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The number of High Net-Worth Individuals (HNIs) and Ultra High Net-Worth Individuals (UHNIs) in India is growing at an impressive compounded annual growth rate (CAGR) of 12 per cent, according to a report by Motilal Oswal.
The report attributed this growth to India's robust economic expansion and buoyant equity markets, which are also helping their wealth grow at an even faster pace. It said "With robust economic growth, the number of HNIs and UHNIs has been growing in India (at 12 per cent CAGR), and their wealth is growing at a faster pace, aided by buoyant equity markets". Despite this rapid growth, the report noted that the penetration of organized wealth management services in India remains significantly low at just 15 per cent, compared to 75 per cent in developed economies. This presents a vast opportunity for wealth management firms to expand their reach and tap into this growing market segment. One of the key trends highlighted in the report is inter-generational wealth transfer, which is expected to play a pivotal role in driving the adoption of organized wealth management. The younger generation is increasingly showing a preference for modern investment avenues such as Alternative Investment Funds (AIFs), Portfolio Management Services (PMS), Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (INVITs), and international investments, moving away from traditional options like fixed deposits, gold, and physical real estate. The report also emphasized that the expansion of wealth management services into lower-tier cities and the inclusion of the mass affluent population will be critical for future growth. Investments in technology to support a "phygital" (physical and digital) model and the adoption of the Account Aggregator (AA) framework are expected to play a vital role in scaling operations. It said "Expansion into lower-tier cities and widening the customer cohorts to include mass affluent by organized wealth managers will be the next trigger for growth". Wealth management companies have been focusing on increasing their relationship managers (RMs) in recent years, which is likely to bring economies of scale and improve return on equity (RoE) in the medium term. These firms, equipped to cater to clients across multiple asset classes, enjoy high levels of client stickiness and strong cash flows, resulting in premium valuations. The report also mentioned that with RoEs above 25 per cent and healthy cash generation, organized wealth management in India is poised for significant growth, driven by evolving customer preferences, technological advancements, and expansion into new markets. (ANI)
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