Wealth firms tap India’s newly rich as stocks rebound

Wealth firms tap India’s newly rich as stocks rebound

Mumbai: Indian wealth managers are set to jumpstart hiring and revive expansion plans as a rebound in domestic shares mints millionaires once again, 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 or more in investable assets - fell by nearly a 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 and Standard Chartered 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.

It will also add 35 relationship managers to a team of 45 by the end of next year, part of a plan to strengthen a presence in Asia, which suffered less than developed markets during the global downturn and is showing signs of recovering growth.

New entrants Morgan Stanley and Britain’s Barclays 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 to four years. It intends to add another 50 wealth management staff over the next three years, a gain of 50%.

“Where is the growth? US, 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, Credit Suisse 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.

Locals rule

India’s stock market, which has more than doubled from a low hit in early March, is a key source of wealth for Indians, many of whom are first-generation millionaires created by a stock market boom between 2003 and 2007.

Foreign players hope to use their global brands to attract rich Indians, while local competitors tout their large distribution networks and long-term client relationships.

Many of the richest Indians live abroad and are clients of global wealth managers in offshore centres such as Dubai and London.

Overseas players must overcome hurdles in India, including a battered image for the wealth management industry globally following accusations of aggressive mis-selling of products during the boom years before the global markets collapse.

Also, because India restricts overseas investments to $200,000 a year, foreign players have less of an advantage from their global networks than they enjoy elsewhere.

“There are some concerns in terms of the longevity and the stability of many of these foreign banks and their commitment to India as well," said C. Jayaram, executive director and head of wealth management arm of India’s Kotak Mahindra Bank.

Kotak and HDFC 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, told Reuters recently.