As Indians—and India—become more wealthy, a slew of experts are cropping up to help manage the wealth. Until fairly recently, professional wealth management was relying on a trusted accountant or insurance agent, a banker-turned-confidant, or signing up for services offered to a few super rich at a handful of foreign bank here in the country. Or, as most people are prone to do, taking the do-it-yourself route.
But as the number of Indian millionaires grows—there are some 83,000, according to a 2006 report on Asia Pacific wealth by Merrill Lynch-Cap Gemini—there are many more options. Even public sector banks such as State Bank of India and Punjab National Bank are starting to join the fray (see related article on page 14).
The wealthy can also increasingly turn to a number of brokerages for primarily investment-oriented wealth management advice. And there has been a proliferation of so-called Portfolio Management Services, or managed accounts as they are called in the West, that allow people with certain minimum investments—often Rs10 lakh to Rs1 crore, depending on the manager—to avail of the services. The new wealth managers are individuals, often with a banking background, who have turned wealth management entrepreneurs, setting up boutique firms that are growing primarily through word of mouth.
They differentiate themselves by citing their ability to offer highly customized services and personal attention to their clients.
The boutique firms also claim that their advice has less bias, in the sense that they don’t have a vested interest in steering clients to a specific fund or service, unlike some banks and brokerages.
“In a large set-up, the whole orientation towards wealth advisories is short-term,” insists Tushar Chhabra, founder of Elite Wealth Management, New Delhi. “You have to deliver results in a phased and targeted manner, which may or may not be in the best interest of the client who has entrusted the money to you. But, if you are on your own, you can think of building a relationship with your client.”
The flip side is that getting advice from a large financial institution also means that it can offer one-stop shopping for the client, including operations and services both in India and abroad. “Every client of ours not only has personal access to his relationship manager and support staff, but also to the top management, including the chief executive officer (CEO), business head and branch head. Further, the client is also given access to the research and products team and, through this, he gets a firm-wide experience and is not limited to a single relationship manager,” says Vipul Shah, head of the private wealth management group at JM Morgan Stanley Financial Services. Adds Sutapa Banerjee, a senior vice-president and head of private banking at ABN Amro: “We ensure that we have a multiple-touch model for client engagement so that our clients interact with not just one manager, but also with in-house experts on various asset classes.”
Some smaller wealth management companies are also trying to provide add-on services for their clients. For instance, Delhi-based Client Associates often invites international wealth experts to engage in informal discussions with its clients. Founded by ex-private bankers Rohit Sarin and Himanshu Kohli, Client Associates is a bit of a pioneer in boutique wealth management firms and says it now has 250 clients in Mumbai, Delhi and Bangalore. Adds Sapna Narang, founder of Capital League, a wealth manager based in Gurgaon: “This business is based on trust. There is no end to the information or research one can provide to the client. But if it doesn’t work for him then, it’s of no use.”
Mint talked to three entrepreneurs in and around Delhi who represent the new breed of wealth managers, to see what made them take the plunge on their own and how they are faring.
Raman Deep Singh
Verdant Financial Advisory Services
After spending several years as an investment banker with Grindlays Bank, Singh joined Deutsche Bank in 2000 where he spent the next five years in wealth management.
With the help of a strategic investor, Singh launched Verdant in 2005. Besides seeking to increase entrepreneurial drive, the inefficiencies of dealing with clients in an institutional set-up acted as a trigger. “I couldn’t develop a long-term relationship with my clients,” recalls Singh.
Verdant today has nine staff members—experts in art, commodities, stock markets, corporate finance and taxation. The firm advises senior corporate executives, professionals and mid-sized entrepreneurs with an ability to invest at least Rs1 crore. It has offices in Delhi and in adjoining cities including Himachal Pradesh, Punjab and Uttarakhand.
“This is a big market with space for each player depending on his business focus and area of expertise,” says Singh. “This industry is growing at an astounding pace. We are also growing at a pace which many would envy.”
Singh says being relatively new in the business, Verdant is keen on developing a client base and a long-term relationship with them. He declined to comment on the fee, but said it depends on the kind of service rendered and the level of engagement with the client.
Head advisory (India)
Elite Wealth Management
Chhabra, who cut his teeth in the mutual funds business for five years, spent a year with ABN Amro’s wealth management team before deciding to strike out on his own in 2003.
After deliberating over almost a year, Chhabra teamed up with a financial backer with a marketing background and started Elite. He notes that he got little support from friends and colleagues who were sure that most prospective clients would prefer to do business with a well-established brand such as ABN Amro.
Chhabra started off in an 800sq. ft rented space in South Delhi’s Nehru Place with just three people. In the past four years, the staff strength has increased to 14 and Chhabra has moved into a space of the same size that he now owns, in the same area. He claims Elite has about 178 clients, including NRIs, in several states. The firm has also opened an office in Texas and is now looking at Mumbai as well as South India.
“While the stock market boom helped us grow the business, more importantly, people did realize and respect what we were doing,” says Chhabra. One of his clients, VK (who didn’t want his first name used), says he was banking with a foreign bank for the last 10-12 years but every time he called his relationship manager at the bank, he had to deal with a new face. “There was no single contact point that I could rely on,” VK says, noting that the experience with Elite has been different because he and his family members know exactly who is managing their financial assets.
The relationship business has its downsides too. Chhabra says he often gets calls from spouses who are keeping tabs on their family fortunes. “They question you in detail and will call you every hour after watching a business channel and ask why we invested in stock A and not in stock B.”
Elite says it doesn’t charge a fixed fee in the first year. After that, clients are charged on multiple criteria. For advice on stock markets, for instance, the fee is based on the kind of returns generated by the stocks recommended. On other services, there isn’t one standard fee model but it is based on the assets and nature of services provided to the specific client, says Chhabra, who declined to provide additional details.
Capital League Wealth Management
For this MBA with an engineering background and a mother of two, it was a post-lecture conversation with an Australian ex-banker that changed her professional life for good. As a wealth manager at HSBC, Narang spent considerable time with wealth management colleagues outside India. But it was a January 2003 lecture by the Australia-based wealth manager that set her thinking about starting off on her own. The speaker noted that after working with several large banks in Australia, he had decided he could do a much better job of being a wealth manager if he was on his own.
With support from the family and good wishes from some of her HSBC clients, Sapna quit the bank in 2003. “It wasn’t an easy decision,” she says. “My baby was only three. I asked some of my clients if the absence of a big name would be a deterrent. But all of them were supportive.”
She shifted some furniture from her home in Gurgaon to a small rented office space and started work. But some of her HSBC clients, who had promised to give her business, weren’t forthcoming when she approached them on her own. It took a year for her business to start picking up.
Over the past four years, Narang has been joined by three of her ex-colleagues from HSBC—Vinita Idnani, Rajul Kothari and Anju Sharma. Currently, all seven staffers at Capital League are women.
Capital League provides a variety of services—tax planning, investment advice, estate planning, business cash flow management—to investors with investible incomes of Rs1 crore or more.
Some 10% of the firm’s current clients are NRIs. “In the beginning, we were getting 15-20% of what goes to large wealth management outfits, but today I can say confidently that we get 30% of the share,” claims Narang, who foresees a situation when her clients’ daughters and sons will also turn to her when it comes to managing their own money.
Capital League say it too doesn’t have a set fee structure. On commission-based products, such as mutual funds, they don’t charge the client. For value-added services such as tax planning or business planning, the fee depends on investments and relationship with specific clients.
Narang says one of the big perks of striking out on her own is the ability to hang out with her children on weekends and the ability to tuck them into bed every night.
THE BIG PLAYERS
Private banking firms
You should have personal wealth of at least Rs50 lakh or more to hire them as your wealth managers. For instance, JM Morgan Stanley and BNP Paribas India prescribe a minimum investible surplus of Rs5 crore. DSP Merill Lynch prescribes a minimum limit of Rs2.5 crore. They provide highly customized plans for investments, help in managing business income and taking business decisions in a tax-efficient way, in estate planning and a full range of other services, which a client may desire to use from time to time.
Players: DSP Merill Lynch, ABN Amro, JM Morgan Stanley, BNP Paribas India, Deustche Bank, HSBC
Minimum networth requirement: Rs50 lakh and above
Brokerages and banks
Typically, wealth management services of banks and brokerage houses include advice on investments across various asset classes. Brokerage houses provide such services through their portfolio management services (PMS) wherein a stock portfolio is managed actively for a fee. For instance, Motilal Oswal Securities Ltd provides wealth services to all its clients, but those having a minimum investible surplus of Rs10 lakh or above are assigned a pesonalized relationship manager.
Also, banks provide these services to investors based on the amount of funds that the client has in their savings account. In HDFC Bank, one should have a minimum balance of Rs1 lakh. The bank follows a fixed fee model wherein its charges are based on the kind of services and research provided.
Players: Kotak Wealth Management, ICICI Bank, HDFC Bank, Motilal Oswal Securities Ltd, ASK Raymond James
Minimum networth requirement: Rs1 lakh and above for banks
The boutique firms could be in the form of corporate entities with a board of directors or independent partnership firms providing a full range of wealth- management services. Within this segment, some firms may focus on investment advisories in certain asset classes such as mutual funds, and there could be some which provide a full range of services such as investments across stocks, art, commodities, cash flow planning in business, estate planning.
Players:Unitis Tower Wealth Advisors Pvt Ltd, Elite Wealth Management, Client Associates, Capital League, Verdant Financial Advisory Services
Minimum networth requirement: May range from Rs10 lakh to Rs2 crore
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