Private Wealth Management: Instruments wherein HNIs and UHNIs want to park their money

The Wealth Management industry is going through a paradigm shift, as the new generation of investors has established a penchant for better technology, quicker & easier execution, reduced costs and more customised investment solutions. At the same time, increased asset class volatility, growing complexities of investment instruments and evolving regulatory requirements have all resulted in new industry standards on how advice and investment products are delivered. Wealth advisors are increasingly being kept on their toes by a tough investing climate, higher levels of unpredictability and exacting client service expectations. Abhijit Bhave, CEO of Fisdom Private Wealth shares his knowledge on the emerging trends of offering quality private wealth advice high net worth individuals (HNI) and Ultra HNIs.

'Virtual interaction has gained traction'

Giving the background, Abhijit Bhave, said, “These changing investor expectations and the rapid adoption of technology has catapulted the fintech and wealthtech industries to the forefront, while the COVID-19 scenario has also proven to be a blessing in disguise, resulting in the development of a “phygital” model of wealth management that can cater to the needs of HNIs/ ultra HNIs with increased reach among Tier II and Tier III cities. Following the Covid19 crisis, virtual interaction with HNIs/UHNIs has gained traction and it has also improved the convenience of reaching out beyond traditional geographies. Automation of client onboarding & experience and seamless transmission of research ideas by advisory and wealth management firms gained traction in last one year.”

'Huge growth potential'

Citing Jeffries report, Bhave said, “India's MF AUM as a percentage of GDP is among the lowest, at 12%, and far below the global average of 63 %; thus showing a huge growth potential especially coming from the nation's hinterlands. According to AMFI data, individual investors held Rs.19.40 lac crores in mutual funds as of August 2021, up 35.48 % from August 2020, with around 16 % of these coming from B30 locations. With the AUM of the entire industry likely to increase by 12-15% between 2021 and 2026, we should reach around INR 60 trillion in mutual funds alone, thanks to an expanded internet footprint and increased awareness of mutual funds as long-term wealth generators.”

'Consistency of return and capital preservation'

Talking about the money flow, Bhave added, “Money appears to have flowed into riskier asset classes over the last year and most investors appear to have developed an apparent "Midas Touch", as the bulk of the investments they touch have turned to gold! But for the future, a balanced portfolio and handholding by a financial advisor are essential to ensure consistency of return and capital preservation so as to fulfil the investment objectives. The investment preferences of investors are shifting, as evidenced by the fact that low-cost ETFs and index funds are attracting larger inflows instead of managed large-cap equity portfolios. Customized wealth solutions, such as capital-protected structured products, pre-IPO unlisted stocks and high-yield debt have also become popular investment options for HNIs and UHNIs.”

'Trust of HNIs in investment advisors'

Bhave opines, “Clients of wealth management firms have traditionally placed a high level of trust in their advisors. Although there have been numerous FinTech launches in the retail market, the HNI space has yet to fully exploit the power of digital distribution.”

“Fintech and physical models in its new ‘avatar’ are the need of the hour in the current environment. The “phygital” (physical plus digital) model aids in the preservation of the human touch while offering the speed & efficiency due to technology and ensuring optimum client convenience & satisfaction thus offering an unique & superior client experience,” Bhave concluded.