India’s growth story makes it an attractive market for HNI investments. The changing tax regime remains in favor of the customer. While the regulatory environment in India is evolving, there are ample opportunities for established wealth managers to maximize their offerings to HNI customers.
Despite GDP growth rate hovering around the 5% mark as well as high inflation, India’s growth story is making it an increasingly attractive market for HNI investment. This trend is expected to continue, with India estimated to become the third largest global economy by 2030.*
While the percentage of wealthy individuals in India is small compared to developed markets, forecasted growth figures point toward high potential for asset accumulation over the foreseeable future. India has the key ingredients of a high-growth wealth management market, namely a very large and young mass affluent segment; an increase in the wealth of global Indians; the Indian government’s push to curb illicit leaks and more tightly regulate markets; and an increasing share of the organized advisory market players (e.g., Wealth Management at Banks, Online advisory through Artificial Intelligence, etc).
India’s wealth management services sector is largely fragmented, which isn’t surprising given the industry is still in its early days. Most organized players have so far focused mainly on the urban segment, leaving untapped about one-fifth of India’s population of HNIs. While early entrants and established local players have gained trust with potential investors, firms looking to enter the market will need to invest heavily in brand-building exercises to convey their trustworthiness. Hence, it is recommended that investors take a long-term view while evaluating and choosing wealth adviser for their investments.
The regulatory environment in India is evolving, presenting opportunities for established wealth managers to expand their offerings to HNI customers. The changing tax regime in every annual budget cycle is adding some uncertainty; yet remains in favor of the customer.
Given the nascent stage of the market, as well as a demographic and regulatory environment that is significantly different from elsewhere in the world, we recommend HNI customers to consider the following:
- Choose an advisor that focuses on transparency
- Capability to build life-time plan across customer lifecycle
- Offer customized and simple products
To conclude, asset allocation strategy is key. Stay invested with long-term view while evaluating potential return on investment. A 5% allocation on each market correction will build a strong portfolio. Also consider Multicap Fund for HNI customers with Risk profile “High” and Balance fund for HNI with “Moderate to Low” risk tolerance.
*Datamonitor Global Wealth Market Database 2008
The opinions expressed in this newsletter do not purport to reflect the views or opinions of AU Bank or its employees.
Looking for some great products to build your Wealth portfolio? Click here.