India’s New Affluent: Why Wealth Management Is Moving Beyond The UHNI Playbook

India’s wealth story is no longer limited to the ultra-rich. A growing pool of investors now sits in the middle – wealthy enough to have meaningful investable surplus, but not wealthy enough to attract the personalised attention, which is traditionally reserved for high networth individuals (HNIs) and ultra HNIs (UHNIs).

Typically, ‘affluent’ can broadly be described as investors with Rs 1 crore to Rs 5 crore of investable liquidity. This is a sizeable and increasingly important segment, yet many in this group have never had access to organised wealth management. Their financial lives have largely been managed through bank branches, mutual fund distributors, insurance agents, and personal networks.

But this is now beginning to change. After years of strong market performance, a period of muted returns, uncertain global cues, and a softer real estate market is forcing affluent investors to take a closer look at how their wealth is being managed. The question is no longer simply where to invest, but whether their portfolios have been built with a clear strategy in the first place.

This is where India’s wealth management industry faces a curious mismatch: the need for professional advice among affluent investors is growing, but the industry’s traditional relationship-manager model has made this segment difficult and, in many cases, uneconomical to serve. 

It often takes a sustained period of weak market performance for investors to realise that their portfolios may not have been built as well as they thought.

Says Kunal Agarwal, co-founder and chief executive officer (CEO), Samar Capital, a wealth management company: “We find ourselves at such a point in India where market performance for the last 12-18 months has been anaemic, and larger geopolitical and macro themes, at best, provide a befuddling directive for market movements going forward. Further, a slowdown in real estate across Indian metros has exacerbated the plight of the affluent investor. Quite naturally, this segment is looking for some thoughtful, professional help.”

The challenge for affluent investors is not a lack of demand for professional advice, but a shortage of suitable services. While the need for organised wealth management among this segment is growing, the industry faces a significant human-capital constraint. At the heart of the problem is its most important link with the client – the relationship manager (RM).

India’s wealth-management industry has expanded rapidly over the past decade, with particularly strong growth in the HNI and UHNI segments. But this growth has also created intense competition for experienced RMs.

Says Agarwal: “RMs have been in short supply, and money has poured into the industry with the advent of many new firms. The result has been rapid RM wage inflation. Indeed, while the fortunes of wealth management companies and their end customers might have wavered, RMs in general have seen linear growth in compensation across the board. Further, RM attrition rates are through the roof and the quality bar has fallen consistently.”

Incidentally, the economics of wealth management are closely tied to the revenue an RM can generate from a client. A client with Rs 2 crore of investable surplus may require almost as much time and attention to acquire and service as a client with an investible surplus of Rs 10 crore. Yet, the fee income generated by the two clients can be vastly different.

“As RM wages go parabolic, the propensity of this workforce to focus on affluent investors decreases significantly. As a result, we have a dynamic in the industry wherein the HNI/UHNI segment is overserved and the affluent segment is an afterthought,” says Agarwal.

This is also a structural problem, and there is no quick fix. As more capital flows into wealth management, competition for RMs could intensify further, pushing up compensation and making it even harder for traditional wealth managers to serve smaller-ticket clients profitably.

Incidentally, affluent Indian investors are not new to managing money. They are often comfortable with assets, such as real estate and gold and may know their local property markets, developers, rental yields and financing options in considerable detail. Financial assets, however, can be a different story.

Over long periods, financial assets can deliver competitive, and often superior, returns to real estate, but investor behaviour is very different. Property and gold are typically held for years, while investors in market-linked products can be much quicker to react to volatility.

Adds Agarwal: “As soon as you have a semblance of wealth management, you can see a stark difference. For instance, an investor investing with a mutual fund distributor is 2.4x more likely to stay invested over five years than someone with a direct plan. Without patience and emotional regulation, investing in financial markets is usually a losing proposition.”

For affluent investors, therefore, the need for professional wealth management is becoming clearer. The bigger question is whether the industry can develop a model that makes such advice accessible and commercially viable for this growing segment. Until then, many investors may continue to find themselves caught between do-it-yourself (DIY) investing and wealth management services designed primarily for those with much larger portfolios.