Changing trends in Wealth management in India

Although the wealth management market in India is growing and presents a huge opportunity for both domestic and foreign players in India, the competitive landscape is only becoming more intense with fintech players posing bigger threats to the traditional players with their product, pricing, and digital differentiation.

The Indian wealth management market is on a sustained path of growth, driven by India’s long-term economic prospects, positive demographics, rising income levels and existing low levels of penetration. Although the percentage of wealthy individuals in India is small relative to developed markets, India has the second highest number of high-net-worth individuals amongst the BRICS nations, and hence is well positioned as an attractive destination for wealth managers globally.

India’s high net worth individual population is expected to grow by 75% from 3.5 lakhs in 2020 to 6.11 lakhs in 2025. Ultra-high net worth individuals are predicted to grow by 39% from 13,637 in 2021 to 19,006 in 2026. Wealth in India is likely to grow by 10% annually and reach US$5.5 trillion by year 2025.

New segment of Millennials called digital natives is growing fast. It is interesting to note the emergence of wealthtech players disrupting the market for incumbent players. These wealthtech players are serving a significant customer base of 4 million most of which are Millennials. Number of investors in wealthtech products is expected to grow three-folds to 12 million by 2025. This presents a golden opportunity for incumbent players’ expansion goals.

Today, India is much more integrated with global markets and likewise aligned with geopolitical and regulatory developments than in the past. Over the past two years, that has been demonstrated by how the Indian equity, bond, and commodity markets have witnessed huge volatility due to geopolitical events.

However, as global central banks continue to impose interest rate hikes to arrest inflationary pressures, and despite nine continuous months of net Foreign Institutional Investors outflows through to July 2022, Indian equity markets are showing resilience and demonstrating the increasing influence of Domestic Institutional Investors and retail investors participation.

Wealth management players will need to establish a realistic, long-term transformation roadmap underpinned by the building blocks of a future state model. This transformation roadmap will require a behavioural step change at the executive level to establish an environment which fosters agile innovation while progressing through their change journey.

In India, big banks and large brokers offering wealth management products that currently dominate the landscape should consider five building blocks for a future digital operating model that will allow them to remain relevant and compete.

Transformation based on these recommended five building blocks will ensure full alignment with market forces such as customer dynamics and fintech competitors, drive trusted digital experience for customers powered by Innovation, Data, and Technology through a collaborative agile organization culture.

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA