George Mitra is the Chief Executive Officer at Avendus Wealth Management, a wealth management subsidiary of Avendus Group, a Mumbai-based provider of financial services. In an interview with Furquan Moharkan of Deccan Herald, Mitra says that while the news on HSBC is public, there are at least two other foreign banks that are in the midst of a sell-down.
Why is it that despite the number of high networth individuals (HNIs) growing in India, these banks still possess a narrower client base?
The first wave of private banking players in India were the foreign banks. As regulations allowed more investment choices (even a mutual fund is fairly new), the need for advice was felt, and the foreign banks, with their global base, stepped in to cater to the need. This was still the ‘traditional’ HNI families at that point. With time, and the rise of first generation entrepreneurs, ‘advice’ became a commodity, and there was a need to be ‘relevant’ to the HNIs, and their companies. Unfortunately, apart from low cost loans against financial assets, most of the traditional wealth management outfits were not relevant. As the new generation wealth also started being made, the bankers who supported them in their businesses started taking a larger share of the pie. So, the banks don’t necessarily have a narrower client base, it’s just that they are less and less relevant to a larger base.
Do these firms need to revamp their strategies to keep grounded in Indian markets?
As I mentioned, unless they become relevant, and be more than a name, they would continue to struggle. We also need to understand that stability is a key aspect that people want to see. Every sneeze in the global environment, which affects the parent bank causes reactions in India. This holds true not only for clients, but also for employees as well. Increasingly people working in these firms are also becoming weary of being dependent on how the global organisation is faring. While the news on HSBC is public, there are at least two other foreign banks that are in the midst of a sell-down/closure.
There have been allegations as well as evidence against various international wealth managers being tax evasion vehicles for uber HNIs? How is this exit spree going to have an impact on it?
The good thing is that the new uber HNIs do not believe in evasion. The opportunities that India offer are vibrant and they believe that they are much better off by being compliant and using their money productively. The days of the ‘suitcase bankers’, furtively meeting clients, is almost over. Some of the wealth advisory providers of old in India were built around this premise, that there would be continuing the need for ‘foreign’ shores to park wealth. That was the relevance they were banking on.
Is the dissent of Indian masses against money laundering a reason for this?
I would not say ‘dissent’. The fact is that we are all smart people. Why should we not partake in the economic growth of our own country? As financial investors, or as entrepreneurs? Whoever can help us access this, help us in navigating, will flourish. There are winds of change globally. Tax evasion, money laundering and corruption has increasingly come into focus. The repercussions of this is affecting parent organisations everywhere and that is being felt in India as well.
The Indian AM industry is very weak when compared with various global scenario. Is it due to trust deficit of clients? Why so?
I would not say it is ‘weak’. The fact remains that we attract a lot of capital in India, in public markets, in bonds, in FDI and in the startup economy. Unfortunately, the WM industry in India had not been able to deepen the base. Again, partly because they were not able to address this segment, nor were they able to help people access opportunities.
What more can be done to improve this?
Things are improving. Our regulators are very forward thinking and they have supported the growth of this industry, while keeping in mind the interest of investors. As more shake-ups happen, the new breed of WM firms, those that believe in being relevant, and who have both the knowledge and access to new opportunities, will help grow the industry. Technology is a very important aspect in this. The pace at which we are embracing technology in all aspects of our life is increasing. FinTech will change the way we engage with clients and in managing our savings as well.
