Mumbai, May 30, 2024
India’s equity markets have enjoyed a remarkable rise since the nadir of April 2020 as the world grappled with the first wave of the pandemic. Today, the overall market capitalisation is more than USD4.3 trillion, and the market shows little sign of running out of steam. With economic growth still rolling on at a very healthy pace, with such rapid private wealth creation, and with an escalating transition of ‘old’ money to the next generations, it is of little surprise that the Indian wealth management industry is in an ebullient mood. Indeed, competitors in the wealth market are enjoying a remarkable ride on this country-wide wave of enthusiasm and optimism. Moreover, at the same time, wealthy Indian clients have also been diversifying more of their portfolios into private investments and alternatives, as well as towards global assets, most of which have also performed well. Shiv Gupta, Founder & Chief Executive Officer of Sanctum Wealth, met with Hubbis recently in Dubai to offer his insights into how his firm is addressing the needs of the different segments of India’s private wealth universe, and what he expects ahead. He offered a vision of wealth management being driven by integrity and market forces, not by regulation, and where trustworthiness, transparency, and high-quality service result in client satisfaction and new business generation.
Sanctum Wealth emerged as a carve-out of the RBS India private banking business in 2016. Shiv and his partners and colleagues have since then built the firm into one of the leading private wealth management businesses in India. The firm today employs roughly 125 people overseeing assets under advice of more than USD 4 billion across 1,300 HNW and UHNW families. The group also boasts marquee external investors, including Multiples Alternative Asset Management and the Xander Group.
Offering optionality based on solid architecture
Shiv first observes that whatever a client’s investment style, Sanctum must be able to service their requirements, whether that is facilitating more of a DIY investment approach or more of a Sanctum-led portfolio and product curation. “Active or passive, stock or asset picking, or more through collective strategies, we are fully able to service the different client profiles and preferences,” he reports. “The business architecture offers that agility.”
Additionally, he says the firm is also fully able to maintain enduring relationships with client family members as wealth and control of assets transitions gradually from the founder to the next and younger generations.
Connectivity to the nextgens
“We always have a keen eye on intergenerational wealth transfer, aiming to maintain continuity of the relationship,” he says. “This process does not start when the family situation changes. It must begin well before the actual transfer from one generation to the next takes place. If the wealth firms position themselves properly, they will be better placed in respect of retaining assets after that transfer occurs.”
He notes that there are certain elements that are consistent through the generations, including using the same building blocks.
Flexibility and agility
“The firm’s architecture can accommodate their different approaches,” he says. “They might have a different style, preferences, allocations, risk inclinations, they might err more towards impact, and they might be more digital in connectivity and engagement. But whatever their approach, they need certain standard offerings, including good advice, robust execution, data and analytics, smooth and accurate reporting, and so forth. And we can handle all of that within the proposition we have built.”
Shiv explains that for the time being, as a firm that in its current guise dates back only to 2016, they have more than enough to focus on in India without looking to expand overseas.
India’s gravitational pull
“We have these building blocks in place to handle the growing client base and to connect from here to international partners and clients. We’ve invested in product platforms, we’ve invested in people, we’ve added new niches, for example in derivatives, and at this stage, our focus is on deploying all of these more fully. By doing so, we will achieve the growth objectives that we have in mind for this stage of our evolution.”
Sanctum’s scale and capacity
He adds that the firm now has six offices in the country and a team of around 125 people, of which 35 are relationship managers.
Room for healthy competition
Shiv reminds us of his view of the wealth market as one in which there is room for plenty of competition, and in which clients often work with a variety of banks and firms. “This is not an industry in which everyone gravitates to just a few providers,” he states. “It is not a winner-takes-all marketplace. Clients work with wealth managers for three key reasons – trustworthiness, their ideas, and their customer experience. In my view, those are what forms the basis for differentiation.”
Staying true to the fundamentals
He expands on this view, stating that if you can build a reputation for trustworthiness – and he believes Sanctum Wealth had done exactly that – it is worth its weight in gold. “I worked with Coutts for 15 years and saw that in action in many markets. This is central to our culture and proposition.”
On the second point regarding what Shiv calls ‘ideation’, or idea generation, and dynamism, he says that Sanctum has approaching 30-strong in their products and solutions team. “Out of around 125 people in total, that is a large number and underscores our commitment to delivering the right ideas and products with the right diligence and agility.”
Finally, the firm is investing keenly and continuously on elevating the customer experience and quality of service. Technology is central to their delivery on that commitment, he says.
Huge growth but taking nothing for granted
Shiv reports that the result is a business that has grown by 30% annually since they launched as an independent wealth firm. “And last year, we expanded our AUM by more than 75%,” he reports. “This is quite phenomenal, and it was supported, of course, by the outstanding performance of Indian markets. But we also brought in new clients and new AUM. And we take nothing for granted – we regularly ask our clients for their feedback on how we might improve.
Regulating wealth management
Shiv then turns his attention to regulation. In general, he appreciates the work done by regulators towards investor protection and market development. On the advice versus distribution debate, however, he says he is not a proponent of rules-based regulations (rather than principles-based) that interfere with market forces by setting rules on commercial matters like pricing and fees. “The market must be a market and should be allowed to determine the price and method for the delivery of services albeit all relevant information should be disclosed to clients. “We need to take a nuanced approach to fee structuring that aligns most accurately with client preferences and acceptability, and that is relevant to market conditions.”
Sustaining a well-balanced business
Shiv elaborates further on these comments, noting that if advisors are not allowed to charge for certain advice and services, it can lead to a situation where providers revert to a distribution model, not out of a desire to earn more covertly but because the pure advisory model does not allow them to charge fees that are necessary to run their platform sustainably.
He also challenges the notion that the only way to ensure ethical behaviour in wealth management is through a fee-based model. “The idea that this engenders an ethical model is somewhat simplistic,” he comments. “Actually, much depends on the underlying culture and value system of the organisation; these play a crucial role in determining how services are provided and transparency. You need to present and uphold an organisational culture that promotes ethical practices and integrity in order to deliver a sustainable wealth management proposition.”
A culture of transparency and integrity
He crystallises these nuances by stating that he does not think that having a model where you charge for transactions and doing the right thing transparently for your client are mutually exclusive. “I don’t believe that is true,” he states. “I firmly believe you can have a culture and a system in an organisation, a genuine commitment to a certain conduct that ensures this. You can do the right thing for the client, and you get paid for it commensurately. The regulator requires everyone to disclose all fees to clients, so in my view, that should be based on commercial negotiation and agreement with the clients.”
Let market forces determine value
He concludes by saying that whatever his views, he thinks the debate over how fees get charged for advice versus distribution and how it all comes together for clients who want a fee-based model but also access to ideation will take some time to play out and take final shape.
– Shiv Gupta, Founder and Chief Executive Officer
For more information, please visit www.sanctumwealth.com
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