Rapid Growth in India's Wealthy Population

The number of High Net-Worth Individuals (HNIs) and Ultra High Net-Worth Individuals (UHNIs) in India is experiencing a remarkable compounded annual growth rate (CAGR) of 12%, according to a report by Motilal Oswal. This surge is attributed to India's robust economic expansion and buoyant equity markets, which are also accelerating the growth of their wealth.

Despite this rapid growth, the penetration of organized wealth management services in India remains significantly low at just 15%, compared to 75% in developed economies. This presents a vast opportunity for wealth management firms to expand their reach and tap into this growing market segment.

Key Trends in Wealth Management

One of the key trends highlighted in the report is inter-generational wealth transfer, 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.

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.

Future Prospects for Wealth Management

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.

With RoEs above 25% 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.