Singapore/Mumbai: Homegrown wealth managers in India are raising the heat on their western rivals by poaching top talent, as the fight for clients’ wallets in the world’s second-fastest growing market for millionaires intensifies.
While Standard Chartered and other foreign rivals are unveiling plans to hire hundreds of private bankers and open new offices across India to boost business, some such as Deutsche Bank and Morgan Stanley have lost senior executives to Indian rivals.
This is unlike other emerging markets such as Indonesia, where specialised banking for the rich is a relatively new phenomenon and local banks are often unwilling or unable to match their foreign counterparts in the salary stakes.
“Foreign banks, which have demonstrated strong abilities in developing private bankers, often struggle to retain them due to aggressive hiring by leading local bank competitors,” Donie Lochan, a partner at management consultancy Bain & Co, said in a reference to India.
The potential for wealth managers in India is huge.
Merrill Lynch-Capgemini, in its annual report on wealth, said the combined wealth of Asia Pacific’s high net-worth individuals (HNWIs), or those with investible assets of over $1 million, is estimated to grow at an annual rate of 8.8% until 2018, faster than the global average of 7.1%, with China and India likely to lead HNWI growth in Asia Pacific.
Consultant Bain estimates India has around 115,000 HNWIs, less than 20% of whom have financial advisers.
Recent departures from Western banks to local rivals include Nikhil Kapadia, who left Deutsche for Avendus Capital in January, and Anshu Kapoor, who joined Edelweiss Capital from HSBC.
Kapadia built Deutsche’s private wealth business in India, and his last position at the German bank was chief operating officer for Asia Pacific onshore private banking.
Sutapa Banerjee, who left ABN AMRO Private Bank last year to head the wealth unit of India’s Ambit Capital, said her decision was prompted by the opportunity to grow a new business and the monetary benefits that would appear if she succeeded.
“The freedom that you have to be able to make decisions and be quick-to-market is far easier in a local entity,” she said. “You accept the challenge of creating something out of nothing, with the proviso that you partake of the riches you create.”
Offshore banking a better bet?
Besides boutiques, foreign private banks also face competition in India from domestic companies such as Kotak Mahindra and ICICI Bank, which have better local knowledge and distribution networks.
But most of the world’s big private banks appear undaunted so far by the competition, and Societe Generale, Credit Suisse and Morgan Stanley are among those that are steadily growing their onshore presence in India.
Ambit’s Banerjee said casualties were inevitable, given the number of new entrants. But she added a shakeout was probably 4-5 years away as the market is growing rapidly.
Big global private banks do, however, have an advantage over Indian rivals in terms of brand recognition along with a perception that their staff are better trained.
Sanjiv Batra, who made his fortune by selling his paint business to Sherwin-Williams and now heads the US firm’s India operations, said he uses foreign private banks because their representatives were more polished and appeared better equiped to handle his needs.
“Indian banks, especially the public limited banks, are very sloppy. Their presentations are very poor and you somehow don’t give them much credence and credibility,” he said.
A better near-term bet for foreign players could be the offshore market where StanChart, Barclays and other relative newcomers compete with established players such as UBS and Citigroup to serve wealthy overseas Indians from bases in Singapore, Hong Kong, Dubai and London.
The new players are in better shape financially than the incumbents and are more able or willing to offer leverage, a key criteria used by overseas Indians when choosing a private bank, industry players say.
StanChart estimates that among the world’s 22 million overseas Indians, about 7 in 1,000 are millionaires, one of the highest ratios in the world. Like other Asians, India’s wealthy have relatively high appetites for risk, favouring banks with a global footprint that are more willing to extend loans.
“A larger proportion of clients in Asia are entrepreneurs -- first or second generation... They are active investors and they are keen on cross-border opportunities, pan Asia or in other parts of the world,” said Peter Flavel, StanChart’s global head of private banking.
“Lending is an important part of an entire portfolio,” he added.