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Monday, Mar 15, 2004

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Pvt banks in a scramble to manage wealth

Poornima Mohandas

Mumbai , March 14

THE wealth management business faces cutthroat competition even as new customers emerge. Private and foreign banks and broking houses have made poaching the name of the game.

Traditionally, wealth management, as defined in developed markets, is professional advice for investments largely in favour of equities for wealthy persons with investible surplus of over $5 million.

With the bull run on at the Indian bourses and more people reaching the `mass affluent' category, the wealth management business of private banks is at its crest with plenty of customers seeking advice. Some banks put their growth rate as high as 100 per cent in terms of new customers.

In India, the minimum level of wealth to avail of wealth management services is much lower with the average size of the client's corpus at Rs 1.5 crore.

As the corpus increases, the services and advice become more refined with personal wealth managers offering personalised investment advice and even execution of transactions.

In today's market, banks and the traditional wealth managers, brokers, are all running after the same clients.

"We poach clients on the basis of the expertise; we have good expertise in equities and derivatives. Typically we approach senior executives and promoters of companies and inheritors of wealth and pitch our expertise,'' said a private banker.

Poaching is not just restricted to clients; there is a very high turnover of employees in this booming industry with wealth managers fast switching from one bank to the other within the private banking division on pay hikes as much as 100 per cent.

Wealth managers are much sought after with their ability to anticipate trends and provide the investment option to their clients before the bandwagon gets there.

Investment areas in India usually include equities, derivative instruments, mutual funds, bonds and of late, commodities.

There are no authentic estimates on the size of this industry and banks do not readily share their numbers since a lot of the managed moolah is not squeaky clean.

Guesstimates of the current market size vary from Rs 20,000 crore to as much as Rs 2,00,000 crore.

The numbers vary also because there are various definitions for the service and the entry level of wealth to be a private banking customer varies from bank to bank, from Rs 5 lakh to Rs 5 crore.

"Now there is a lot of customer interest in investing overseas ever since the RBI permitted it. We are entering into tie-ups to facilitate investments in equity, fixed income and commodities funds in various international markets. Diversification of portfolio rather than returns is the aim,'' said a foreign bank official.

The large players in the industry include HSBC, BNP Paribas, HDFC Bank, Kotak Mahindra Bank, ABN Amro Bank, Citibank and Standard Chartered, and brokers DSP Merrill Lynch and JM Morgan Stanley.

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