India's wealth management business set to boom

By SiliconIndia   |   Thursday, 24 January 2008, 13:31 Hrs
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Mumbai: According to a new research conducted by Celent, a Boston based financial research and consultancy firm, the Indian wealth management industry is gearing up to meet expanding market opportunities. To exploit the immense growth opportunity in the field, service providers, products, channels, technology, regulation and clients are coming together in the wealth management industry, reported the Business line.

The report titled "Overview of Indian Wealth Management Market" reveals that over the next four-five years, the revenue from wealth management service is expected to contribute to over one third (32-37 percent) of full-service financial institutions.

The wealth management market is undergoing structural changes as market penetration by organized players has increased drawing clients from unorganized end of the market.

According to Celent, with large segments of the population showing interest in financial products and service lines, growth and buoyancy across sectors are boosting the financial service industry of India.

By 2017 disposable income is expected to grow from present 2 percent to 5 percent. Currently, Indian financial sector shares about 7 percent of the total national disposable income. The estimated share of the financial institutions would grow to 18 percent by 2012.

The report estimated an addition of 500 million people to the working class in the next decade, with the young population enjoying increase in income levels. A 20 percent compounded annual growth rate in the nearly $400 billion annual consumer spending could be expected.

The wealth management service providers have segmented Indian market into four categories, namely: the mass market (investible surplus $5,000 to $25,000); the mass affluent ($25,000 to $1 million); the high net worth (HNW $1 million to $30 million) and the ultra-high net worth (ultra-HNW greater than $30 million).

The lower rung of this pyramid is currently clocking tremendous growth at 30 percent for mass affluent and 27 percent for mass market and will continue the same phase says the report.

Suggesting that there is a paradigm shift in Indian wealth management business-having moved from safeguarding wealth to growing wealth, the report says there is momentum towards more sophisticated customer segmentation, products and delivery channels.

The wealth management market currently registers a 30 percent plus growth and is expected to touch $1 trillion by 2012. The households are also expected to increase from current 13 million to 42 million households.

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