The next few years may prove to be very interesting for wealth managers. Globally, the wealth management industry is already experiencing a significant shift: it is moving from years of wealth preservation during the pandemic to growth with uncertainty caused by high interest rates, geopolitical instability and inflation. As major economies around the world are growing relatively slowly, India is proving to be one of the few bright spots, especially in the region with large economies. According to the OECD Economic Outlook from November 2023, India’s GDP growth for 2024 and 2025 is projected at 6.1% and 6.5% respectively – the fastest in the world. An interesting game.
Over the past decade, India’s GDP grew at a 7% CAGR, and the country’s wealth management industry is projected to grow to $429 billion by 2023. The report estimates a growth rate of 12-15% for the sector by 2026. India According to Knight Frank’s The Wealth Report 2024, the number of wealthy individuals globally will increase by 28.1% by 2028, and in India this number will increase by 50%. This will also make India the fastest growing money market. Rising disposable income, increasing financial literacy, a mature financial ecosystem, and growing interest in long-term investment strategies are some of the factors driving this growth.
Personal wealth in India grew by 85% in the last decade. India’s UHNI population is expected to increase to more than 19,000 by 2026. By 2025, the number of Indian HNIs could exceed 6 lakh. What is the reason behind this change? Factors such as inter-generational wealth transfers, international investment and increasing use of technology in wealth management. Recently, a growing number of innovative businesses, self-made entrepreneurs, technology innovators and senior corporate executives are also contributing to this growth of personal wealth.
There is now a growing realization that the old model of offering similar products is not able to attract customers willing to make money. Therefore, companies are now focusing on building stronger relationships with their customers, targeting new segments and aligning practices with customers’ values ​​and goals by using holistic, one-stop-shop solutions that take into account individual and family needs. Concentrating. As the sector changes and adapts, recurring themes in customer conversations are convenience, transparency and personalized advice.
An attractive development in India is the increase in wealth creation in tier 2 and tier 3 cities. This shift has seen many wealth management companies innovating and providing service to HNIs from different backgrounds, indicating the democratization of wealth management. Wealth managers are tailoring their services to meet the specific needs of clients in these areas, allowing them to reach more people. For example, as per a report by a leading publication, 32% of Indian UHNIs are going to invest in luxury real estate.
Strategic portfolio rebalancing and diversification to deal with market volatility and achieve sustainable wealth growth is another trend worth watching. Private credit strategies, hedge fund strategies, private equity and real estate investment trusts (REITs) attract the attention of investors and asset managers looking for sustained growth opportunities while effectively managing risks. Agility and flexibility are important in changing markets.
Another beneficial trend for wealth creation in India – a shot in the arm – is the migration of NRIs who are returning to their motherland. These individuals have a vast amount of knowledge and experience acquired through their global experiences. As such individuals bring back their assets, they require tailored wealth management services. The potential for growth and relationship building is enormous for wealth managers who can successfully reach this demographic.
According to IMF report, India could be the world’s third largest economy by 2027. To fully capitalize on the ample opportunities presented by an expanding economy, the wealth management sector will have to accommodate important emerging trends such as diversification, digitalisation, customerisation, -Centralization, and individualization.
(The views expressed here are those of Mr. Anshul Arzare, MD & CEO, Yes Securities India Limited.)
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