Page 42 - Banking Finance November 2019

ARTICLE

of wealth is - Funds, Assets, investments and cash. It means Wealth Management - Evolution &
that the term wealth management deal with funds Asset,
instrument, cash and any other item of similar nature. While Relevance in Today's Indian Context :
defining wealth Management we have to think in planned Wealth Management, in conceptuality has been in existence
manner. "Wealth Management is an all inclusive set of for quarter of a century in India. From serving the Ultra Rich
strategies that aims to grow, manage, protect and individuals and families way back in 1970s to what it is today.
distribute assets in a much planned systematic and Wealth Management has evolved to become a multi
integrated manner." disciplinary approach with multiple solutions. However, from
single product advisory to a multi product, goal oriented
The Indian Wealth Management Market is on a sustained wealth management approach, has been a gradual
path of growth, given India's long term economic prospects, progression.
positive demographics, rising income levels & current low
penetration. India is currently ranked among the top 10 This line of business function can credit its emergence from
nations in terms of total private wealth held as per the banking system. The banks in the 1970s have functioned
Capgemini's world wealth report. merely on deposits and providing credit to investor. With the
emergence and expansion of the banking system in the
India has registered tremendous growth in terms of the 1970s, India's savings rate rose from 16 percent of GDP from
population of HNIs & their wealth after crisis. HNIs in India early 1970s to 35 percent of the GDP by 1980. While
consists of 8% of the total wealthy households but constitutes financial deepening through banks played its vital role, rising
around 45 % of the total wealth. Also around 69 % of the per capita income and diminishing share of agriculture in
Indian HNIs population is in the age group of 30-55, Which the GDP also helped. This period was aptly called the golden
has long term investment plans & thus requires financial era, as far as Indian Savings were concerned.
planning and advisory asset management. Around 39 % of
the HNIs wealth has been accumulated on the basis of Banking till 1970s has been mostly about, accumulating and
business income, leading to the demand of tax planning preserving wealth within the boundaries of bank deposits.
solution which can help to protect wealth and mitigate risk Early 1970s also saw the rise of Insurance Advisory,
.The aggregate wealth held by Indian HNIs (i.e. Individuals specifically life insurance. Life Insurance Corporation Of India
with investible assets of $ 1 million or more) is expected to ( LIC) since its formation in 1956 has played a vital role in
grow at a CAGR of 27 % over the next five years to insuring lives till then , Apart from mere risk cover , LIC
approximately Rs 400 trillion. This combined with growing encouraged investors to consider investments through its
allocation to financial assets augurs well for the Indian Wealth conventional plans . An Indian Investor till 1980s, considered
Management Industry. a bank account and an LIC policy as his means to accumulate
wealth.
The scope of wealth management services, which essentially
relates but not restricted to providing professional advice Though the Unit Trust of India (UTI) started in 1963, it took
on finance and investment, accounting and tax service, UTI 25 years to reach an Assets Under Management (AUM)
retirement planning and estate planning, depend primarily of 6700 crores. With the emergence of the Bombay Stock
on the presence of high net worth individuals in the country. Exchange (BSE) in 1980s, there emerged a new avenue to
India being the fastest growing economy in the world and a make investments, shares or stocks as it is popularly known.
home of more than 200,000 HNWIs, seems to be a high However, this was essentially for the risk friendly investors
potential ground for the development of the services. But and neither could many comprehend nor have access to ,
the data shows that only 20% wealthy families take advice However it was during the second phase of the Mutual Fund
from the wealth manager and there is huge scope of Industry (1987-1993), did High Net Worth Investors take
development in this sector. Banking sector has a natural cognizance of the Mutual Funds and Capital markets in total.
advantage while providing these services resulting in the With the emergence of non - UTI, PSU mutual funds. By then
increase fee based income and strong engagement with the Life Insurance business was open to Non LIC, private
customers. participants as well. Banks and financial institutions, founds

42 | 2019 | NOVEMBER | BANKING FINANCE