02 September 2024
Wealth management in India is growing quickly and becoming one of the fastest-growing sectors within the financial services industry. This growth is driven by the country's strong economic development and an increasing number of ultra-high-net-worth individuals (UHNWIs) and high-net-worth individuals (HNWIs).
In recent years, the assets under management (AUM) in this sector have been increasing at an annual rate of 15-20%. Projections suggest that AUM could reach $1.8 trillion in the next 4-5 years, reflecting a compound annual growth rate (CAGR) of 13-14%. This remarkable growth is accompanied by a shift in asset allocation strategies. Investors are moving away from traditional investments like fixed deposits, gold, and real estate towards more dynamic asset classes such as alternative investment funds (AIFs), real estate investment trusts (REITs), infrastructure investment trusts (INVITs), private equity, and cryptocurrencies. The increasing appeal of these emerging investment avenues reflects a growing appetite for higher returns and innovative financial instruments.
Additionally, foreign investments, especially among UHNWIs, are gaining traction, with the Gujarat International Finance Tec-City (GIFT City) playing a crucial role due to its favorable tax advantages.
The sector is also witnessing the emergence of new customer segments, including millennials and women, who have distinct financial needs compared to traditional clients. Women, in particular, are increasingly taking control of their investments, often with greater investible surpluses than their male counterparts. This demographic shift is compelling wealth managers to adapt their services to meet the specific needs of these new client groups.
Despite this promising trajectory, the industry faces several challenges. A major issue is the talent shortage, which affects various aspects of the wealth management value chain, from relationship management to operations. The demand for wealth management services is outpacing the available talent pool, exacerbating the problem. Currently, investment in training and upskilling within the industry is minimal, accounting for less than 1% of overall expenditures.
To address this, there is a pressing need for increased investment in training programs and closer collaboration between industry and academia to cultivate talent from the grassroots level.
Wealth management in India is growing quickly and becoming one of the fastest-growing sectors within the financial services industry. This growth is driven by the country's strong economic development and an increasing number of ultra-high-net-worth individuals (UHNWIs) and high-net-worth individuals (HNWIs).
In recent years, the assets under management (AUM) in this sector have been increasing at an annual rate of 15-20%. Projections suggest that AUM could reach $1.8 trillion in the next 4-5 years, reflecting a compound annual growth rate (CAGR) of 13-14%. This remarkable growth is accompanied by a shift in asset allocation strategies. Investors are moving away from traditional investments like fixed deposits, gold, and real estate towards more dynamic asset classes such as alternative investment funds (AIFs), real estate investment trusts (REITs), infrastructure investment trusts (INVITs), private equity, and cryptocurrencies. The increasing appeal of these emerging investment avenues reflects a growing appetite for higher returns and innovative financial instruments.
Additionally, foreign investments, especially among UHNWIs, are gaining traction, with the Gujarat International Finance Tec-City (GIFT City) playing a crucial role due to its favorable tax advantages.
The sector is also witnessing the emergence of new customer segments, including millennials and women, who have distinct financial needs compared to traditional clients. Women, in particular, are increasingly taking control of their investments, often with greater investible surpluses than their male counterparts. This demographic shift is compelling wealth managers to adapt their services to meet the specific needs of these new client groups.
Despite this promising trajectory, the industry faces several challenges. A major issue is the talent shortage, which affects various aspects of the wealth management value chain, from relationship management to operations. The demand for wealth management services is outpacing the available talent pool, exacerbating the problem. Currently, investment in training and upskilling within the industry is minimal, accounting for less than 1% of overall expenditures.
To address this, there is a pressing need for increased investment in training programs and closer collaboration between industry and academia to cultivate talent from the grassroots level.
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