Of Transparency in statements: The periodical

portfolio statement generated by brokers for their clients are a
big challenge. A client who has little or no exposure to
investment markets will really find the portfolio statement
difficult to understand. Since it is a consolidated figure of all
gains, losses charges commissions it becomes a mess for an
investor to judge his/her net effective return.

 Product, profitability focused approach: In this era of

competition the banks and brokers are constrained to focus
more profitability and products rather than customer and their
goals, that is actually their job. In order to maintain breakeven
revenues and generate profits wealth managers instead of
adopting risk-mitigation strategies, are going for more risky

GTM :- GTM orders remains valid in exchange system for 1 month from the date they
are punched in.

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avenues in order to maximize client’s returns, so that their
commission based income is enhanced.

 Still out of reach: Wealth management is available only for

HNI’s. While some may say that it is a myth giving examples of
mutual funds and financial planning; actual reality is that if we
want to take professional advisory services from banks or
brokers we’ll have to maintain a minimum balance of 5-10 lac
investible assets with them. Now that is a big amount of money
even now for majority of Indians. While It is true that growth
rate of millionaires is highest among India and China but
another face to story is India is nowhere in Top-10 nations in
terms of number of HNI’s.

 Hurdles in reaching global investment Markets:

Since the Indian capital markets are highly regulated by SEBI
(Securities and Exchange Board Of India) and RBI (Reserve
Bank Of India), Indian investor is still not able reap the benefits
of global markets. For example if an investor has analysed that
dollar is going to appreciate against euro in coming month and

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he is looking out to sell euro-dollar contract, he can’t do it in
India since forex trading has recently begun and only few
currency pairs are allowed to trade.

In order to tap this opportunity he’ll have to open an account

with a foreign broker having Indian branch and then pay a
heavy charges as per brokers norms and then he’ll be allowed
to trade in global markets.

 Untapped BOP Potential: In India every bank and

brokers is running towards for HNI’s and the likes whereas
a vast majority of Indian transaction still invests in FD’s
and Bonds of govt, Post offices and Provident funds like
traditional options.

So there lies a vast untapped pool of investors who on little

insistence can bring in a huge shift in Wealth management
business by deploying their funds in capital markets and taking
calculative risks.


The middle class should drive growth in India

The growth of the middle class and the economic growth of India are
in a virtuous cycle. Rising incomes lead to more consumption, which
in turn leads to higher economic growth, then more employment
opportunities and subsequently higher wages and the circle starts
Thus, as the middle class grows and continues to increase domestic
demand, the economy will also continue to grow. In terms of
consumption, real private
consumption (including both
households and private
companies) accounts for
approximately 55% of GDP. The
growth of the middle class will
continue to increase household
consumption in the country. The
middle class also demands

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better healthcare and education. In addition to the benefit of
strengthening human capital and thus productivity, this also leads to
more private expenditure on healthcare and education and thus
improvements in existing infrastructure. In fact, the CLSA survey of
middle income and upper-middle income behaviour showed that
education was the third largest household expenditure behind
essentials such as rent/mortgage and groceries. In terms of
investment (already around 35% of GDP), the growth of the middle
class will also make an impact as it will force more business to
expand or new business to take root.
The middle class is also increasing its share of financial investments
and thus providing new sources of capital for companies. Although
household savings and investment rates as a % of GDP have
remained relatively the same over the past several years,
investment in shares and bonds has risen over the past several
years. As the middle class recovers from the crisis, this trend should

One key point to ensuring that the link between middle class growth
and economic growth continues to strengthen is providing the right
education and skills to the middle class and creating enough
opportunities in society to absorb these employees.

Matching middle class skills with the demands of the

growing economy
One benefit of India’s strong economic growth is that the
economy has the potential to provide employment for the
growing middle class. The boom in call centres and other
outsourcing industries helped many households to achieve
higher incomes over this past decade. However, one challenge
is to continue increasing skills at all levels of the income
pyramid to ensure that the newly emerging middle class (or
those on the fringe of the middle class) are viable employees.

The second challenge, of a more general nature, is to increase

the number of skilled professionals in the workplace to change
the structure of the economy to a higher-skilled economy.
Graduates often do not have the necessary skills to be
effective in the marketplace. For instance, the World Bank

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estimates that a threefold increase in civil engineering
graduates would be necessary to meet India’s large
infrastructure needs

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TCS- Report on Wealth Management

World Wealth Report 2010

Deutsche Bank Report Issue 15th Feb 2010

Websites :




Indian Wealth Management – Trends & Issues

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Economic Times (News Paper). Delhi

Financial Express (News Paper). Delhi

Business World (Magazine). Delhi

Business Economy (Magazine). Delhi

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