The demographic trends in India suggest that there is high growth in the number of individuals who move upwards from middle income to upper middle income or to upper-income groups.
Accumulation of wealth brings about the questions of finding the right places to invest the money so that it grows at reasonable rates and is protected.
The Wealth Management industry in India has evolved significantly in the last two decades and an increasing amount of wealth managers are recognising the need to help clients sail through their financial journey and with increasing demand for personalized products and alternative asset classes.
As the wealth management industry metamorphoses itself, a few trends are clearly visible that are shaping its future – Increasing recognition for the need for wealth managers
With rising nuclear families and the changing lifestyles of millennials, it is nudging Gen X to start actively preparing for their retirement to secure their future as they start to acknowledge the need to rely on their own wealth for meeting expenses rather than being dependent on their children.
There is a realisation of the danger that one may outlive the wealth due to longer life expectancy and increasing costs of medical care and emergencies.
Moreover, with an increasing amount of awareness and exposure, people want to enjoy the luxuries of life and therefore have a desire to save for lifestyle needs.
Consequently, the willingness to hire a professional advisor to manage one’s wealth has been increasing.
Increasing Complexities of Financial Markets
The financial markets are becoming complex and volatile. It is very difficult to ascertain which products to invest in and then monitor the investments to make sure that you are not sitting on rank underperformers.
For instance, there are more than 400 Equity schemes to choose from. And if one were to rank all of them based on their performance, the difference between the worst and the best performer may be more than 100%.
One needs a wealth manager who is tracking these investment options as a profession and therefore can guide investors suitably.
Besides just the vast range of choices that can confuse even seasoned investors, the market volatility is also on the rise, which can require advice from professionals.
Usage of Technology, Roba Advisory, Easy to use platforms
The smartphone revolution has given investors access to technology. Clients no longer need to fill lengthy forms and do unmanageable correspondence to make an investment. Everything can now be done with a flick of a finger.
More and more investors, especially the younger population, are gravitating towards technology platforms that provide advise as well as execution platforms.
Even wealth managers are recognising the need for technology upgradation and are offering various online solutions to investors to help them invest and monitor their investments.
Robo-advisors of late have also started gaining attention. Robo advisors are automated, algo based systems that provide wealth management advice. They make the whole process accessible, affordable, and convenient to digital-savvy individuals.
Investors preferring hand-holding through rough times or in black swan events will continue to prefer personal interaction. But wealth managers who manage to provide a fusion of Robo advisory and personal interaction can bloom in the market.
Focus towards goal-based planning rather than wealth accumulation
Wealth management firms need to rethink their wealth maximization offerings and provide solutions that are goal-based i.e., in sync with the cash flow requirement of the individual.
This has become an incredibly complex task for the advisor with assumptions regarding income & spending patterns, inflation, expected return, etc. This has shifted the focus from advising high yield products to the goal-based product offering.
Increasing demand for alternative asset classes rather than traditional asset classes
In the current era with sub-par returns from fixed deposits & bonds where savings are eroded with inflation, investor's demand for alternative assets like structured debt, private equity, and AIF has amplified substantially as investors diversify from traditional products like FD, bonds, Equity & Gold.
Wealth Managers also find value in many of these offerings as they break away from the usual and give them an opportunity to sophisticate their product offerings.
A growing number of Millennials & women HNW as clients
The client mix for wealth managers is expected to change, with the proportion of millionaire millennials and high net worth women set to increase.
Lifestyle cost profile for them is very different from that of Gen X, wealth managers need to radically change the cost assumptions while projecting investable surplus for these clients.
In a nutshell, the wealth management industry is seeing some significant shifts but most of these changes are related to accessibility, technology, servicing, complexity etc.
But the time-tested fundamentals of investing still remain the same and the investors and wealth managers should give credence to them while constructing and managing their investment portfolios.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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