The
wealthy, Bhave says, has evolved a lot in the past two-three years, especially
in terms of making learned decisions and considering the costs involved in the
investments
ABHIJIT
BHAVE, chief executive officer of Karvy Private Wealth talks to Puneet Wadhwa
on the key trends in the wealth management business in India and the road ahead
for the industry. Edited excerpts:
Do you think the wealth
management segment is getting overcrowded and the margins will get thinner
going ahead?
India
is on the growth trajectory where projections of a $10 trillion economy over
eight years are being made. This leads to a lot of potentials for wealth
management companies to grow and the sector will not get saturated anytime
soon. In the short-term, there may seem to be some overcrowding in this space.
That said, there is huge potential to grow over the long term.
The
margins will definitely get thinner going ahead but an increase in the asset
base in terms of volumes will bring profitability in the future rather than
margins. One of the options that many wealth management companies would
consider after regulatory clarity would be to go into the advisory model for
long term sustainability of the business.
Can you elaborate on the
likely industry growth rate for the next three-five years?
Considering
projections of at least a $5 trillion economy over the next three-five years
and the increase and inclusion of a larger investor base across the length and
breadth of India, double-digit growth in the wealth management industry is very
likely.
The wealth management
business competes with banks as well. How do you maintain your leadership,
profitability and growth strategy?
While
a bank will provide comprehensive banking solutions where wealth management is
a part of their services, we are specialists in only wealth management. We
focus and position ourselves into offering the best in class investment
products. By maintaining a diverse and all-inclusive category of products after
strict due diligence and evaluation, we get a competitive edge in terms of
investments.
How have the investing
trends among the wealthy/high net worth individuals changed over the last
two-three years? What is the road ahead?
The
wealthy have evolved a lot in the past two-three years, especially in terms of
making learned decisions and considering the costs involved in the investments.
The requirements have also evolved over time, where they are actively looking at
absolute return strategies, venture capital (VC), private equity (PE) and
international diversification. The merits of advisory models, succession and
estate planning are also visible and exercised. Going ahead, we foresee a much
deeper relationship between ultra-high net worth (UHNI) clients and wealth
managers in the advisory role, where both would have higher levels of awareness
and knowledge levels.
Over the last few years,
avenues such as art, wines, etc have emerged as investment options. Are the well-heeled
in India looking that them?
Though
these investment avenues sound glamorous and may seem attractive, we believe
these avenues have yet not evolved in a structured way in India compared to the
developed economies. The UHNI segment is definitely looking at these investment
avenues, but not a lot of actual investments are happening. These investments
are expensive to enter and the exits are uncertain. Though if the right one is
picked up early, the returns can be astronomical.
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