“The new generation of wealthy are the ones open to using wealth-management services”
October 13, 2009
Yogesh Sapkale (MLD): Tell us about the wealth management services of BNP Paribas.
Sharad Sharma (SS): Wealth management services in India started in 2001 and BNP Paribas was amongst the first to start. Since then we have been very consistently trying to emphasise more on the quality build-up rather than volumes. Our attrition rates for clients are very low. Acquiring client details is a long process and we would like our clients to stick to us for a much longer period. As of today, we have relations with around 1,000 family groups. Actual account numbers can be much more because one family can have 4 or 5 accounts. What is unique about our client relations is we give them a solution which is holistic rather than sticking to what the license permits.
MLD: What are your core target segments?
SS: Our target market comprises business families, entrepreneurs, professionals and senior management professionals. The segment of smaller entrepreneurs is where we see the maximum possibility for our value-added services. That’s the most preferred client segment. And we know that tremendous growth is expected in the years to come. This also means more and more individuals are seeking specialised advice in managing their growing wealth.
MLD: In India, the number of wealthy fell by nearly a third to 84,000 in 2008, the fastest drop in the world after Hong Kong. During the recent turmoil, many of the players in the wealth management business have lost clients. What is the situation right now?
SS: Last year, a lot of clients were moving out from risk assets to risk-free kind of assets. There is certainly a marked change in the situation today than it was a year ago. The rise in the markets has been swift so far. The sentiment has changed and investment appetite is gradually reviving, driven by the performance of asset classes. We feel that there is never is a perfect time to enter the market. Investment in equity has to be over a three-five year horizon. I must add, we were barely impacted by any loss in clients. There was a large segment among the wealthy which was not using wealth management services. They are using advisory services now rather than doing it on a standalone basis or picking and choosing each service provider for only the transactions they wanted to do.
MLD: How much current client assets under management BNP Paribas has at present and where you see BNP Paribas in the next 12 months?
SS: Client assets in all organisations are a mix of things and so an apple to apple comparison is not possible. But I can say our growth has been fast. I see growth in terms of adding more and more families. On the asset side, the growth based on the acquisition will keep on increasing as well as on the wallet size of existing clients.
MLD: Many of the millionaires in India are first-generation, mostly created by the stock market boom between 2003 and 2007. How does BNP Paribas deal with their expectations?
SS: In fact, the new generation of wealthy are the ones open to using professional services. The reason is they have grown using the most modern facilities and practices available in their own industry and the same attitude applies for handling their wealth. They are very receptive to new ideas.
MLD: Financial institutions have divided wealth management services market into four segments based on income levels. Is that logical?
SS: The requirements, perceptions, risk appetite will be different for different segments. Segmentation helps in aligning the advice, products, services and delivery channels to their specific needs.
MLD: Do you have specific criteria for selecting new clients?
SS: The starting point is $1 million plus investment. That is a good starting point and we build on that.
MLD: Most local wealth management service providers accuse global players with some concerns in the longevity and stability and their commitment to India. Your comments…
SS: Well, all I can say is that BNP Paribas will shortly be completing 150 years in India, in some form or the other, so we have been around for a while now.
MLD: Going forward, the competition in the wealth management segment is bound to increase. How you plan to tackle it?
SS: We welcome competition because as more and more organised players come, the market practices will improve and ultimately it will be the resident Indians, who will have better services. We were early entrants, so we already have gone through the learning curve much earlier. We also bring in the best practices and more experience.
MLD: If I have to differentiate between BNP Paribas Wealth Management and others, what would be your USP?
SS: The biggest factor is we are not transaction oriented. We are more focussed on long term relationship oriented approach.
MLD: What about marketing practices?
SS: Our marketing is based on a simple principle: understand the client’s total requirement. We are not going to go with a single product but rather with a holistic approach. We find solutions for clients and not really sell products. That’s how we probably build.
MLD: What about growth through consolidation, mergers and acquisitions?
SS: I think it is too premature for consolidation in wealth management segment because as of now the penetration levels are quite low. I think consolidation is a few years away.