Wealth management space the next frontier for the Indian finance industry amid technology advancements

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As late as the late 1980s and early 1990s, there were minimal professional investment advisors in India and wealth management services were restricted to a handful of high networth individuals (HNIs). Investment intelligence came mostly from LIC agents who posed as the de facto investment advisors for the masses. Consequently, most of the time, only LIC policies got sold as investments that lead to massive mis-selling around the country.

Over the last two decades, while this trend changed a lot with the introduction of professional wealth managers that was still restricted to HNIs and ultra-high networth individuals (UHNIs). Sustained investments for the laymen had still not taken off excluding a few involvements in equity.

In the last decade or so, the situation changed drastically. Wealth management has gone above and beyond HNIs and UHNIs onto retail investors who actively indulge in investments across assets. This happened on the back of a general increase in the earnings of the middle class resulting in a considerable increase in the disposable income.

With the advancement of internet and technology, now there is increased awareness about the significance of investments in the right asset classes. Investors are now well-informed about asset classes, risks involved and returns expected and their benefits. New technology is now changing the way in which wealth is managed in India.

A big advancement that has catalysed wealth management across classes is the increase in the number of start-ups and subsequently the number of unicorns that have appeared on the Indian industrial development. India currently boasts the third-largest start-up ecosystem in the world with about 60,000 start-ups functioning. As of January 2022, India had 81 unicorns with a total valuation crossing $274 billion out of which 43 unicorns with a total valuation of more than $89 billion emerged just in a period of last one year. The unicorns, with a younger leadership, have brought down the average age of the HNI or investors to just about 30 years.

Presently, there is a considerable wealth in India that is available to be managed professionally. According to Capgemini’s World Wealth Report, India stands in the top 10 countries with respect to total holding of private wealth. India’s wealth is estimated to cross the magical figure of Rs. 400 trillion over the next five years with growth expected at a CAGR of 27 per cent. 

he investment trends among Indians have also reshaped as investors are now looking to move their money from fixed deposits to ULIPs and Mutual Funds and not just the stock markets. This resulted in wealth management companies having to change their approach. Wealth management companies have had to revamp their product offerings with increased focus on innovation and changed their approach and focus from wealth accumulation to goal-based solutions which focus on the actual cash flow requirement of the investors.

The subsequent wave that has already started to take shape is that of Fintechs which will leverage digitization and enable investors in taking charge of their own money and make everyone a DIY investor. An increased number of investors today are willing to manage their money on their own through sources such as YouTube, blogs and internet advisors. 

Fintech start-ups have made their presence felt in the market and are transforming the financial services industry with disruptive innovative, cost-effective services and enhanced customer experience. While technology has made investing easier, it has also given ways to new challenge.

This ease of investing has lead to investors behaving like buyers who are purchasing every financial instrument that pops up on their screens. More often than not, the instruments bought do not align with the investor profile and so they end up having a lot of financial products without really having knowledge on what to do and how to steer their investments.

The next wave of innovation should focus on providing personalized investing intelligence that enable the investors to invest in alignment with their goals and do so without having to consistently find answers to questions such as when to invest, where to invest, and how much to invest.

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Views expressed above are the author’s own.