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BW Businessworld

Of Handling Super Wealth

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India's wealthy are becoming increasingly global and sophisticated. They are looking not just for the best-of-breed solutions, but also want it customised to their needs. This is all the more true for the ultra-high net worth (UHNW) investors who do not look for generic goals like retirement, marriage, children's education, etc. They have clearly defined needs relating to wealth — from its creation and preservation to utilisation and transition.

At different points of time, their emphasis can be on any one or more of these needs. Advisors need to adapt to the changes in their emphasis. A client may be on wealth creation mode, but changes in his family relations may force him to suddenly shift his emphasis to wealth transition. There is also an increasing emphasis on philanthropy as many families prefer an unselfish use of wealth, which goes beyond their lifestyle needs.

The UHNW families tend to have various assets that range from strategic business holdings to lifestyle assets like private jets or art collections. In general, their wealth comprises three pots: 

Personal holdings: These assets are driven by passion and include jewellery, family residences or holiday homes, private jets, liquid assets or bank balances.

Investment holdings: These cover all asset classes including cash as well as short-term and long-term debt investments, equities, real estate, alternative investments, etc.

Opportunistic or strategic holdings: These are the most significant holdings for most Indian business families and include investments in their own businesses or a concentrated investment in high-conviction ideas or businesses of others.

To manage wealth through a crisis, advisors need to understand the nuances of each of the asset pools and rebalance them through market cycles. Moreover, efficient tax structuring is an important dimension of decision making for most UHNW families, particularly when family members operate or reside across multiple tax jurisdictions.

UHNW clients often seek specific product features. They are quasi-institutions and need institution-quality solutions. They have a latent demand for "real" assets, whether real estate or metals and mining assets, and advisors can help them get access to investment or co-investment opportunities across markets and industries.

Wealth creation in India is still at an early stage, with most families still focusing on building and growing their wealth through their businesses. Their financial needs are often fungible across business and personal assets, hence the need for holistic advice across corporate banking and private banking needs. Advisors need to leverage their investment banking and corporate banking arms to provide holistic solutions to the UHNW clients.

While achieving their success and pursuing further growth, the super rich often do not get the time to consolidate and think through the complicated set-ups that may have evolved over time. This becomes particularly evident when first-generation entrepreneurs are in the process of bequeathing their assets to posterity. In such cases, they may need a simple family trust or a more sophisticated family structure such as a family constitution or a family board.

Thus, wealth management for the UHNW families cannot be a standardised offering. They require carefully calibrated, bespoke and holistic solutions for their multi-faceted needs. Advisors need to coordinate across the entire banking sector and create an open architecture platform to offer a true ‘private investment banking' experience. 

The author is CEO, Barclays Wealth India

(This story was published in Businessworld Issue Dated 25-07-2011)