In a country where cricket is a religion, the Indian cricket team’s five-wicket win over Australia in the ongoing 2011 ICC Cricket World Cup’s quarter-finals was a moment of national joy and celebration. Batsman Yuvraj Singh’s unbeaten 57 runs won him the Man of the Match award for the fourth time in the tournament while, cricketing legend Sachin Tendulkar, who had scored his 99th international century in the previous match against South Africa, crossed 18,000 One Day International runs with his 53-run total.
Indian cricketers enjoy a huge and obsessive fan following that often rivals that of Bollywood stars. Cricket is also the only lucrative sport in the country. Interestingly, 38 year-old Mr Tendulkar, who is revered as a demi-god amongst cricket lovers throughout the world was recently ranked 59th in a recent survey of most trusted brands in India, ahead of many public companies. He was the first Indian cricketer to breach the million-dollar mark with a contract with sports management company, WordTel. Since then, others have followed suit and today, courtesy of brand endorsements, most Indian cricketers playing at the international level are millionaires, reflecting the aspirations of their countrymen striving to succeed in an economically resurgent India.
Sports celebrities and Bollywood stars however account for a tiny fraction of the growing high net worth individuals (HNW) and ultra HNW in the country, regarded to be one of the fasted growing domains in the financial services industry. According to the Zurich-based Credit Suisse Research Institute’s inaugural Global Wealth Report, released in October 2010, there are around 170,000 HNWs in the country. These include among others, agriculturists, old economy players from established business houses, IT and new economy entrepreneurs and highly paid professionals.
The Wealth Report states that wealth in India has grown strongly over the past decade with wealth per adult more than doubling from $2,000 in the year 2000 to $4,900 in 2010. Over the past decade, the report estimates total wealth in India has tripled to $3,500bn, and is predicted to nearly double to $6,400bn by 2015.
FIGHTING FOR THEIR SHARE
While the share of ‘organised’ players in the market is steadily growing and according to analyst firm Celent, is supposed to account for 80 percent by 2014, the wealth industry is highly fragmented. There are a variety of financial institutions vying for a share of the pie. This includes foreign banks, brokerages, local private sector banks, boutique firms, independent financial advisors (IFAs) and even state-backed public sector banks which have for long primarily focused on servicing the masses.
In recent years, wealth management service providers have managed to establish and consolidate their presence in various market segments. For instance, domestic banks are strong in the affluent segments of the market, while international private banks have become strong in the HNW and ultra HNW sectors.
“Foreign banks are very well entrenched in the market because they have the products and the knowhow,” observes Ravi Nawal, analyst at Celent.
“Brokerages, domestic Indian banks and IFAs have a strong presence among the mass affluents and in the lower end of the HNW segment. The public sector banks on the other hand have been trying to launch their wealth offerings but they haven’t yet achieved success. And even when they do launch, they will achieve initial traction in the mass market segment since that comprises their near-captive customer base.”
Royal Bank of Scotland (RBS), a typical foreign entrant, is targeting the HNW segment. RBS has been present in India since 2002 and in 2008, it even signed up Mr Tendulkar as Global Ambassador to increase its brand awareness in the Asia Pacific region.
However, last year the bank decided to sell its retail and commercial banking business in India to HSBC, while continuing to retain its wholesale and private banking operations. The latter in turn owes much of its antecedents to the private banking business of Dutch financial institution, ABN Amro which RBS acquired a few years back.
“India is a priority market for RBS wealth management,” says Shiv Gupta, head of private banking for India at RBS.
His wealth management business currently runs assets worth $1bn and the bank’s target is to triple this over the next four to five years. But one of the biggest challenges facing the Indian wealth industry, observes Mr Gupta, is lack of breadth and depth of instruments available to invest in.
For instance, he says the domestic fixed income market is very shallow. Additionally, alternative investments such as hedge funds are non-existent. “The non-availability of a liquid deep market in a variety of financial instruments limits our investment options and reduces our flexibility as well,” explains Mr Gupta.
