Decoding The Wealth Management Market In India: Trends & Building Blocks Of A Successful Model

The wealth management market in India is growing and presents a huge opportunity for both domestic and foreign players. However, 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. 

Wealth management players in India would need to respond both strategically and innovatively to be able to compete in an environment fraught with ever-increasing customer expectations or digital experiences and personalised goal-oriented offerings. 

If successful, incumbent players, including banks, will be well placed to give competitors, old and new, a run for their money. It will be possible, in particular, through the use of reimagined technology and data insight capabilities.

In this article, we will provide an overview of the Indian wealth management market before discussing the trends shaping that market in light of digital disruption. We will also recommend key actions across strategic, operational and technological fronts to kick off the transformation journeys that will allow players to remain relevant and competitive.

The Indian Wealth Management Market

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 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 (HNIs) amongst the BRICS nations. Hence, it is well-positioned as an attractive destination for wealth managers globally. India’s high net worth individual (HNI) population is expected to grow by 75% from 3.5 Lakhs in 2020 to 6.11 Lakhs in 2025. 

The number of ultra-high net worth individuals (UHNIs) is expected to increase by 39% from 13,637 in 2021 to 19,006 in 2026. India’s wealth is expected to grow by 10% per year and reach $5.5 Tn by 2025. 

A new generation of millennials known as digital natives is rapidly growing.  It is worth noting the emergence of wealthtech players who are disrupting the market for incumbent players.  These wealthtech players serve a large customer base of 4 Mn people, the majority of whom are millennials. By 2025, the number of investors in wealthtech products is expected to triple to 12 Mn. This presents a golden opportunity for incumbent players’ expansion goals.

Today, India is much more integrated with global markets and similarly 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 consecutive months of net FII outflows through July 2022, Indian equity markets are demonstrating resilience and demonstrating the growing influence of domestic institutional investors and retail investor participation.

According to the CASHe Millennial Mood Index 2021, 84% of millennials are more cautious about saving in the face of the pandemic, and 35% are purchasing health and life insurance policies. Millennials are tech-savvy and when it comes to managing finances, they aspire to manage on their own. 

They also want a high-tech banking experience that includes ecosystem integration, mobile apps, goal-based personalised financial management, product comparison tools, and digital payment mechanisms during their purchasing journey.  Furthermore, they prefer gamified dashboards and recommendations over social media, and it is no surprise that millennials account for 70% of customers of new fintech platforms in the wealth management space.

Key Imperatives For Legacy Indian Wealth Managers

Grow Market Share Amidst The Competition Driven By Overwhelming Digital Disruption 

Wealth management players in India would need to be more vigilant in future with respect to their market share. They face the daunting task of transforming themselves to address challenges such as siloed operating models and value propositions out of sync with customer needs which have changed significantly. A change largely due to shifting demographics in India and increasing customer preference for digital experience.

The limitations of wealth management players’ traditional models restrict them from tailoring their product strategies to align with segment-specific characteristics. This leads to the inability to offer a level of personalisation in products to attract key client segments such as millennials. 

Innovative Digital Customer Acquisition & Servicing Capabilities 

The pandemic has amplified and accelerated ongoing digitalisation around customer acquisition, servicing and experience. The business environment over this period exposed the limitations of some wealth managers in India in terms of the maturity of their technology and digital capabilities. 

Market players with greater degrees of digital readiness were able to engage with customers in very cost-efficient ways. Their wealth manager businesses outshone the competition thanks to capabilities such as digitised account opening, e-KYC, e-signatures, and payment integration, leading to a superior customer experience and more effective relationship management.

Leverage AI & Machine Learning (ML) To Boost Data & Analytics Capabilities

This will help unleash the power of hyper-personalisation for advisory as well as non-advisory services, such as customer acquisition and servicing.

As Indian financial markets progressively integrate more deeply with global markets, wealth management players have been forced to enhance their advisory capabilities. They have started introducing AI and ML into customer acquisition, portfolio recommendations, risk management and identifying investment trends early. This allows them to respond more dynamically before scenarios unfold in financial markets. 

We are aware of one large global investment bank that is exploring partnerships with robo-advisors to deliver data-driven monitoring for risk and exposure levels without diluting the human touch attribute. Other banks have been investing in data and are now able to explore AI/ML initiatives to provide automated portfolio recommendations and tax planning models. 

Reimagine Technology As Business Partner 

Incumbent players in Indian wealth management (banks and large national distributors) have grown over time with fragmented technology platforms and infrastructure. The latter is fraught with limitations stemming from this mix of large legacy applications and architecture. 

Such challenges are not easy to address, not least because implementing change is a slow process. Organisations have not been able to leverage the full power of all their data due to the siloed nature of IT applications and data systems. Over the years, banks have been investing in digitalisation but the investment has not been balanced across all components of technology capability. 

A Path Forward For Future Transformation

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 that fosters agile innovation while progressing through their change journey. 

Big banks and large brokers in India that currently dominate the wealth management landscape should consider five building blocks for a future digital operating model that will allow them to remain relevant and compete. These are targeted at: 

• Addressing the shift in wealth customer demographics and gaps in their wealth products strategy
• Differentiating the wealth customer experience through real-time personalised mobile and social connectivity 
• Deploying rapid innovation by integrating data, AI/ML and analytics for wealth advisory and services 
• Mobilising the right mix of technology and platforms, with a focus on cloud 
• Fostering agile working across business, technology and data teams within the enterprise

The Five Building Blocks Of a Transformed Wealth Model

Governance

This comprises players’ vision, mission, guidance on revenue and profitability and commitments to shareholders. 

Governance will ensure sponsorship and commitment to setting up and running the model in the best interest of the stakeholders, driving customer-centricity and a digital focus within the organisation.

Wealth Customer Experiences

The new operating model will place the customer at the forefront to ensure full alignment with their evolving aspirations. 

Players should focus on building upon customer experiences by prioritising mobile-first, omnichannel engagement and hyper-personalisation alongside their products and service offerings, with a focus on providing life stage and life event-based recommendations.

Analytics For Wealth 

This powers the conversion of data into predictive and meaningful business insights. When you consider the dimensions of the customer experience set out above, a powerful and state-of-the-art analytics capability will be key. It will drive the hyper-personalisation of product recommendations, customer interactions and communications, as well as provide enhanced control in respect of risk and fraud. 

This capability will need to match the requirements for AI/ML models to drive insights and decisions by provisioning for big data. Players would need to integrate analytics at a specific maturity level to support AI/ML, NLP, AR and VR-based programmes that differentiate the customer journeys. 

Digital Innovation 

Leveraging a variety of tools and technologies, digital innovation will act as the catalyst to deliver impactful real-time and personalised elements within the customer journey. Organisations must ensure the seamless integration and operation of the joint products of business, technology analytics, and digital innovation capabilities. 

Redefined Operating Models 

Spanning technology, data, business, security, operations and functional teams, this model serves to bind together and foster partnerships across different domains within the organisation and address the key priorities.

Wealth Management Operating Model: Teams

Teams across the five domains will be empowered to work synergistically and in alignment with the organisation’s digital and innovation objectives. The adoption of agile methodologies will allow for superior performance through the planning of minimum viable products. 

To conclude, transformation based on these five recommended building blocks will ensure full alignment with market forces such as customer dynamics and fintech competitors. It will also drive a trusted digital experience for customers powered by innovation, data, and technology through a collaborative agile organisation culture.

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