Indian Wealth Management: Strategies, Products and Players

Indian Wealth Management: Strategies, Products and Players

ii

Table of Contents

Tables Executive Summary Assessing Individual Segments Reputation and Regulation Outlook, Competition and Players Section 1: Introduction Chapter 1: Context - Financial Services Grow as Indias Role in the World Changes Long term changes unfolding A changing consumer mindset fuel retail banking growth Structure of the market place Public Sector Banks Foreign Banks Private Banks Competing in the Indian retail banking market The dash for market share Saturation among the most attractive customers Diversification of product lines Risk management its no walk in the park. Are we there yet? The liberalization of Indian banking Big middle class, small purchasing power Figuring out the Indian consumer A paucity of talent amid an abundance of people Succeeding in the Indian banking market Map out a distribution strategy Capitalise on technology Take a long term view Watch your back Conclusion. Section 2 Wealth Management and issues in Wealth Management Chapter 2: The Wealth Market The wealth market Reputational issues Regulation Case study: ICICI Bank Case study: SG Private Banking Section 3: VRL Roundtable Chapter 3 Background Information On Attendees and Companies 1. Rahul Johri, Head - Consumer Banking Group, DBS Bank Ltd (India) 2. Ajay Bagga, Head of Private Wealth Management, Deutsche Bank (India) 3. Soumya Rajan, Head of Private Banking, Standard Chartered Bank (India) 4. Ramnath Krishnan, Managing Director & Head Private Banking, HSBC (India) 5. Samir Bimal, Country Head - Private Banking, ING Vysya Bank Ltd 6. Nipun Mehta, Executive Director & Head, SG Private Banking (India) 7. Rohit Sarin, Founder Partner, Client Associates 8. Ashish Khetan, Senior Vice President Wealth Management & Head Family Office Services, Kotak Mahindra Bank Ltd. 9. Nitin Jain, Head Wealth Management, Edelweiss Capital 10. Mr. Balamurugan, Joint General Manager, ICICI Bank

v vi vi vii vii 9 11 12 13 15 15 16 17 17 17 18 18 18 19 20 20 21 22 22 23 23 23 24 26 27 27 29 30 35 37 39 41 41 42 42 43 44 44 45 46 47 47

iii

Indian Wealth Management: Strategies, Products and Players

Chapter 4 Business models Introduction from Titien Ahmed, head of Asia-Pacific editorial, VRL: Soumya Rajan, head of private banking, Standard Chartered (India): Samir Bimal, head, private banking, ING Vysya: William Cain, editor, Private Banker International: Mr. Balamurugan, Joint General Manager, ICICI: Nitin Jain, Head of Wealth Management, Edelweiss Capital: Ashish Khetan, Senior Vice President, head, family office services, Kotak Mahindra Bank: Ajay Bagga, head of Private Wealth Management, Deutsche Bank (India): Rahul Johri, head, Consumer Banking Group, DBS Bank (India): Chapter 5 Foreign investment and regulation Chapter 6 Summary of Roundtable Mumbai Roundtable: Business Models Private-investment banking a hit in India

49 49 49 49 49 49 51 52 53 55 57 63 63 63

iv

Tables & Figures

Table 1.1 Summary of Indias Banking Reform Time Table Table 2.1 Indian HNWI households/individuals: Table 2.2 Income and consumption distribution in India (2003-4) Table 2.3 Most and least trusted financial providers in India Table 2.4 City-wise distribution of wealthy households Table 2.5 Acquisitions of Non domestic players in India Figure 1.1 Real GDP Growth in India Figure 2.1 Timeline of Foreign Banks in India

19 28 28 29 31 31 12 33

Indian Wealth Management: Strategies, Products and Players

Executive Summary

This report features exclusive proprietary data, including interviews with senior industry players taken from Private Banker Internationals Indian Wealth Roundtable to present the most incisive view of one of the most lucrative wealth markets in the world. The potential of India as a wealth management market is difficult to over-emphasise. The fundamentals are strong by any metric. As this report will show, this potential exists not only in the untapped nature of the market, but also in terms of: a relaxing of financial regulation and a quickly growing mass affluent and HNW population in addition to the already established ultra high net worth segment. Opportunity also lies in providing services to the non-resident Indians (NRIs) who have achieved success and generated wealth across the globe. While the Indian growth story has been an integral part of any assessment of global wealth for some time, the sense is that 2009-10 could offer a real tipping point in terms of onshore wealth management services. The list of recent entrants takes in all types of wealth manager, from long-established players like Goldman Sachs to burgeoning brands such as Barclays Wealth and domestic brokerages such as Motila Oswal.

Assessing Individual Segments

Segmenting this wealth remains a difficult prospect. The extent of the growth within India has left the country with a wildly divergent population in terms of income and living standards. From a high-end perspective, it is important to note that India has the second highest number of UHNWIs in Asia after Singapore - over half the billionaires in Asia now come from India. Conversely just 38 percent of the wealth market is owned by those considered to be high net worth in the traditional sense. This makes the targeting of differing wealth segments both desirable and practical. These trends have also resulted in the most fragmented wealth market in Asia. The rapid rate of growth seen in the Indian wealth market in recent years has given rise to numerous independent financial advisors and brokerage houses, though the services offered by these segments are limited, and face stiff competition from insurers and private banks themselves.

vi

Executive Summary

The high incidence of mass affluent individuals in India has also led to a continued reduction in the minimum liquid asset thresholds required to use wealth management services.

Reputation and Regulation

The long and varied history of foreign banking presence in India means that there remains a degree of uncertainty regarding the commitment and ultimate intentions of foreign financial institutions. Despite the surge of wealth and influx of private banking initiatives, the shadow of regulation still hangs heavy over the Indian wealth management market. Investment controls remain of secondary importance when compared with private banks ability to establish a presence in the region. Banking reform is expected to make this process far simpler, diversifying the field still further and mitigating the competitive advantage of the domestic banks which are able to leverage their significant branch networks. Obtaining a non bank financial corporation (NBFC) licence is an increasingly common way for foreign banks to enter India given the tight restrictions placed upon branch-based expansion by overseas institutions. The RBI currently only allows foreign banks to increase their cumulative network by between 18 and 20 branches per year. The figure is higher than the 12 India is required to permit under the terms of its trade deals with the World Trade Organisation but does not allow significant room for manoeuvre.

Outlook, Competition and Players

The Indian wealth market is delicately poised, and nowhere is that more apparent than in the competition between domestic and foreign players. The influx of foreign competitors has led to a domestic fightback, as banks, brokerage houses and new entrants develop their offerings. Of all the domestic competitors seeking to target HNWIs in 2009-10, the most notable is perhaps Reliance Money, which launched its wealth management programme in July 2008. Backed by Indian billionaire businessman Anil Ambani, Reliance announced it would be offering Indias first cradle to grave wealth management service, utilising its network of over 10,000 outlets across 5,000 towns and cities in India to do so. The groups segmentation efforts will involve a focus on both senior citizens and non-resident Indians. With its extensive local network and considerable knowledge of the local market, Reliances entrance into the Indian wealth market poses a number of threats to even the largest foreign banks. As the largest brokerage house in India, the firm has a pre-existing base of investor to target, and the potential for referrals from other Reliance businesses is considerable.

vii

Indian Wealth Management: Strategies, Products and Players

The aggressive nature of Reliance Moneys push into the wealth management sector is evidenced by its AuM targets: reportedly, the firm is looking to reach $11.3 billion in assets under management by the end of 2009, just 18 months after it first launched. But Reliance Money is not the only domestic institution to have announced plans to diversify into wealth management. A marketplace which already has firms of all shapes and sizes jostling for position is likely to get more crowded still for as long as this trend continues.

viii

Order form
Quantity Title Cost Offer code

New order

Renewal

Your Details
Mr/Mrs/Ms Family Name Job Title Company Name Address First Name

Payment Details
Cheque enclosed for ________ made payable to Financial News Publishing Ltd Please invoice me/my organisation Charge my Visa/MasterCard/American Express Card No. Expiry date
Cardholder name: Signature:

Security Code

Country

Postcode/Zip

VAT Number: For further information and to place your order: London, UK Office VRL Financial News 34 Porchester Road London, W2 6ES Tel: +44 (0)20 7563 5688 Fax: +44 (0)20 7563 5601 Singapore Office 20 Maxwell Road #09-01A, Maxwell House Singapore 069113 Tel: +65 6383 4688 Fax: +65 6383 5433

Telephone Fax Email Type of business

Asia orders
asiapacific@vrlfinancialnews.com + 65 6383 4688

EMEA orders
info@vrlfinancialnews.com +44 (0) 20 7563 5605