Asian Private Banker, Aug 13, 2018
CEO. Sanctum Wealth Management
In 2015, Shiv Gupta, then head of RBS’s private banking arm in India, led a management buyout of the business amid a wide-scale pullback by RBS from foreign markets. Sanctum Wealth Management opened for business in April 2016, bringing on former Coutts CEO Rory Tapner as a board member and, more recently, expanding operations offshore. Gupta spoke with Asian Private Banker about why local players should feel optimistic about the industry’s prospects, Sanctum’s milestones to date, and the state of its international foray.
Shiv, India’s wealth management market is brimming with confidence. Do you share the view that the industry could be entering a golden age?
When I think about the macro situation, we are in a period where we are going through a wave of structural changes that are transforming the local economy which could go on for as long as a decade and should translate into significant growth in wealth on the ground. So the timing is good for wealth managers — it has been for some time now and will continue to be so. We also expect markets to generally remain positive. Short-term concerns may arise from time-to-time, but our long view is that markets will continue to do well despite being on the higher side of valuations currently. Clients have become used to dealing with local players, whereas earlier, there would have been a premium placed on dealing with a foreign firm.
If you look at overall business momentum, at least in terms of asset growth, it’s fair to say that the velocity is higher among local players. Are clients voting with their feet after a stream of exits by foreign banks in recent years?
I would say the industry has also been impacted by the global environment, with many foreign banks entering and exiting India on their own accord due to factors ranging from rising compliance costs to their overall global strategies. As a result, clients have become used to dealing with local players, whereas earlier, there would have been a premium placed on dealing with a foreign firm. Having said that, regulations are affecting the way wealth management is practiced in India as in other jurisdictions, with a drive for greater transparency and investor protection. So what we’ve seen is that as a private, domestic and independent firm, regulatory changes and the flip-flopping of foreign players have played to our advantage. We are more agile and in sync with the local environment, and clients do not want to adhere to foreign regulations that do not quite apply to them. In fact, the current marketplace remains favourable to local players which are seeing a real increase in business activity, with a number of firms recently raising money. As a private, domestic and independent firm, regulatory changes and the flip-flopping of foreign players have played to our advantage.
When you look across the competitive landscape and at firms’ business models, are you seeing significant differentiation or homogenisation at this juncture?
There is an element of homogenisation in terms of the way local players are positioning themselves from a breadth-of-proposition perspective. But our proposition philosophy is to be in a position to be a credible solution provider across a wide range of wealth management needs. The challenge in India is that you don’t have an omnibus system where you have one licence as you would in Singapore — you have to cobble together multiple licences to do multiple activities so there is a lot of design work involved when it comes to your business and operating model. We have five licences and two legal entities to credibly address the full range of wealth management needs of our clients.
It’s been two or so years since the firm was set up. Are you satisfied with the progress you have made in terms of developing the platform, bringing in talent, and acquiring clients?
The first phase was all about putting together the core architecture and migrating the client base from RBS —we had 95% client retention. We then had a year of stabilisation, during which we put together a broader platform of products and services. And then it’s been about growth. We had 95% client retention. We added 14 relationship managers last year with almost no turnover and now we are poised to hire several more. The platform has matured considerably, and we have grown our client base by more than 70% since launch, alongside considerable share-of-wallet growth. We are excited by the rate of acquisition which should further accelerate over the coming year as our brand recognition grows. This is textbook organic growth.
You mentioned earlier that a number of Indian wealth managers are raising money — Sanctum, too, has been in on the act with [private equity firm] Multiples investing INR 73 crores into the firm this year.How significant was this capital injection?
In and of itself, it was an important milestone, but also, this partnership will allow us to strengthen our technology platform, deepen our client proposition, and expand our coverage. As the year progresses, we expect to cross important milestones in each of these areas.
Late last year, Sanctum launched an international markets desk amid plans to open offices in Hong Kong, Singapore, and Dubai. When do you expect to have these offices up and running?
We appointed a Singapore-based senior advisor, Sridhar Natarajan, with whom we have been working on defining the precise entity and licence structure for our Asian offices. This work is almost complete and we expect to set up our Singapore office in the next three-to-four months followed closely by our Dubai office. We expect to set up our Singapore office in the next three-to-four months followed closely by our Dubai office.
To this end, Sanctum has also been looking to partner with private banks and multi-family offices in the offshore space. Have you made any headway?
We are actively engaged with several private banks and external asset managers to help identify ways for their clients to invest more effectively in the India opportunity. We have also collaborated with two Indian firms to make available a USD-denominated thematic product investing in Indian equities, for global investors. We expect the international business to account for as much as 25% of Sanctum’s overall financial performance.
You have high hopes that your international clients/NRI business will contribute substantially to your overall business in time, whereas some other Indian wealth management firms with offshore operations have been less bullish on this front. What are your targets?
The short-term objective of our international business is to establish Sanctum as a provider of differentiated products (investing in India, across asset classes) and high-quality service to our partners. In the medium term, we expect the business to be a meaningful contributor, i.e. to account for as much as 25% of Sanctum’s overall financial performance.