The Indian wealth management business is expanding and offers both domestic and international players a sizable opportunity. Fintech players, however, are posing greater threats to established businesses with their product, pricing, and digital differentiation, intensifying the competitive environment. Players in the wealth management industry in India would need to react both strategically and creatively to be able to compete in a market that is rife with rising client expectations for individualized goal-oriented services and digital experiences.

Although banking scions and merchant dynasties have long been known to congregate around India’s largest conurbations, such as Mumbai, New Delhi, and Hyderabad, but more millionaires are now appearing in 2 and 3-tier cities that are thought of as less developed but nonetheless populated. Among the BRICS nations, India has the second-highest proportion of high-net-worth individuals (HNIs), while having a lower wealth distribution than western markets.

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Innovative distribution models

In the upcoming years, it is projected that the wealth management industry in the nation would expand significantly. The broad adoption of fresh, creative distribution methods that increase the availability and affordability of wealth management services will be the main driver of this growth. Therefore, in light of the growing competition from creative start-ups and digital platforms, traditional banks are currently being forced to reassess their current models.

With the rise of fintech platforms, robo-advisory services, and direct-to-consumer (D2C) investment channels in recent years, the digital distribution model has undergone significant evolution. By providing a number of benefits, these platforms have altered the traditional middleman landscape. Wealth management services are now more readily available to a wider audience thanks to digital distribution channels, especially in 2&3 tier cities where conventional intermediaries might not be as well-represented.

Digital platforms can provide competitive pricing and cheaper costs compared to their traditional competitors because they don’t require physical branches and hav e lesser overhead. Traditional intermediaries have been under pressure to review their fee schedules as a result of this.

RMs key player for wealth distribution

Clients still respect relationship managers’ hands-on advice, but because of operational and repetitive tasks that could be automated, relationship managers only have 44% of their workdays to devote to activities that generate income. This has an effect on the degree of service they can offer as well, as 50% of customers feel that the RM’s service could be better. Banks and wealth management companies must use technology, especially artificial intelligence, generative AI, and intelligent automation, to empower RMs. Additionally, digital enablers can support the entire client lifecycle, from prospecting and onboarding to sales planning, advice, and servicing. One example is an integrated RM cockpit with single-view dashboards.

Omni channel approach

Different strategies, including digital self-serve, omni-channel, and RM-assisted channels, are needed to successfully attract investors in the affluent, high-net worth, and ultra-high-net worth categories. For instance, investors, especially those in the wealthy sectors, need a clever, digital-first omni-channel approach that is connected to the “turning point” events that affect their decision to take action. On the other hand, despite the fact that ultra-high-net-worth investors place a high value on mobile and digital capabilities for convenience, wealth management companies still need to offer them advanced risk management (RM) tools and other forms of human assistance.

Hyper-personalization is the need of the hour

The wealth management sector now has more openness because to the digital distribution model, which also allows investors to compare fees and performance across different service providers and receive real-time information on their investments. Digital platforms use data analytics and AI to provide personalised investment solutions and individualized advice.

Traditional intermediaries

The landscape of intermediaries is expected to change much more as the digital distribution paradigm develops further. The value proposition of traditional intermediaries must be improved by utilizing data analytics and artificial intelligence (AI) while providing a seamless and personalized consumer experience.

Intermediaries will need to focus on providing value-added services like comprehensive financial planning, goal-based investment, and tax-efficient solutions in order to stand out in a crowded market. Intermediaries must diversify their income streams because the traditional trail commission model is under strain. They may employ fee-based advice models or use hybrid strategies that combine commissions and fee-based services.

The way ahead…

The economy of the nation is predicted to expand as a result of excessive consumption and the expectations of the middle-income class. This will increase the need for easily accessible, reasonably priced, and tailored wealth management services. Consequently, the continuing innovation and disruption in the Indian wealth management sector give a potential opportunity for both established players and newcomers to take advantage of this expanding market while helping to standardize financial services throughout the country.

(By Abhishek Bansal, Founder & Chairman of ABANS. Views are personal)