Robo Ad­vi­sory is the new buzz

Aditya Gadge, CEO of As­so­ci­a­tion of In­ter­na­tional Wealth Man­age­ment of In­dia, dis­cusses the cur­rent trends and fu­ture sce­nario of wealth man­age­ment in In­dia

Banking Frontiers - - Wealth Management - Mehul@bank­ingfron­

Mehul Dani: How has the pro­file of In­dian in­vestors shifted in the last few years?

Aditya Gadge: The In­dian wealth man­age­ment client seg­ment is to­day an in­ter­est­ing mix of busi­ness fam­i­lies, nextgen­er­a­tion mem­bers of busi­ness fam­i­lies, first gen­er­a­tion en­trepreneurs, celebri­ties, top-end pro­fes­sion­als, NRIs and in­sti­tu­tional clients. They are be­com­ing more and more global in their ap­proach and have a plethora of in­vest­ment op­por­tu­ni­ties. Founders of suc­cess­ful star­tups like Vi­jay Shekhar Sharma (Paytm), Sachin Bansal (Flip­kart), Naveen Ti­wari (InMobi), Kunal Bahl (Snapdeal), and many more like them are some of the most ac­tive an­gel in­vestors in the coun­try. With the real es­tate sec­tor los­ing some of its sheen due to reg­u­la­tions and eq­ui­ties and met­als not do­ing that well, the al­ter­na­tive in­vest­ments sec­tor is a huge at­trac­tion to­day.

What are the cur­rent trends in wealth man­age­ment in In­dia?

Slowly but steadily, wealth man­age­ment is shift­ing to­wards fam­ily of­fice model. Fam­ily of­fices are of 2 kinds: sin­gle fam­ily of­fices is a set-up / le­gal en­tity, es­tab­lished by an in­di­vid­ual fam­ily which man­ages its wealth, suc­ces­sion plan­ning, etc. Multi-fam­ily of­fices are pri­vate wealth man­age­ment ad­vi­sory firms that serve ul­tra­high net worth in­vestors. They are dif­fer­ent from tra­di­tional wealth man­age­ment shops in that they of­fer a to­tal out­sourced so­lu­tion to man­ag­ing the fi­nan­cial and in­vest­ment side of an af­flu­ent in­di­vid­ual or fam­ily.

An in­creas­ing num­ber of prom­i­nent high net worth busi­ness fam­i­lies, celebri­ties and first gen­er­a­tion en­trepreneurs are adopt­ing the fam­ily of­fice model. To­day, there are roughly 100 sin­gle fam­ily of­fices and about 25 multi-fam­ily of­fices func­tion­ing in In­dia. AIWMI ex­pects these num­bers to grow more than 5 times within the next 2-3 years.

The prac­tice of fee-based ad­vi­sory has been grow­ing sig­nif­i­cantly year on year, a pleas­ant change from the his­tor­i­cal trans­ac­tion based prac­tice. There is in­ter­est in al­ter­na­tive in­vest­ments and ac­cord­ing to SEBI data, `481.39 bil­lion was raised by SEBI reg­is­tered al­ter­na­tive in­vest­ment funds as of June 2017. In ad­di­tion, grow­ing in­ter­est in art, struc­tured prod­ucts, pri­vate eq­uity, in­ter­na­tional real es­tate, REITs, bit­coins, etc, is open­ing up ex­cit­ing new as­set classes for the wealth man­age­ment clients.

Also, many In­di­ans are buy­ing real es­tate out­side In­dia. UK was the most pre­ferred des­ti­na­tion fol­lowed by Dubai and the US. Within In­dia, there is a shift from res­i­den­tial to com­mer­cial real es­tate.

Why is wealth man­age­ment from smaller towns still a dif­fi­cult task?

Fi­nan­cial lit­er­acy among the in­vestors and pro­fes­sional stan­dards among the ad­vi­sors are chal­lenges in smaller towns. We are ac­tively work­ing on skilling wealth ad­vi­sors, ed­u­cat­ing in­vestors through our fi­nan­cial lit­er­acy and in­clu­sion ini­tia­tives. In Jan­uary 2017, we launched an an­nual na­tional ini­tia­tive in part­ner­ship with Na­tional In­sti­tute of Se­cu­ri­ties Mar­kets (NISM) called Fi­nan­cial Ed­u­ca­tion Week cover­ing more than 150 cities and vil­lages and 5000 peo­ple. More than 700 fi­nan­cial ex­perts had joined in as vol­un­teers. In 2018, we are tar­get­ing more than 500 cities and an au­di­ence of 20,000+.

How is tech­nol­ogy be­ing used in the wealth man­age­ment? How have the play­ers gained by de­ploy­ing an­a­lyt­ics to in­crease busi­ness?

Tech­nol­ogy is the real dis­rupter to­day. A lot of fi­nan­cial plan­ning work is be­ing done by dig­i­tal plat­forms need­ing lesser hu­man in­ter­ven­tion. Robo ad­vi­sory is fast be­com­ing a big en­abler for wealth man­age­ment com­pa­nies. Sev­eral firms have been set­ting up dig­i­tal ad­vi­sory plat­forms and re­plac­ing their cur­rent busi­ness mod­els. Grow­ing reach of fin­tech com­pa­nies is ex­pected to fur­ther carry wealth man­age­ment so­lu­tions to dif­fer­ent clients at con­sid­er­ably lower costs. Tech­nol­ogy is the key for scal­ing up wealth man­age­ment ser­vices to a big­ger au­di­ence at a much lesser cost. Tech­nol­ogy to a large ex­tent will also curb the men­ace of mis-sell­ing.

What is the short to medium term out­look for wealth man­age­ment in­dus­try in gen­eral?

In­di­ans are get­ting richer by the day. In­dia is ex­pected to be the 2nd big­gest econ­omy by 2050. The startup craze is adding many new names to the wealth list ev­ery year. A record `10 tril­lion worth of wealth is ex­pected to be passed on to the next gen­er­a­tion over the next 5 years. The gen-next clients are all well ed­u­cated and well trav­elled and ex­pect a cer­tain stan­dard of ad­vice and ser­vices. This will re­quire the in­dus­try to dras­ti­cally change it­self and be­come much more tech­nol­ogy driven and pro­fes­sional. The need is for spe­cial­ists and peo­ple who are tuned in to fast chang­ing client pro­files and as­pi­ra­tions.

Aditya Gadge es­ti­mates that a record `10 tril­lion worth of wealth will be passed on to the next gen­er­a­tion over the next 5 years

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