The Hindu Business Line : India’s wealth management business set to boom

The Indian wealth management industry is gearing itself up to meet expanding market opportunities. Providers, products, channels, technology, regulation and clients are coming together in the wealth management space to capitalise on tremendous growth opportunity, according to a new research.

In its latest report titled ‘Overview of Indian Wealth Management Market’, Celent, a Boston-based financial research and consultancy firm, has said that over the next four-five years, wealth management service revenues are expected to contribute to over a third (32-37 per cent) of full-service financial institutions.

Also, the wealth management market is currently undergoing structural changes with increased market penetration by organised players drawing clients from the unorganised end of the market. According to Celent, with large segments of the population showing interest in financial products and service lines, growth and buoyancy across sectors are boosting the financial service industry of India.

Financial sector

Disposable income is expected to grow from the current 2 per cent to 5 per cent in 2017. Currently, Indian financial sector shares about 7 per cent of the total national disposable income. The share of the financial institutions would grow to 18 per cent by 2012, it is estimated.

Projecting an addition of 500 million people to the working class in the next decade, with the young population enjoying increase in income levels, a 20 per cent compounded annual growth rate in the nearly $400 billion annual consumer spending could be expected, the report points out, adding that this enhanced spending would soon find its way into the financial institutions.

The Indian market has been segmented by wealth management service providers into four categories, namely: the mass market (investible surplus $5,000 to $25,000); the mass affluent ($25,000 to $1 million); the high net worth (HNW $1 million to $30 million) and the ultra-high net worth (ultra-HNW greater than $30 million).The lower rung of this pyramid is currently clocking tremendous growth at 30 per cent for mass affluent and 27 per cent for mass market.

Continuous growth

These segments will continue to grow, asserts Celent. Suggesting that there is a paradigm shift in Indian wealth management business — having moved from safeguarding wealth to growing wealth — the report says there is momentum towards more sophisticated customer segmentation, products and delivery channels.

Little wonder then that the wealth management industry currently registers a 30 per cent-plus growth rate; and by 2012, the country’s wealth management market is expected to be $1 trillion, with approximately 42 million households, over three-fold increase from 13 million households today.

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