Digital Platforms And Stock Market Growth Fuel India’s Wealth Management Industry: Deloitte Report

According to Deloitte’s latest report on “Financial Wealth Management Services In India,” India’s wealth management industry constitutes a US$1.6 trillion growth opportunity between FY24 and FY29. The growth comes on the back of changing macroeconomic trends, increasing income levels, and evolving investment behaviours of customers across segments. The report estimates that demand for wealth management services in terms of assets under management (AUM) will almost double, climbing from US$1.1 trillion in FY24 to US$2.3 trillion by FY29.

The report underlines significant unmet demand for wealth management services. From the total US$1.1 trillion financial wealth possessed by prosperous families in FY24, around US$0.4 trillion is estimated to be self-managed or informally managed. It is expected by FY29, the wealth of these prosperous families will increase to US$2.3 trillion, creating significant opportunities for both established players and new entrants in the sector. 

Commenting on the report findings, Vijay Mani, partner, banking and capital markets leader, Deloitte India, said: “Rising affluence and shifting preferences of relevant customer segments are likely to drive unprecedented growth in India's wealth management industry. At the same time, it is a competitive landscape marked by a diverse set of providers. Success in terms of growth and profitability will require a different approach from the past, i.e., there is a need for a sharper understanding of the customer, better tailoring of products for varying segments, hybrid operating models that blend technology powerfully with Relationship Manager (RM) talent and a keen eye on regulatory compliance.”

Growing Share Of Investment Allocation To Financial Assets

One of the report's key highlights is the growing share of investment allocation to financial assets.  Traditionally, Indians have shown their inclination for investment in physical assets such as gold and real estate, rather than financial assets such as bank deposits, mutual funds, bonds, and stocks. However, we are slowly seeing a shift in this trend, with more households investing in financial assets. This is clear from the investor’s increasing interest in direct stocks, mutual funds, and Portfolio Management Services (PMS) products. 

From FY17 to FY24, Mutual Fund AUM has seen a 16.2 per cent compounded annual growth rate (CAGR), which now stands at $651 billion. However, India's mutual fund AUM to GDP ratio is 16 per cent, which is smaller than other countries and indicates substantial growth opportunities. To compare, the ratio is 23 per cent for China, 72 per cent for Brazil, and 140 per cent for the US. 

The AUM for PMS has also grown from US$149 billion in FY17 to US$405 billion in FY24. Stock market returns post-COVID and higher awareness of PMS are reasons behind this growth. 

According to the report, here are the main reasons for the growth in investment products: 

Increased Awareness: Initiatives such as ‘Mutual Funds Sahi Hain’ and other marketing initiatives by fintech players have created awareness among investors. 

Digital-First Investment Platforms: Many new-age investment platforms have made it easy to invest. Simplified UI/UX has made investments easier, especially for first-time investors. Investors can now start investing with small-ticket SIPs. 

Rise Of The Stock Market: The Indian stock market has also performed strongly. NIFTY reached 8,000 during COVID-19 and is now around 23,000. This has meant that many first-time investors have entered the market. 

From FY17 to FY24, the Demat accounts’ number in India has seen a 24.8 per cent CAGR growth. However, only three per cent of Indian investors actively invested in the stock markets in 2023. The corresponding numbers in China and the US are 13 and 55 per cent respectively. 

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