Nuvama Wealth: President Rahul Jain on India’s wealth management trends

Payel Majumdar Upreti

How have millennial and Gen Z investors bucked the trend when it comes to real estate and gold, and which direction are they looking in to invest? Is it okay to buy a BMW on loan?Nuvama Wealth President & Head Rahul Jain breaks down the trend towards financialisation on one end, and premiumisation on the other in India. LuxeBook caught up with him over a virtual session to decode how India inc. has been wooing the current generation of investors while retaining others.

Q. Would you agree that wealth management is a sunrise industry in India?

I completely agree with the statement – wealth management is a sunrise industry, and there are multiple reasons around it. Everyone knows that India is one of the fastest growing economies in the globe and also while we grow, India has been a very savers-led economy.

If we look at India right now, India does around $3.75 trillion off GDP out of which 30 per cent is generally saved. If you take it as 28% also conservatively as India’s savings, so 20% of $3.75 trillion is excess of $1 trillion in savings. My estimate is that India saves $1.2 trillion or around 100 lakh crore of rupees every year. That is what India saves.

In India, earlier the larger part of savings was going into real estate gold and fixed deposits. For people who are in their 50s and 60s right now, a person’s first goal was to buy a house. But now those type of conversations are not relevant anymore.

I think the behaviour is changing, the thinking is changing, the current generation is thinking in a very different way while investing their money. That is what we term as financialisation of savings, effectively, from real estate, gold and FD. Once that financialisation happens, savings are happening but is it going into real estate? The answer is no. Not at that intensity. It is going to mutual funds, SIPs, bonds, AIF, etc. While this financialisation happens, people need wealth managers to come and advise them. This is where we stack up.

Q. How does financialisation change things?

Just imagine: India saves 100 lakh crore every year. Right now, India’s net worth, upto 51-52 per cent would be in real estate, 17 per cent in gold, and another 15 per cent in fixed deposits. If you combine all this, it becomes 83-84 per cent, and the rest is insurance, pension, mutual funds, etc.

Now with this trend towards financialisation, the need for wealth managers will grow at a fast pace because people are saving and they now want to invest in financial products rather than in traditional avenues.

Q. What is the industry outlook for 2024 when it comes to wealth management?

If you look at India, there is retail, affluent, HNI and ultra HNI, the GDP is growing. As GDP grows, it brings more money into the hands of people. As consumption grows, so does saving. With more financialisation happening, it looks very robust in 2024, demand for such a set of people is growing at a rapid pace.

Q. Do wealth managers have any role to play in India’s luxury consumption story?

On the contrary, wealth managers expect that a client save more money so they can invest more through us and create more wealth for future. Consumption is also a behavioural change. What is happening in India right now can be termed premiumisation.
What we mean by that is since you’re saving more, and since you have aspirations of changing your lifestyle, you try experimenting with certain things.

You want to experiment with those, but effectively those experimentation becomes reality of life. Let me give you an example. Say you bought a BMW, a German car, then once you get into that segment, it will become difficult to go back to a Hyundai. I would say 20 years back, buying a hold cinema hall ticket for ₹1000 was unthinkable but now a reality for a lot of people.

Q. Yes, but now there’s been a wave towards premiumisation?

India is going through a big premiumisation wave and that is happening because the middle class, which is the largest segment of India in terms of people, is earning more and their behavior is changing. Their behaviour change is leading to more consumption and more saving.

Q. A lot of people buy luxury purchases on loans. How has credit growth fuelled the consumption story of luxury goods in India? 

There are three parameters for luxury consumption. First is behaviour change. If I look at the previous generation’s mindset, they wanted to also make money, but never want to spend it the same way. We were conservative in spending, which is changing.

Secondly, since the economy is growing, affluence is growing, and people are earning more money effectively. Third is the availability of credit, which is there for most of the things in the market. A certain set of lenders are also funding you for your luxury holidays. Dental care is again a luxury consumption in that sense, which also gets funded by lenders effectively. So increase in consumption is not just credit, but a combination of all three coming together.

Q. As a wealth manager what is your take on credit fuelling consumption of luxury goods?

We follow a very basic rule where we say 30% of your income should get saved anyhow. I would say that we need to be balanced. Is someone is making enough, and he’s within his parameters, then its ok if he’s using leverage via loans or credit cards. Life isn’t unlimited. Then your aspiration or dreams of holidays, buying a good imported car, traveling etcetera, all are important.

You mentioned how GenZ and millennials are looking at non-traditional avenues to invest in.

Q. Would you say art is one of those?

Art is, I would say is only for a very select people. We handle lot of Ultra HNI and even among them a very limited number of people invest in art because it needs a certain understanding. Even the storing of art is also a big challenge. People who have a general aesthetic and taste towards art are the ones who invest in it.

Q. What non traditional avenues of investment are growing right now?

When I speak about nontraditional avenues, I generally mean non – real estate, gold or FDA. I think there is now a huge splurge on mutual fund investments. People directly coming in, investing in equities and bonds. But as India is above all is, I think as the economy is becoming larger, more mature. There are also new opportunities coming in.

So for example, commercial real estate is a big theme in India right now because of the growing demand for businesses, corporates and commercial real estate is becoming big. India is an infrastructure hungry country. Startup is a big one in India, the largest startup ecosystem. Startups also need capital.There are a lot of private market investments which will go to public markets in the coming years. I would say these sort of very different exciting opportunities exist which has the ability to create alpha for the investors.

I think these sort of schemes are mostly available on AIF category and I think I would say these are new ideas which are there in the market. We advise our clients in the last two categories a fair bit. Apart from that, there’s a category called market linked debentures or structure products. where you can reduce the risk significantly but still participate in the upside. So this product where your downside is protected, but upside is completely with you is liked by a lot of HNIs and ultra-HNIs right now.

Q. Tell us what your typical client wants from Nuvama?

So generally our client segment are people who are doing very well in life. They’re very busy with their professional life. They want someone who can come and help them achieve their goals. They have a lot of money which they save. They want someone who can come, advise them, help them achieve their goals and create wealth from a long term perspective. Our relationship with clients runs for decades.

There is no one straight jacketed approach, since we are we are a very affluent plus plus led wealth management company. In what ways is a wealth manager a bridge between the industry and HNIs and beneficial to both parties?

Yes, since clients are a supply of capital and the industrial has a demand for capital effectively that is how it works. Because if I if if I’m a mutual fund and I visit the access between the mutual fund company and the Consumer Mutual Fund is raising capital because he will deploy it somewhere, who needs capital and I am person who’s who’s sourcing capital for them.