From consumer to custodian: The changing face of wealth management for India’s elite
wealth management race for leveraging the maximum out of UHNIs/family offices' investments, the entity that often loses the most is the investor. To understand this misaligned thesis better and identify the path towards a more investor-aligned process, it is imperative to observe the entire ecosystem and study its evolution over time.
India, a developing economy, has only recently started witnessing a splurge in the population of the wealthy, and thus, the industry that manages this population’s wealth is also at its very nascent stage, hardly 30 years old. This implies that the value chain of wealth management is still far from reaching its most efficient state.
In the first three decades, the key stakeholders have been moving along the chain with a common aim -
a. Investor — maximum returns
b. Product manufacturer — maximum yields
c.
Wealth manager — maximum commissions
When the common aim is to ‘maximise’, the process can get skewed towards those with more skin in the game, and hence, investor interests get compromised. That was the case until the 4th key stakeholder, the Regulator, intervened at regular intervals to realign the value chain.
The First 3 Decades of Wealth Management in India
The first two decades, broadly from 1990 to 2010, were dominated by the distributors earning product-centric commissions. With the fund size still low, and entry loads high, the cost of investing was as high as 2.75-3% of the assets under management (AUM).
