Desi millionaires’ investment portfolio today includes castles in Europe, islands in the Pacific, and oil wells in West Asia. And there are wealth managers to advise them on the best mix, and how to handle inheritance
Debojyoti Ghosh | TNN
Bangalore: Should I pick up a private jet and save on travel time or plan long term and invest in a private island? Art at Christie’s or solitaires at Sotheby’s? Chateau on the Swiss Alps or beach house by the Malaysian shores?
Tough decisions in a day in the life on an Indian HNI (high networth individual). And dreamy as this life may sound to most of us, managing this massive wealth is serious business. The number of Indian millionaires is growing at 18.3%, a close second to Singapore, which is spawning millionaires at 20% annually.
According to the 2007 World Wealth Report by Merrill Lynch and CapGemini, the HNI market in Asia Pacific is $8.4 trillion and is expected to touch $12 trillion by 2011, growing at an annual rate of 8.5%, well above the global rate of 6.8%. To tap into this fast growing affluent segment, private and PSU banks, financial institutions and independent wealth managers are jumping on to the HNI bandwagon and are offering customised and diversified services like tailormade products, wealth counseling, legal advice, investment guidance and to a certain extent personal advice to clients.
“Entrepreneurial growth has fuelled the rise of millionaires in India. The confidence in the ability to create wealth is high in today’s generation. There are many first-generation millionaires among our clientele,” said Anup Bagchi, global head (private banking), ICICI Bank.
“What will happen to the wealth in their absence is a major concern for them. So in certain cases we end up giving legal advice like forming a trust, and anything else that will take care of the money until a suitable heir to the property is found,” says Bagchi. “There was a case where the client only had a daughter who was in her teens. He was worried about the huge wealth he had accumulated so we offered personal legal advice to handle the situation.”
Investment banks and private-sector banks offer services ranging from banking to brokering, mutual funds to insurance, home loans to venture funds, short-term funding requirement or sourcing suitable private equity partners. They also offer exclusive services like unlocking value
through IPOs and guiding the transition process and handling overseas acquisition for ultra HNIs.
A Datamonitor study commissioned by American Express finds that there are 83,000 HNIs and 7,11,000 super-rich people in India. By 2009, India can expect to see over a million super-rich.
There are niche divisions that cater to demands as specific as financing private jets, handling exotic deals like going for exquisite art pieces, international real estate deals like purchasing property in European countries, buying vineyards, orchards and castles.
“Depending on the profile of the clients, their tastes and interests the portfolios are made. There are exclusive service providers or special agency affiliated with the wealth management organisation and banks, which handles buying and selling of castles and other exotic properties. These providers then network, manage, hold and handle the deal on behalf of the banks,” said Mrunmay Das, who runs wealth management firm Das Capital.
These kinds of special deals are mostly operated through a special purpose vehicle like a trust account looked after by trust managers or funding through a shell company, which is easier to monitor and track. The single entity is not put at risk. A separate entity or subsidiary is created to fund these deals and the particular investment is isolated from the overall asset of the client, Das added.
The purpose behind these unique deals can be genuine requirement, to go beyond standard asset allocation or diversification of portfolio, personal satisfaction or status symbol. Nowadays there are even deals in power projects and oil wells too.
“We offer research-based advice for our HNI and ultra-HNI clients, from cash handling to alternative investment. Our relationship managers and portfolio counsellors understand their needs and prepare their products accordingly,” says Aseem Arora, global head (NRI market) of Merrill Lynch. P ro d u c t specialists based in India and abroad, research domestic and global financial markets and various asset classes to develop innovative and customised solutions.
“India is the fastest growing wealth base in the entire Asia Pacific. Bangalore is growing faster than the industry average of 35%,” said Vishal Kapoor, senior director (financial advisory services), American Express India.
Who’s an ultra HNI?
The ultra-HNI — with more than $30 million in net financial assets — often makes investing decisions ahead of market trends. Ultra-HNIs, who account for 1% of the global HNI population and about one-third of its financial wealth, tend to be more sophisticated and better informed than HNI investors when it comes to managing their assets finds the World Wealth Report. Who’s on the HNI list
Top-level management of MNCs Senior IT professionals Senior banking professionals CEOs NRIs Expats Businessmen Entrepreneurs
