The pandemic highlighted the need for holistic financial planning with a focon being prepared for the VUCA world. People previously content with investing in real estate, insurance policies/FDs and stock tips have realised the importance of cash flow/asset liquidity and are now open to seeking holistic advice to improve their overall financial health.
The Wealth Management (WM) market in India has been growing steadily supported by the growth in investable income especially in younger demographics, higher awareness around inflation and returns and increasing trust in regulatory bodies. Digital technologies enabled FinTechs are further fuelling this growth by providing reach, content and options at low costs.
Established wealth management firms are facing stiff competition from digitally- enabled players in acquiring new customers, providing innovative products and competitive pricing. Established firms are enabling their employees to compete in the market and providing unbundled selections to the Do it Yourself (DIY) millennial generation.
New Customer Acquisition: The traditional high touch advisor/agent led sales model should be augmented with digital acquisition of prospects to ensure that the cost of customer acquisition remains low, and the firms can reach the DIY segment which prefers to research online instead of talking to an advisor. A great digital presence, an optimised website and data-led decisioning engine can help improve sales effectiveness multi-fold. Digital technologies have evolved drastically over the last 3 years and fully digital, low-cost customer onboarding is a reality now.
Products: Professionally managed portfolios were an exclusive domain of established Portfolio Management Services (PMS) providers but with the onset of one-click portfolios by digitally enabled players, investors have a host of options. In the US, Robo advisors have been gaining market share and some established WM firms have launched their Robo advisors to provide
the self-service option to a digitally savvy customer segment. Established firms should continuously evolve their products & services to remain relevant against the digital players and continuously educate the customers on the wealth.
Pricing: Millennials are very price sensitive and are always looking for the best value for money. With the explosion in information and increase in social networking, it is very easy to compare different providers and is increasingly becoming difficult to justify higher price points with buzzwords. Established firms must highlight the differences in products clearly and allow customers to opt-in/out of different features to provide the most competitive price for a customer’s unique requirements.
Digital is helping expand the market. Taking new Demat accounts as an indicator for future growth for wealth managers, over 2 crores new Demat accounts in the last 1 yearindicate an exponential demand. With only ~4% of Indians investing in the stock market in comparison to over 40% in developed western economies, we have a large runway to grow.
The onset of digital is also changing customer expectations. From getting a complete DIY digital platform to a strong ‘What-If’ scenario an analysis engine to access, to verified online investor communities, to access to verified online investor communities, to access to newer assets & markets, the list goes on. BigTechs (Google, Amazon etc.) have already disrupted the payments market and it’s a matter of time before they disrupt the wealth management segment.
Trust is a key factor in wealth management and human interactions continue to be a vital differentiator for established firms. ‘Hybrid’ seems to be the way forward for the established wealth management firms. Firms should adopt digital technologies to provide options to customers while building on the existing brand and the value of human touch to differentiate themselves in the current market.