While robo advisory has become fairly popular with investors in developed countries, this class of financial services is at a very nascent stage in India. Indian UHNWIs still prefer traditional wealth management services, which allow them to interact with their wealth managers.
Kotak Top of the Pyramid Report 2017 which studied UHNWI trends in India shows that while 34% respondents said that they were aware of what robo advisory services are, most of them had not actually used these services. In fact, the survey conducted among 200 UHNWIs shows that 66% were unfamiliar with robo advisers. Those who had used robo advisers said that ‘saving time’ as a key driver for engaging their services.
Currently, India has a population of 1.60 lakh UHNWIs which is expected to go up to 3.30 lakh by FY22, representing a combined net worth of Rs 352 trillion. Kotak defines UHNWIs as one with a minimum net worth of Rs 250 million, mapped over 10 years.
Providing specialised services is the key
The report noted that robo advisory could succeed and gain prominence as customers in India become more tech-savvy and if they provide more specialised services such as retirement planning, inheritance planning, or even tax-loss harvesting.
For now, ultra HNIs are neutral about these services and remain inclined towards human collaboration for their wealth-management needs.
Use of information tools
A separate study from LinkedIn notes that UHNWIs require a more custom and hands-on approach which robo-advisers don’t provide. The study says that utilizing communication and information sharing tools during early informative stage is more important to the wealthiest UHNWIs than is access to automated investing tools. Technology plays an important role during the transaction phase.
Further, the study reveals that UHNWIs who were interested in robo advisory used them only for typical asset allocation strategies and looked for a human touch for their more complex investing needs. Only 3% of respondents looked for robo-advice as part of their decision-making process while choosing a wealth manager.
How do ultra-rich hire wealth managers?
Personal connections and recommendations from family and friends are still the top ways UHNWIs identify new managers. Around 86% of UHNWIs in the LinkedIn survey said they would recommend their primary adviser to others, consider seeding content through customer’s social networks and amplifying this with social selling tools.
Edited excerpts from Kotak Top of the Pyramid 2017 Report and LinkedIn Customer Journey in Wealth Management Study.