Indian brokerages are competing with banks to offer wealth management services to the nation’s burgeoning millionaires in a growing economy as a volatile stock market makes revenues from broking operations unstable.
So far, wealth management in India mainly included equity-linked portfolio management services and mutual funds but now the definition has widened to include estate planning, private equity, arts, among others.
India’s new millionaires, with high disposable income, want advanced financial advisory services and brokerages see this as an opportunity to diversify their revenue stream and hedge themselves from volatile equity markets.
"With the complexities in the financial market going up, its difficult for individuals to manage their own portfolios," said C.J. George, Managing Director of Geojit Financial Services Ltd.
Geojit has announced plans to enter the wealth management business which also includes rivals such as Motilal Oswal Financial Services, Kotak Securities and Edelweiss Capital.
The noveau-riche, unlike their predecessors who bought gold as a safe-haven investment, are open to more advanced assets such as private equity, real estate, arts and structured products.
"We see people want to move away from pure broking services to a broad range of wealth management," said Rashesh Shah, chairman, Edelweiss, adding people were happy with only equities when the stock markets were moving up.
Many financially well-off Indians have a habit of having a personal investment advisor and their brokers double up for the role, he said.
Broking companies, facing an income crunch because of increase competition, may seek to allay some woes through wealth management services.
Severe competition in retail broking may force some companies to offer steep discounts on commissions, which may squeeze their earnings, said Sanjay Aggarwal, national industries director (financial services), KPMG.
New services such as wealth management will help leverage the acquisition cost and maximise revenues, he added.
COMPETITION FROM BANKS
India has over 100,000 people having a net worth of over $1 million and the size is expanding by a fifth every year, said V. Vaidyanathan, executive director, ICICI Bank adding the revenue opportunity is 40-50 billion rupees for the industry.
India, along with Hong Kong, Indonesia, Singapore and South Korea are homes for half of the 10 fastest growing markets for high networth individuals, according to KPMG.
Global firms such as HSBC, BNP Paribas, UBS, Citigroup, Standard Chartered and Societe Generale have been expanding their wealth management services in India.
Indian banks such as ICICI Bank, Axis Bank and Yes Bank have also jumped into the fray to boost their fee income.
Financial services group ASK sold its brokerage business to JM Financial Services to focus on wealth management and launch private equity funds.
Edelweiss plans to boost its wealth management business and would set up 100 offices across India from the present 40, Shah said.
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