A Celent news release about its study said the organized wealth management sector has seen tremendous growth in the past two years, reaching 60% market share (compared to 40% in 2007). This is due to a three-way push: increasing presence of organized providers, income and profitability pressures resulting in consolidation, and talent migration, Celent said.
“The sheer size of the wealth management market in India and the desire of financial institutions to corner a large market share have resulted in fascinating trends in the sector,” says Ravi Nawal, Senior Analyst with Celent’s Indian Financial Services Group and author of the report, in the news release. “The significant growth of the industry is impacting providers, products, and clients and their interactions with each other in a number of ways.”
The report examines sector-related changes, the size and growth of various client segments, shifts in product preferences, specialization of provider classes and the emergence of new provider classes, and changing customer behavior.
Major issues raised by the Celent report include:
- India is poised to have a $1.2-trillion wealth management market by 2014. Demographics, economic growth, and provider push are contributing to the growth . Assets under management are highest for the HNW and ultra HNW segments of the market. The mass market will be a $300 billion dollar opportunity by 2014.
- Various provider classes have established and consolidated positions in the market. Domestic wealth management providers are strong in the affluent segments of the market, while international private banks and boutique wealth management outfits have become strong in the HNW and ultra HNW segments of the market.
- Firms that provide everything from insurance and brokerage services to mutual funds and private equity funds to lending (and in some cases even banking operations) through a number of subsidiaries carrying the same brand identity are on the rise. Their rise is driven by the growth in the mass market and mass affluent segments of the market. These segments of the market are more comfortable dealing with entities carrying brand identities of the more reliable parent company.
- Brokerages are morphing into wealth management advisory services companies. Two trends are being observed: Consolidation in a hypercompetitive and commoditized market space to gain national footprint and enhance product portfolio; and a focus on advisory businesses to increase margins and reduce dependency on volumes at the mass affluent and upwards segments of the market.
- There is a move to a customer-centric approach via the rise of new provider classes, the supermarkets, the aggregators, and the accountants, together with a surge in other provider classes like the family offices. Family offices operating in India have grown to nearly 450 in 2010 from around 300 in 2007.
- There has been a slight decrease in the allocation towards equities in the wealth management portfolio. The fixed income and debt products have seen a rise as a result of changing customer preference for less risky products. This is consistent with international figures; however, in western markets, while institutional investors are still on a low profile, retail traders have already started looking for high alpha and more risky asset classes. Alternate investment products such as art and real estate have slowed down significantly.