Page 45 - Banking Finance November 2019

ARTICLE

Size and Growth of Wealth Management Regulatory environment

in India : The regulatory environment of the Indian economy is still
evolving because of which there still is substantial vagueness
If we look at the total size of the HNWI population of India
in the jurisdiction of numerous regulators. And one of the
it could be a small number compared to the other
reasons of wealth managers not experimenting with
established markets but the NHWI wealth is estimated to innovative products is because of the vigilant measures of
grow by 97% to US$2,134 billion in 2015. Looking at these the Indian regulators. Also looking at the various products,
statistics India is considered to be one of fastest growing
wealth management markets. Likewise the liquid assets of the commodities, derivative and bond market is not as
the HNWI compared to the liquid assets are increasing at a mature as the equity market in India.
good pace, which shows growth of investible wealth in the
country. Entry blockades
Another important challenge for potential wealth managers
According to research reports the wealthy households is setting up locations for which they have to pay a heavy
include 8% of but they account for 45% of the total wealth. property price. The increase in the real estate prices in the
There is a lot of scope for wealth management sector to last decade or so has acted as a deterrent. Moreover this
grow as only 20-25% from the HNWI population takes advice factor of having physical locations cannot be avoided as
from the wealth managers. Considering the demographics wealth management as a service requires that physical
the HNWI population is between the age-group of 30-55 presence to build client relationships.
years who are looking for wealth management services
which leads to wealth accumulation, risk mitigation and Finance literacy
product portfolio which gives them high returns. The awareness about the financial products that are

available is low among the target population. Also there is
India is considered as an attractive economy for prospective
a sense of insecurity among the investors due to scams,
new participants in the wealth management area as it has
harmful practices of some advisers and absence of investor
been predicted that it is going to be the largest economy
protection environment. All this has led to a very narrow
by 2030.
minded view among investors regarding certain investments
which are long term.
Another fact which favors the growth of wealth
management in India is the decrease in the share of
unorganized players in the market. By unorganized players Sector reach
we mean the small brokers, agents and advisers. This The HNWI are attended by foreign banks and other large
happened because the organized players have an increased brokers but its reach is limited only to the metropolitan areas.
presence and also income and profitability burdens have And according to the statistics 20% of the HNWI population
resulted in consolidation. As a resultant effect of this the lives outside the metros which are served by the unorganized
liquid assets accessible for the organized players has players. Therefore for this sector to expand, its reach will
increased which added to their growth in assets under play an important part in arresting the untapped wealth and
management. transforming it to assets under management.

Also it has been observed that there has been an inclination Product and Service offerings
of wealth management firms in India to offer custom made Though there has been great improvement in the product
services to the non-resident Indian clients. This could be a
portfolio being offered to investors the standards do not
rewarding segment for wealth management in India since
match with that of other mature market players. In order
the number of NRI people is estimated to be huge at around
to succeed the wealth management service providers will
29 million all over the world.
have to innovate in terms of meeting the diverse customer
needs. Even innovating could pose a challenge in the
Challenges to Wealth Management in obstructive regulatory environment coupled with preserving
India : the product structure and pricing transparency.

BANKING FINANCE | NOVEMBER | 2019 | 45