Senior employees of large wealth management companies who walked out together to build something of their own are starting to show that the model can work. According to reports from Stock Market News, the entities they set up are now advising clients on assets worth more than ₹1.38 trillion. At least six such new wealth management ventures have come up over the past few years, with notable examples including TriGen Wealth formed after about 35 employees of LGT Wealth quit together, and Veriqus Partners incorporated in August last year with a majority of the team having worked at DSP Merrill Lynch. As noted by TriGen's Maneesh Kapoor, "Clients often associate more with the individual than the firm," highlighting the challenge of building institutional trust in these new ventures.
Demand for wealth management services in India is expected to grow significantly, with assets under management (AUM) projected to almost double to $2.3 trillion by FY29 from $1.1 trillion in FY24, according to a report from Deloitte. The number of ultra-high net worth individuals, defined as those with a net worth above ₹25 crore, reached 13,600 in 2024, as per DBS Bank. This growth trajectory is driving the entrepreneurial wave among experienced wealth managers who see opportunities to build their own firms.
The trigger for departures of senior wealth management executives is often the lack or reducing number of incentives to stay on as they manage huge assets. As reported by Stock Market News, when an executive manages a book of ₹200 crore and generates commission income of ₹2 crore, he gets a salary and bonus of ₹35 lakh. However, a manager with a ₹1,000 crore book may generate ₹10 crore income but receive only ₹2 crore as salary and bonus. Founding members of new wealth management companies can often secure more meaningful equity participation through ESOPs, making independence more attractive. The math explains it clearly - a manager handling ₹1,000 crore might earn the firm ₹10 crore, yet take home just ₹2 crore, while going independent means keeping far more of that revenue pie.
While private equity firms are showing growing interest in the wealth management space, reaching break-even remains difficult for these new ventures. According to reports from Stock Market News, wealth management companies need to lower their fixed costs to reach break-even faster. The challenge lies in retaining senior relationship managers who bring large client books, as they are valuable to competitors and there's always a risk of poaching. Most wealth management companies are hesitant to spend time on assessing whether an RM fits their value system, and there's reluctance to invest the effort needed to develop someone into a good RM. Private equity money is fueling this shift too, funding startups like TriGen and Veriqus, but scaling isn't easy given the client loyalty to individual advisors.
Sustainability becomes a significant concern, especially with PE firms investing in wealth management companies. As reported by Stock Market News, the PEs are investing through funds with a lifespan that may be over before the wealth management firm even starts making money. When wealth management companies have high cost structures and need to recover costs quickly, there's temptation to sell products with very high margins, such as unlisted shares and alternative investment funds with large upfront commissions. This pressure to monetize quickly can impact client portfolios, with lower-margin products like mutual funds receiving less attention. The real risk is the pressure to monetise quickly, which can push firms toward high-margin products and away from long-term client relationships.
