Published in Silicon India Consultants Magazine, Jan 2017 issue
By Ashish Tyagi, Senior Equity Strategist, Divitas Capital
With increasing number of savvy investors willing to take opportunistic bets and taking the initiative to manage their financial future along with rising globalization, the years ahead will be a game changer for the Wealth Management industry. If you believe there's a chance of particular stock or mutual fund doing well, you would like to put money in it and take advantage. But how do you find that right stock or the mutual fund and take the investment call? What is needed are sophisticated research tools with financial need analysis along with planning and execution capabilities or a good financial advisor who is committed to manage your financial affairs.
While most Wealth Management firms currently use fairly simple analysis to deliver the key advice, we expect the firms to develop more descriptive and predictive analysis. As wealth grows, particularly in emerging markets like India, there's a compelling need for a paradigm shift in the business models of long-established advisory firms. The emergence of new avenues for growth coupled with disruption caused by cyclical headwinds, robo-advisory and uncertainty over the regulatory changes has led to the change in landscape of Wealth Management industry. Thin margins, significant pressure on revenues and cut-throat competition is raising concerns for the small advisors who have large part of their business tied to retail commissions.
We see an opportunity in emerging markets driven by explosion of wealth to cater the complex needs of High Net-Worth Individuals (HNIs) by serving the mass affluent and HNIs in lower wealth brackets. The enhanced use of technology by the younger generation and young professionals to manage their own investments makes it inevitable for wealth management firms to invest in utility-based models, digital solutions, advice tools and self-service capable websites. The rise of automated advisors, aware and informed investor and willingness of advisors to serve affluent mass segment will result in further consolidation in the industry. The share of unorganized players (typically independent advisors, small brokers/agents) has shrunk considerably over the last few years, primarily due to the increased presence of organized players. Given the nascent stage of the Indian wealth management industry, firms face a shortage of trained advisors. This problem is further aggravated by the mis-selling and wrong advice to churn more and earn higher commissions thereby resulting into an unsatisfied investor. Hence, it is critical for organizations to develop and retain highly qualified team that will be the key differentiator for them.
As rightly said by Bill Gates, “I believe that if you show people the problems and you show them the solutions they will be moved to act”, this holds true for our wealth management industry as well. Though the landscape is changing, as an advisor, we need to work on our client's problems and come up with best possible solution as small efforts produce big results.