MUMBAI: Demand for private bankers in India has surged in recent times with the emergence of new millionaires and burgeoning pools of shrewdly invested money in growing asset classes.
This is making wealth management the most sought-after profession within the financial services sector where a top banker managing an active investment book in excess of Rs 4,000 crore can consistently earn a total annual compensation of Rs 3-4 crore. Compared to this, investment bankers see compensation fluctuating every year in line with deal income.
“The amount of wealth creation is increasing in India, leading to a greater need for people to manage it,” said Anshu Kapoor, head, EdelweissNSE 1.10 % Private Wealth Management. “As wealth is compounding at 12-14% per annum, more clients are seeking options of what to do with it.”
There are more than 2,500 established private bankers in India, with 200 of them managing over Rs 1,000 crore, according to estimates by Vito India, a leading executive search firm.
Most wealth management firms increased their headcount last year, anticipating larger business volumes in the future. IIFL added 250, Centrum Wealth added 135, while Edelweiss, Aditya BirlaNSE -2.91 % and Kotak Wealth beefed up their wealth desks by 50 each.
“In the past 24 months, the industry has seen a massive surge in demand for professionals at the middle to senior level,” said Naveen Tiwari, head, private banking practice, Vito. In the past six months, Vito has been retained for five CEO searches for existing and new wealth outfits.
“We have seen emergence of newer domestic wealth outfits including some global entrants and some of the existing large wealth firms going public. Demand of talent has grown exponentially,” Tiwari said.
Wealth managers like Kapoor believe the opportunity for growth is significantly bigger from a longer-term career perspective in wealth management than in investment banking, with its larger market size and revenue pool. Plus, compensation is more attractive due to the dearth of quality talent.
“The industry is growing in leaps and bounds with lots of wealth and new money being created through different avenues such as selling of land parcels, unlocking equity or people doing successful business going in for IPOs (initial public offerings),” said Prateek Pant, head, product and solutions, Sanctum Wealth Management.
There are about 150,000 families in India with wealth of Rs 25 crore or more each, according to industry estimates. This is expected to rise to 500,000 by 2025. Cumulative wealth will increase to Rs 500 trillion by 2025 from Rs 160 trillion now.
However, the amount of wealth being managed by institutional players is less than 25%, leading to robust demand. Families have also witnessed the creation of wealth through capital markets, sparking the need for wealth managers.
“Many new entrants have been added and older institutions have wrapped up and pared down as savvy customers demand better service and pricing and are not as gullible as in the past,” said Sraboni Haralalka, executive director, Wodehouse Capital Advisors.
Competition for talent is leading to job opportunities. Last week, ET reported that about 20 senior-level executives from the leadership team at RelianceNSE 1.23 % Wealth Management quit the Reliance CapitalNSE 3.88 % subsidiary and joined Avendus Wealth, the wealth management arm of KKR-owned financial services firm Avendus Capital.
Indian wealth managers earn as much or even more than global counterparts — as much as 20-25% of revenue generated against 12-18% internationally, according to Vito data.
If a client has held a portfolio for a sustained period of time, revenue predictability is much higher for a private banker due to aspects such as trail revenue and performance-linked advisory fees associated with the investment book. This translates into the greater possibility of incentives or bonuses for the private banker without incremental effort on the investment book built.
A wealth manager’s compensation consists of trail, advisory revenue and commission. Trail revenue is an annuity income which a private banking outfit earns from the cumulative mutual fund portfolio of its clients which is held for more than a year. (It is generally 0.4-0.6% of the total mutual fund holding.)
The increasing demand for wealth managers is also because many outfits are looking to penetrate newer territories by opening offices in tier two cities. Due to scarcity and out-pricing of talent, various wealth outfits are willing to look at personnel from alternate pools such as asset management, corporate banking and treasury businesses.