R Vaidyanath, Head, FS Domain Solutions Group - Capgemini India, has over twenty five years of experience in Insurance and Capital markets of which ten years has been with a large diversified stock exchange in India. He was also the Practice Head – Capital Markets for the Consulting Division of a leading multinational IT company and one year as the Capital Markets Lead for a leading global IT Company. He has successfully defined, developed and implemented winning strategies for Operational Excellence, Online Trading Platforms, E-Brokerage, Financial Planning, Back Office Processing, Wealth Management Platforms, Shared Service Centers and Exchange Trading Platforms. Vaidyanath holds a Masters degree from the University of Mumbai, India with major in Financial Management.
Capgemini India has over 26,000 people across 7 cities (Mumbai, Bangalore, Hyderabad, Kolkata, Chennai, Pune and Delhi). A pioneer for the IT industry, Capgemini has over 40 years of global expertise collaborating with leading corporations and now brings the Consulting, Technology and Outsourcing experience to India. With dedicated teams to service the local markets, Capgemini has strong domain experience to assist clients across the Government and Public Sector, Energy and Utilities, Manufacturing, Telecom and Financial Services sectors and help them advance in their respective industries.
Replying to Anil Mascarenhas of IIFL, R Vaidyanath says, “HNWI clients have emerged more cautious and conservative, and yet are much more engaged in their financial affairs after the crisis.”
How do you define a high-net-worth individual (HNWI)? How many are there in India?
We define a HNWI as an individual with over US$1 million in investable assets including the value of all forms of publicly-quoted equities, bonds, funds, and cash deposits, as well as private equity holdings stated at book value. The term excludes real estate used for primary residences, collectibles, consumables, and consumer durables. For India we have 1,26,700 HNWIs.
What are the key findings with specific reference to India and Asia-Pacific?
We bring out an Asia-Pacific Wealth Report every year which is built on the global World Wealth Report, and provides HNWI market sizing with a review of economic drivers, HNWI investing behaviors and asset allocation trends in the Asia-Pacific region. The 2010 Asia-Pacific Wealth Report will cover eleven core markets: Australia, China, Hong Kong, India, Indonesia, Japan, New Zealand, Singapore, South Korea, Taiwan, and Thailand. Unfortunately, we will not be able to provide specific findings related to India at this stage apart from the findings related to the number of HNWIs and few economic indicators.
As far as the Asia-Pacific findings are concerned the increase in the HNWI population and its wealth were substantial in the Asia-Pacific region as the region's economies experienced continued robust economic growth and strong gains in other key drivers of wealth. The other highlights are:
- The Asia-Pacific HNWI population rose 25.8% overall to 3.0 million, catching up with Europe for the first time, after falling 14.2% in 2008.
- Asia-Pacific HNWI wealth surged 30.9% to US$9.7 trillion, more than erasing 2008 losses and surpassing the US$9.5 trillion in wealth held by Europe's HNWIs in 2009.
- HNWIs in Asia-Pacific excluding Japan have the world's highest allocation to real estate investment overall, and to residential real estate in particular (60% of all real-estate investments).
- In China, real GDP growth slowed somewhat in 2009, but was still robust at 8.7%, down from 9.6% in 2008.
- In India, real GDP growth increased to 6.8% in 2009 from 6.1% in 2008. Market capitalization in India and China almost doubled in 2009 (growing 102.9% and 100.9% respectively), heavily boosting the size and wealth of the HNWI population in the region.
What makes you confident of Asia-Pacific becoming the powerhouse? How long will it take? What are the factors which you see enabling the same?
On aggregate, the number and wealth of HNWIs around the world recovered significantly in 2009, but Asia-Pacific was the showcase, thanks to a solid performance in both the economic and market drivers of wealth. Asia-Pacific excluding Japan is expected to show the strongest GDP growth of any region, with growth of 7.0% in 2010 and 6.4% in 2011. That would outpace growth in the G7 developed nations. The region’s GDP growth is likely to be led by China and India, where independent engines of growth, such as domestic consumption, are expected to be strong. In Asia-Pacific, China and India will continue to lead the way, with economic expansion and growth likely to keep outpacing more developed economies. The region’s HNWI growth is likely to be the fastest in the world as a result.
However, HNWI-wealth creation is always driven by a combination of macro and micro economic factors. The macroeconomic concerns can contain upside HNWI performance, even when market performance is stellar. Around the globe, then, the creation of HNWIs and wealth is likely to depend heavily on the success each country has in managing the nascent economic recovery while driving expansion and handling ongoing domestic and global challenges in financial conditions.
Does increased wealth add to the philanthropy-related services in the same proportion?
Increased wealth does add to the philanthropic giving of the HNWIs. However, it is not necessarily in the same proportion. While most HNWIs and Ultra-HNWIs give primarily for altruistic reasons, feelings of social responsibility, social networking, and tax benefits are all reasons for philanthropic giving.
Roughly what percent would have created their wealth in the last five years?
We would not be able to give a number on this.
What are the lessons from the world wealth report?
The Asia-Pacific region caught up with Europe in terms of HNWI population, while the Asia-Pacific HNWI wealth surpassed the HNWI wealth in Europe. The spillovers from the global financial crisis negatively affected GDP growth in 2009 and governments worldwide stepped up efforts to stimulate economic recovery and boost the financial system.
World GDP growth is likely to be positive in 2010-11 and is expected to be led by Asia-Pacific (Ex Japan). However, policymakers across the world are working on formulating viable government stimulus exit strategies.
Post the financial crisis, HNWIs slowly reduced their holdings in cash/ deposits as allocation to fixed income increased: Fixed income allocations rose to 31% in 2009 from 29% in 2008 as HNWIs exercised some degree of caution and placed greater emphasis on predictable income streams.
While financial markets have rebounded to a degree, HNWI clients have emerged more cautious and conservative, and yet are much more engaged in their financial affairs after the crisis. However, their investment decisions are driven much more from emotional than intellectual factors.