Private bankers seek big fish in small ponds

Probably, no wealth manager would have time to sit with a dhoti-clad individual wearing kolhapuri chappals in his office premises.

Just such an individual walked into the posh office of the private banking unit at a private sector bank recently, in a tier II city in
Maharashtra. And it turned out that this individual had parked Rs 8 crore in Reserve Bank of India bonds, and was now looking for advice to invest Rs 7.5 crore.

Even young India is making big bucks, say wealth managers —
a 27-year old in Pune, for example, had Rs 10 crore plus to be invested. Not because he inherited it, but because he earned $2.5 million from a mobile company for developing a mobile game.

Another person, in his late 20s and staying on the outskirts of suburban Mumbai, had netted Rs 280 crore. “He had bought a logistics firm by borrowing Rs 2.5 crore from his father. In about a year, he turned around the company and remodelled it. The company was sold for Rs 280 crore after refurbishing,” says
Abhay Aima, group head-private banking at HDFC Bank.

Wealth managers are now shifting focus to smaller cities and targeting youngsters, as the market in the metros gets saturated. Also, the small cities are numerous and each company is tapping a different segment of the market.

HDFC Bank, says growth in assets managed from such areas has been nearly 1,000%, against a little under 300% combined growth in the metros and tier I cities. It says metros and tier I cities are relatively saturated and have become a competitive market.

Non-banking financial services company Fullerton Securities has even been looking to tap middle class customers. “We are looking at the mass affluent customers, from people who have Rs 4-5 lakh annual income to those at the high-end segment having Rs 20-24 lakh. We look at what is the surplus available with the customer,” says Pallav Sinha, managing director and chief executive officer at Delhi-based Fullerton Securities.

The firm has roped in 6,000 customers so far. “The firm has been helping those who are straight out of colleges and done their MBA
with simple rudiments of investing. They are on the verge of starting a career. These clients may have a limited surface in terms of current transaction, but chances of cross-sell are high,” says Sinha.

India is large enough for everyone to get a piece of the action. Sutapa Banerjee, head-private wealth at Ambit Capital, says, “We are looking at areas like Pune, Goa, Baroda, Ahmedabad, Nashik as well as Bangalore and Hyderabad. We are targeting a niche group of people who are already familiar with the Ambit name and don’t necessarily need a brick and mortar presence in these cities.”

Vikas Agnihotri, chief executive officer of Religare Macquarie Wealth Management, says, “We are looking to partner with the wealthy in places like Madurai, Cochin and Coimbatore in the south, in Gujarat we are eyeing the cities of Baroda, Rajkot and Ahmedabad, and in Punjab, Ludhiana and Jalandhar. We are also looking at Lucknow and other places where there is potential for wealth management firms to operate.”

When it comes to presence in these small cities, most wealth managers will have an office or an employee stationed in one area and will tap the market in the regions close by. As a result, the manager is present here on specific days of a week, and not throughout. Companies say this helps them gain the market at an effective cost.

But it not just about taking products to the different cities; there’s
also a focus on service standards.

“We use technology to be able to help clients in asset allocation.
We have engaged Oracle to generate a consolidated statement across mutual funds, bank, debt, all the equities etc. We have a platform via which you can trade anytime during the day in the equity market,” says Sinha of Fullerton.

“We saw a large potential in the context of the demographic dividend, considering the household savings rate of 32-36%. Individuals are often exposed to several investment products. But they need financial planning to know the right mix,” says Sinha.