Mumbai: The private wealth management (PWM) market in India, which comprises a group of firms with global expertise in portfolio tailoring as well as a few local firms, is now attracting some high-profile global players who target only the ultra elite.
So far, such firms in India have actively leveraged their long-term association with wealthy individuals and families to become their trusted investment advisers. The top foreign players in Indian private wealth management market include France’s Societe Generale and BNP Paribas, Dutch bank ABN Amro, Deutsche Bank AG of Germany and US-based Citigroup and Merrill Lynch.
Local firms Kotak Mahindra Bank Ltd, ICICI Bank Ltd and Axis Bank Ltd are among the leading players, apart from some other non-bank firms such as ASK Group and Edelweiss Capital Ltd.
Now, while US investment bank Morgan Stanley and Co. announced onshore wealth management plans for India last week, UK’s Barclays Bank Plc., too, has started rolling out its wealth management platform here. In addition, Swiss bank UBS AG and two large US investment banks, Goldman Sachs and Lehman Brothers, are also soon expected to join the league of private wealth managers in India.
“There is room for everyone,” claims Jignesh Shah, head of equity at the wealth management division of ABN Amro Bank (India) NV, pointing at the growing number of Indian millionaires.
According to the mid-2007 World Wealth Report prepared by Merrill Lynch along with consulting firm Capgemini, India stood second, behind Singapore, in the annual growth rate of wealthy individuals during calendar year 2006. India saw a 42.85% growth in the number of millionaires from 70,000 at the end of 2004 to 100,000 by the end of 2006.
Banks typically enjoy an upper hand in offering wealth management services as the client’s money is parked with them. Non-banks that offer private banking have to take on the role of adviser.
Wealth management firms are also taking note of the 6.2 million so-called non-resident Indians (NRIs) and their estimated $500 billion of investable assets, according to London-based Datamonitor’s latest report. The greatest concentration of NRIs is in the US, the UK, Canada, Australia, Singapore, Hong Kong and West Asia.
Strong family ties and an emotional link to their homeland is attracting 15-25% of NRI portfolio investments into India, said the Datamonitor report. As a result, wealth managers are pursuing a range of strategies to tap this opportunity.
SG Private Banking and Merrill Lynch are pursing closer integration of their onshore Indian and offshore NRI businesses, according to Datamonitor.
Globally, wealth managers play both advisory and asset manager role. However, the Indian money market regulator does not allow discretionary fund management by banks.
Each provider will have to build its niche based on product portfolios and strengths. Some firms focus more on equity products, while some have wider product portfilos ranging from real estate to art.
“While most large foreign and local firms will offer an entire bouquet of investment vehicles to clients, trust and comfort will be the factors that influence a client to select the wealth manager, said the head of private wealth management operations at a foreign bank who didn’t want to be named.
However, unlike some local players, the new foreign players are targeting the ultra elite from India’s escalating numbers of super rich.
According to Morgan Stanley’s website, its private wealth management division targets individuals, families and foundations with $20 million or more in investable assets. Meanwhile, Barclays aims at clients with $2-5 billion investible assets.
According to Satya Narayan Bansal, chief executive of Barclays Wealth, “it aims to become one of the top three players in India.”
Barclays Wealth globally manages $260 billion worth of assets. The new onshore division in India “will also advise on the India investments of its (private wealth management) assets managed globally,” said Bansal, whose firm has many NRIs among its global clients.