The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
He argues that India offers a more attractive stomping ground for private bankers than China. It is growing millionaires faster than any market bar Singapore.
ôMany people think that if the economy grows, you have more wealthy people, but that is not entirely true,ö Bagchi says. ôChinaÆs GDP growth is faster than IndiaÆs, but it has fewer millionaires. ThatÆs because IndiaÆs growth is driven by entrepreneurialism. We have a huge service sector. ChinaÆs growth has been state-driven. GDP growth is not enough.ö
IndiaÆs newly rich are younger, which creates a new set of challenges when it comes to managing wealth. They have a longer investment horizon, which means they can accept more volatility û and demand higher returns.
Bagchi adds confidence is high, so customers are more eager to embrace higher-risk products. ôThe new segment of wealth is not about preserving wealth but capital appreciation,ö he says. The nouveaux riches are also in a constant hurry. They are less interested in long periods of consultation, and more keen on dealing with the bank via email or over the internet.
ôItÆs not so much about the personal touch,ö Bagchi says. ôFace-to-face time is decreasing, and clients now request it just to close a deal.ö
The complexity of new products and strategies also makes the personal relationship more difficult, because few private bankers know all the details about structured products, hedge funds, private equity and real estate investments. They rely more on a team approach to supply best products and advise clients.
This in turn impacts how private banks present themselves. ICICI, for example, brands itself as innovative and adaptive, in contrast to what it would consider staid private banks in mahogany-panelled offices in Europe.
Developing a business model to fit the new Indian millionaire is not straightforward, however, as the team approach and reliance on IT does not mitigate the need for talent, which is rare.
Another generic problem is the lack of knowledge about cutting-edge products among financial institutions. ôThere are cases were the patient is wiser than the doctor. We have to be sure we add value,ö Bagchi says. ôItÆs not like a traditional relationship, where the client used to look to us for everything.ö
This means ICICI stresses its relationship managers possess ôlearnabilityö skills rather than outstanding knowledge, and be comfortable with the firmÆs IT platform, which can be used to access information on any of its available products.
Bagchi would not disclose the bankÆs private assets under management but says it is considered IndiaÆs largest wealth manager. ICICIÆs wealth management business has grown 100% year on year for over two years, and caters to clients worth up to $10 million or more. For India-based clients it may provide a range of products sourced from international fund managers, while for non-resident Indians in the Gulf and the West, it is used for India exposures.
Mega players Nippon Life and Dai-ichi Life are looking for opportunities in higher-yield single-A US corporate bonds, which offer more appealing yields than stagnant domestic offerings.
The “lower for longer” monetary policy and stimulus packages, coupled with the rolling out of vaccine programmes favorably support real estate investing in the region, with offices and data centres presenting forward-looking opportunities.
As US fixed income default rates rose and yields fell during the pandemic, are Asian bonds, which have had more stable yields through 2020, looking more attractive?
Insto roundup: Norway's Oil Fund praises China governance efforts; NPS commits $100m to taxi-hailing app
Norway's Oil Fund welcome Chinese proposals improving transparency and shareholder protection; HK's MPF assets surge 35% year on year; Korea's NPS commits $100m to TPG consortium to invest in taxi-hailing app; Poba commits W270bn to European property; Malaysia's EPF sees investment income rise 59% year-on-year in first quarter, and more.