Have a look at the following figures:-
Who qualifies to be a HNI in India?
A person with investable assets of $1 million or more (Rs.5 cr in tier 2/3 cities, 10 cr. in metros) is defined as a High Net worth Individual (HNI), and this is the criteria adopted by many investment bankers.
UHNIs- (Ultra Net Worth Individuals) Investors who possess more than Rs 25 Crores in Liquid Assets.
As per Income Tax Act, any individual with annual taxable income above Rs.50 lakh is considered as HNI and he/she has to provide detailed list of all assets & liabilities in their annual income tax return.
The HNI segment is exploding in India. The immense growth in this segment provides an enormous opportunity and future potential for growth for wealth managers. Till now, the focus on HNI segment was limited to the big cities. However, now as Tier 2 and Tier 3 cities have emerged as the new hubs of economic activities, there has also been a comparable accompanying shift in the concentration of HNI clientele from metros and Tier 1 cities. The development of this market has also been encouraged by technological advancements, the availability of internet services, and the ease of digital transactions.
The main challenge across financial intermediaries is to attract, grow and retain their HNI customer base as there is a mad scramble and increased competition to cater to this high revenue generating niche segment. As everyone is putting in their best resources to convert a one-time HNI customer to a recurring client to a Brand Ambassador, what are the 3 basics that a Wealth manager should focus on?
1. Know Your Customer
In the traditional sense KYC is synonymous with only the verification and documentation of identity. However, the meaning can be expanded into truly understanding your customer- Know Your Customer Really Well!! KYC goes beyond theoretical norms and legal compliance. This is about really knowing who your customers are. It is about knowing investment preferences and profiling customers based on transaction behaviour, and more importantly determining what matters to them. Is the client looking for solution and expert guidance? Or does the client only want explicit execution of his ideas. Prepare intensively and understand your client needs. For a long term relationship to work, it is important to deliver a personalised customer experience which can be made effective by preparing a Detailed Client Profile. Objectives, involvement level, knowledge and expertise, risk-reward attitude etc. are some factors which would aid in developing an Investment Policy Statement.
2. Communication
Communication is said to be the key to Customer Retention. Communication is the most powerful tool for a Wealth manager. There has to be a consistency and regularity in dealing with your clients. Understand your clients’ needs and use their preferred communication channels. Regular updates, timely action and quick action to resolve complaints are a must of course. Maintaining records and ensuring safety and security is of paramount importance.
Create a level of transparency and trust. Keep your vision on the long run. Hiding costs and commissions may lead to an increase in profits in the short run but in the long run it may lead to erosion of trust and reputation. The client’s wealth and end objective should be the focus, costs and risks should be made transparent to the client. While good communication with the client not only translates into excellent service, it also provides the organisation opportunities for further customer engagement and effective referrals.
3. Bouquet of Services-
A one-dimensional private wealth management approach no longer satisfies HNIs. They seek financial advisors who can go beyond prudent asset allocation to deliver technology-driven, holistic investment solutions across a wide range of financial services such as wealth preservation, tax planning, portfolio diversification, alternative investments, and philanthropy. Diversifying in complementary fields of service – one stop solution will aid in not only revenue generation but also a long last relationship from client to brands. There is a constant need to re-equip, relearn and stay updated with the changing financial times and technological updates. Though no one is truly indispensable, however one can strive to be truly valuable and irreplaceable.
While customer acquisition is the first step, the real test lies in customer retention. Retained customers are more likely to engage in word of mouth marketing, which has much more impact and credibility than any paid endorsements. Focus on customer experience, that’s the best weapon in this competitive battlefield.
