Fretting over where to invest a billion dollars? (Yes, that’s a ‘b’, and not a typo)
Worry not, wealth managers for the uber-rich are here. Wall Street investment bank Morgan Stanley, which just threw open its ‘private investment club’ for the super rich, estimates there are about a dozen people in India(and an estimated 200 worldwide) who have a billion dollars, or Rs5,000 crore, EACH to invest, indicating that offering ‘wealth management services’ to such people is slowly becoming a lucrative business.
Research firm Celent, based in Boston, US, and with an office in Bangalore, estimates there are 6,000 families in India with an investible surplus of Rs120 crore or more, and more than 20,000 families with Rs40-120 crore.
As business booms, wealth managers, from being just investment managers, are morphing into entities that even do charity and legacy planning. Members of this Morgan Stanley club come only from four other countries globally.
They can invest in equity, debt and even unlisted companies through the firm; sometimes the bank itself partners with the client to invest. Himanshu Bhagat, executive director of Morgan Stanley, who is among the two executives from the bank steering the business in India, did not respond to questions from DNA till Sunday.
While Morgan Stanley may be at the top end of this stratospheric spectrum, domestic finance companies and top banks, including Kotak Wealth Management, Ask Wealth Advisors, Barclays Wealth Managers, Altamount Capital Management and Religare Macquarie Wealth Management, are also increasingly offering such services.
Jaideep Hansraj, executive vice president, Kotak Wealth Management, says for his company, the definition of such “ultra high networth individuals, or HNIs,” is those with at least $20 million or Rs100 crore to invest.
Richa Karpe, director of investments at Altamount Capital Management, said that last year, her company launched the service to plug a “gap” — servicing the ultra HNIs. the ultra HNIs.
“There were a lot of wealth managers looking at people with Rs25-50 lakh of surplus, but nobody for the ultra HNIs. Their needs are beyond just insurance and mutual funds,” Karpe said. That means offering the ‘Family Office Service’.
Under this, a family need not deal with either the bank or stockbroker. The advisory firm sorts out all that. Not just investments, but any consultation that the family needs can be availed and answers found including for alimony!
How much do such services cost?
Globally the fees range between 0.5% and 1% of the investments under supervision.
“It can be a fixed fee or a fee based on the performance of investments advised. A flat fee of 0.25-0.75% per annum may be charged, or a 10-15% of the performance,” said Saluja of Ask Wealth Advisors.
The potential is compelling, say the players. Rajesh Saluja, chief executive officer of Ask Wealth Advisors, said his company started offering services a year ago. “We see a market of 1,000 clients with liquid assets of Rs50 crore or more,” Saluja said. He did not reveal how many clients he has, citing confidentiality.
Hansraj said clients also want him to plan for their philanthropic activities. “People say I want to do charity of Rs5 crore a year. He trusts his banker. The more sophisticated individuals want to get into charity and even the non-sophisticated individuals are willing to give it a hearing,” Hansraj had told DNA earlier.
Vikas Agnihotri, chief executive officer of Religare Macquarie Wealth Management, said the role of advisory is becoming more and more important. “People are not looking at products per se, but the form and method of advisory. They want to know about the various asset classes. We have a concept of family offices which covers people having an investible surplus of at least Rs25 crore,” Agnihotri said.
Some firms don’t ask for managing ideal money, but can even evaluate and supervise already invested funds. “Investible assets that would be under our supervision should be above Rs75 crore. They need not be liquid surplus and could be invested in insurance, mutual funds, etc. We will consolidate investments and would recommend changes to bring the investments in line with the family’s objective,” says Karpe of Altamount.
Her firm even helps families raise money for their business, for instance, by selling out a part of it, she adds. “Families can access private equity deals, but a co-investing opportunity is available only in special cases. The family gets a dedicated PE team without having to pay for it. We present them the opportunities and often negotiate cheaper costs,” Karpe says.
With economies rebounding, risk aversion has also declined among the moneyed.
Sai Krishna Tampi, director, portfolio management services, at Credit Suisse Securities said clients today are willing to take more risk. “However the all-out bullishness has not come back,” Tampi said.
When the slowdown had struck, some banks, which started multi-advisory services only to people having between Rs50 crore and Rs100 crore, had to lower their bar to Rs25 crore levels to increase business. Morgan Stanley just set the bar incredibly high. Guess that, in a way, is a huge thumbs up to the economy, too.
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