Mumbai: Indian wealth managers are set to start hiring and revive expansion plans as a rebound in domestic shares mints millionaires, creating fertile hunting ground for new clients.
The revival comes after a tough 2008 when the ranks of the rich in India — defined as those with $1 million (Rs4.84 crore) or more in investable assets — fell by nearly one-third to 84,000, the steepest drop in the world after Hong Kong, as a 52% fall in local shares wiped out billions of dollars in wealth.
Though demand for riskier, higher-fee assets such as real estate and private equity remains below 2007 levels, industry insiders said, players such as Deutsche Bank AG and Standard Chartered Bank say new client assets under advisement have surged by more than 25% in 2009.
“The opportunity that is presenting itself in India today is unparalleled compared to any other parts of Asia,” said Soumya Rajan, head of Indian wealth management at Standard Chartered. Her firm aims to add at least $500 million in client assets at its Indian wealth arm by the end of 2010, taking the total under management to more than $2 billion.
New entrants Morgan Stanley and Britain’s Barclays Plc are also looking to hire to capture a piece of the high potential Indian wealth management industry.
Morgan Stanley attracted nearly 300 clients between the launch of its India wealth management business in September 2008 and last month, a number it aims to grow to 1,000 over the next three-four years. It intends to add another 50 wealth management staff over the next three years, a gain of 50%.
“Where is the growth? U.S., Europe, Japan—demographics are against growth... For India, we are just on the growth curve,” said Ajay Bagga, head of Deutsche’s Indian wealth arm.
The number of dollar millionaires in India rose 22.7% to 123,000 in 2007, the fastest in the world, attracting new wealth management entrants such as Morgan Stanley, Societe Generale SA, Credit Suisse Group AG and Barclays.
Late in 2007, before the global financial crisis, consultant Celent had forecast that the organized wealth management industry including private banks, then growing at 32% annually, would quadruple to manage about $1 trillion in five years.
Since India restricts overseas investments to $200,000 a year, foreign players have less of an advantage from their global networks than they enjoy elsewhere.
Kotak Mahindra Bank Ltd and HDFC Bank Ltd are among local players competing with foreign names such as Bank of America Merrill Lynch, Deutsche, HSBC and Standard Chartered to attract wealthy Indians.
However, wealth managers in India say the focus is less on grabbing market share than growing the overall industry.
“A large amount of opportunity lies not with the competition but expanding the market,” Satya Bansal, head of Barclays Indian wealth unit, said recently.