Jefferies Forecasts Over 20% Annual Growth For India’s Wealth Management Sector Driven by Rising HNIs

As India’s economy grows and more high net-worth individuals (HNIs) emerge, a report by Jefferies points to strong growth chances for the country’s wealth management sector. The report predicts that top companies in this field could grow their main business by over 20% each year for the next three years.

Wealth Management Firms Could Increase Wealth

The growth momentum in the core wealth management (WM) segment is expected to be driven by several factors, including expanding client base, enhancing the network of relationship managers (RMs), and boosting overall productivity. According to Jefferies, top wealth management firms have the potential to increase their core wealth assets under management (AUM) by more than 20% annually during this period.

However, the report also points out that the HNI market is becoming increasingly competitive, with more players entering the field and revenue sources becoming more complex. A significant transition from a distribution-based model to an advisory-based approach is identified as critical for future success. Timing this shift appropriately is crucial, as premature moves could negatively affect profitability, especially for firms still investing heavily and managing lower AUM per client.

Advisory Model Benefits And Challenges in HNI Market

The advisory model typically commands lower fees—ranging from 30 to 45 basis points—compared to the 50 to 100 basis points common in the distribution model. Despite this margin difference, the advisory approach offers benefits such as larger scale and more profound client relationships. Given that approximately 80% of ultra-high-net-worth individual (UHNI) AUM is vital to most wealth managers, adopting the advisory model can be an effective strategy for retaining these key clients.

Jefferies also underscores that the HNI market in India remains fragmented, characterized by a multitude of domestic and foreign brokers and banks. As competition heats up, firms face growing challenges related to employee attrition and rising costs. Managing these pressures effectively will be essential for sustaining long-term growth in the sector.

As per the report India’s wealth management industry is poised for robust expansion, careful strategic timing, especially regarding the shift to advisory services, and prudent management of operational challenges will be vital for firms to capitalize fully on the opportunities ahead.

(with ANI Inputs)

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