The wealth management industry is witnessing significant change in the operating environment with a slew of changes in regulations on banks and capital markets.  These reforms are increasing the relevance of major financial centers such as Singapore and Hong Kong and represent an unprecedented opportunity for wealth managers who are equipped to assist clients navigate through the changes.  

One of the fastest growing client segments is the global South Asian diaspora. The Non-Resident Indian (NRI) represents a large swathe of this market. Deutsche Bank Private Wealth Management (PWM), with more than three decades of experience in India and Asia, is one of the key players within the NRI space and well placed to advise our clients on the investment opportunities in the market.

To understand the relevance of this market, one has to look at the extent of its growth and size. The Indian diaspora is estimated to account for over $400 billion of global output, with private transfers to India alone amounting to over $50 billion, which is more than four percent of India’s GDP. The diaspora maintains close emotional and cultural links with India and remains a stable source of capital, positively influencing balance of payments and foreign currency reserves.  

There is a significant wealth creation taking place in India.  According to data from the Mckinsey report, the Indian middle class that is estimated to be between 200 to 300 million people, will grow 10 fold between 2005 to 2025. This segment is driving explosive growth in consumption; attributed to the escalating number of mobile phone subscribers, which has grown from 25 to 350 million in the past five years. In a similar vein, credit-card outstanding has also increased over five fold in the past four years – alluding to the tremendous potential in this market segment, given that credit card penetration of middle class households is less than 40 percent.  

India has embarked on a second phase of reforms. These reforms are aimed at strengthening the macro fiscal position and balance sheet of the country. In fact, recent announcements of removing oil subsidies and changes in treatment of fertilizer and food subsidies point in this direction.  The government has also started using direct credits to bank accounts for monies to be paid to workers for employment programs. On the anvil are changes in tax code and some capital market guidelines, which include the new tax code discussion paper that is recently posted on the ministry of finance website for public feedback. Such changes are aimed at ensuring that India attains its eight to nine percent economic growth over the medium term.  

This once again highlights the tremendous wealth creation potential in this growth segment. According to a report in Forbes magazine, the combined networth of India’s top 100 richest people was over $276 Billion in 2009. This is slightly over 25 percent of the country’s overall GDP figure.

Opportunities for private banks

For private banks, what this means is that the emergence of the middle class is fuelling unprecedented consumption, thereby dramatically growing business earnings and entrepreneurial wealth. New billionaires are being created every year and demand for ultra-high net worth wealth structuring and management is rapidly increasing.  

Business owners in consumer durables, real estate, heavy industry, telecom, media, IT services, infrastructure, tourism and hospitality, automobiles, banking and many other sectors are indeed demonstrating robust growth. The expansion of this entrepreneurial segment is also creating unprecedented demand for capital. This is an area where Deutsche Bank plays a prominent role with market leading debt, corporate finance and wealth management franchises in India and Asia.

The Indian diaspora has successfully assimilated in the countries where they have businesses. The wealth in this segment consists primarily of the businesses they own, followed by real estate investments and liquid financial assets. The volatility in the financial markets has underlined the need for a balanced portfolio and why there is a need to dynamically manage one’s portfolio.

At Deutsche Bank PWM, we adhere to the dynamic asset allocation approach – where our Global Investment Committee, which comprises of eight global senior strategists meet on a monthly basis and recommend investments and allocations in nine defined asset categories. These categories are fixed income-sovereign, corporate bonds, developed market equities, emerging market equities, commodities, real estate, absolute return, private equity, cash and foreign exchange. This feed is used for meaningful discussions with clients in formulating their investment portfolios.

Deutsche Bank has a strong balance sheet and deep knowledge of the regional markets.  It matches this with strong credit appetite and long term relationships with key players.  There is a strong commitment to business in Asia and leadership has a strategic objective of doubling the business in Asia over the next three years.