LC Ideas: Views & Insights
Unpacking India’s wealth market boom
India’s wealth market is distinguishing itself by a proliferation of unicorns, expanding financial hubs, and one of the world’s largest diasporas, underscoring the nation’s dynamic economy.
Earlier this year, Mumbai surpassed Beijing to become Asia’s top billionaire city, now ranking third globally after New York and London. This surge is driven not only by the expansion of generational wealth but also by the rise of new wealth, as entrepreneurs continue to create fortunes in the country’s rapidly evolving economic landscape.
The growth is also marked by a broader transformation of the way these UHNWI and HNWI manage their money. The segment is also not just multiplying in number, they are becoming more sophisticated, reshaping traditional approaches to wealth management.
“What we’re witnessing isn’t just wealth creation – it’s wealth evolution,” said Salil Thanawala, Head Global Family Office (India), Lighthouse Canton.
“We’ve moved from a culture of saving to one of spending and investing,” he added.
With the change in thinking and sophistication of this segment, the culture of investing is pivoting from passive fund investing to informed, strategic and active investing.
Two numbers showcase this shift:
Firstly, India is home to over 13,000 UHNWIs, a figure projected to rise by 50.1% by 2028, according to Knight Frank.
Secondly, according to recent data from the Lee Kuan Yew School of Public Policy at the National University of Singapore, the number of startups in India surged by 71.5%, rising from approximately 20,000 in 2021 to over 34,000 in 2023.
Managing this wealth is also uniquely complex due to regional intricacies and cultural differences shape investment preferences across the country.
“A family in South India is very different from one in North India, and these differences extend to their investment strategies,” said Thanawala.
Thanawala believes the future lies in specialisation. “One size fits all will not be the future in India,” he asserted, highlighting the increasing need for bespoke services catering to distinct market segments.
Blended models to service this complexity of segment are needed.
Families increasingly seek bespoke solutions without the limitations of a single-family office or the broad approach of a multi-family office, preferring partners that can deliver uniquely tailored strategies that evolve with clients' changing needs.
Thanawala noted, “While many large outfits still cater to broader markets, smaller, more specialised firms like ours are focusing on specific client segments, particularly those looking for a global outlook and global investments”
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TECH AND RISK MANAGEMENT CONVERSATIONS
Technology is another driving force. "We’re leveraging tech to better serve clients, especially when it comes to complex portfolios involving REITs, structured products, and hedge funds," Thanawala shared.
Wealthtech is still in its infancy in India, as many firms focus on basic reporting and execution functions.
Thanawala explained that many ultra-wealthy families often have an incomplete understanding of their total net worth, also called as comprehensive net-worth mapping.
"While reporting on financial assets like stocks or cash is relatively straightforward, the visibility of 100% of a family’s assets—especially illiquid ones like real estate, private equity, or luxury collections—is often lacking."
"Families increasingly need advice and support in getting a holistic view of their wealth, not just on paper, but with a strategy to manage and grow it," he added. This net worth mapping ensures that all assets are accounted for and that clients have the guidance to make informed, long-term decisions about their wealth.
According to McKinsey's 2024 report on the Asia Pacific family office boom, many family offices face challenges in building their own technology. This creates opportunities for service providers to offer solutions like portfolio performance analytics, data aggregation for investments, and automated financial reporting. Wealthtechs can play a critical role in enhancing the technology infrastructure for family offices, either directly or through partnerships, while also improving risk management—an increasingly vital concern for Indian family offices.
"Capital preservation and risk management are at the core of our conversations with clients," said Thanawala.
While India’s economy has historically been growth-focused, UHNWIs are now more cautious, seeking wealth preservation alongside growth. Thanawala explained, "Growth is not the first derivative anymore; capital preservation and risk management are the primary focus."
THE RISE OF ALTERNATIVES
Thanawala also identified alternatives as a significant trend.
“High-yield fixed income, private credit, and pre-IPO transactions are becoming popular among UHNWIs,” he noted.
Alternatives are providing Indian investors with diversified exposure beyond the traditional asset classes of real estate and equities.
According to Thanawal, the rise of alternative investments is driven by higher interest rates and the diminished appeal of post-tax fixed income yields. With pre tax yield expectations of around 15%—on par with long-term equity returns—these alternatives offer an attractive option without the volatility associated with equities.
Family offices in India are projected to see a 14% compound annual growth rate (CAGR) in assets under management (AUM) growth and a 5% increase in alternative investments over the next three years, according to a report titled “From Legacy to Leadership” by Sundaram Alternates.
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LOOKING AHEAD
Indian UHNWI families are also increasingly adopting a global approach, with many families sending their children outside the country for education and expanding their investment horizons. This shift reflects their diverse global holdings and a growing desire to access a broader pool of investment products across various markets.
Key financial hubs such as DIFC, GIFT City, and Singapore are proving to be strategic investment locations, offering not only accessibility but also robust regulatory frameworks. These centers provide UHNWIs with diverse options for wealth management, ensuring their portfolios are spread across different geographies, thus mitigating risk.
Moreover, these hubs are at the forefront of technological innovation. With advancements like AI and robotics reshaping investment landscapes, Indian investors are eager to engage in these tech-driven opportunities. As Salil Thanawala observed, “A lot of AI is being played globally, and Indian investors are keen to participate in these new-age tech opportunities,” underscoring their desire to engage with cutting-edge technologies.
As the world becomes more interconnected, Indian UHNWIs and families are poised to capitalise on the myriad opportunities that lie beyond their borders. In doing so and by adopting global investment strategies, financial innovations, and wealth tech, they are expanding their horizons, reflecting the diversified growth seen across India's burgeoning wealth management industry.
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