Wealth management has gained significant importance over the past few decades, driven by the country's economic growth and the increasing affluence of its population. With a growing number of individuals and families seeking to preserve, grow, and transfer their wealth, the wealth management industry has witnessed rapid development.

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However, along with these opportunities, several challenges have emerged that require careful consideration and strategic solutions. We explore the major challenges faced by the wealth management sector in India —

 

Legacy issues: Talking about the issues plaguing the wealth management industry, Mohit Gang, CEO of Moneyfront - a subsidiary of Niyogin Fintech Limited, says, "The industry is saddled with a lot of legacy issues and the key ones are antiquated systems, a lot of documentation, lack of product innovation, lack of quality resources, etc."

He says it is ironical that even the best of the wealth outfits lack good reporting and analytical tools. And most of their records are still MS-Excel based or operate on multiple different systems which don’t speak with each other. "There are very few players who can really service High Net Worth Individuals (HNI) and Ultra High Net Worth Individual (UNHI) clients with quality reports and in-depth portfolio analysis which is completely digital," Moneyfront's CEO adds.

The industry still has a lot of documentation and manual intervention, he says, adding that high value products like PMS, AIF, structured products, etc. are mostly concluded with tons of physical documentation. Although he admits that some efforts have been made to solve the issue, but the industry is far from being a few-click solution for such products.

 

Regulatory Landscape: One of the foremost challenges in wealth management in India is the complex and evolving regulatory landscape. The financial sector in India is subject to a multitude of regulations imposed by various authorities such as the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Insurance Regulatory and Development Authority of India (IRDAI). 

Navigating through these regulations while providing customized solutions to clients can be a daunting task for wealth managers.

Talent Shortage: The wealth management industry also faces a dearth of talent. It requires professionals with a blend of financial expertise, interpersonal skills, and market knowledge, but there is a shortage of skilled talent in the industry, leading to increased competition for experienced wealth managers. Finding and retaining qualified professionals who can effectively guide clients through complex financial decisions is a persistent challenge.

"High demand for finance professionals mean that the cost of quality resources has gone through the roof and the overall quality of portfolio discussions has suffered. Plus, resources are more groomed to push few products for short-term gains often overlooking the merit of holistic asset allocation approach or the risk appetite of the investors, resulting in losses or bad experience for clients,"  Moneyfront's CEO says.

Data Security and Technology: As the industry becomes increasingly digitized, ensuring data security and privacy is of paramount importance. Wealth managers need to adopt robust cybersecurity measures to protect sensitive client information from cyber threats. 

Moreover, integrating technology to enhance client experiences while maintaining a human touch is a delicate balance that requires continuous innovation.