Advice for the rich

Some banks are expanding into advisory through (Portfolio Management Services) PMS and (alternate investment funds) AIFs, which are governed by different Sebi rules.

In December 2019, Kotak, one of the largest banking groups in Indias wealth management, launched an AIF called Optimus. The AIF wrapper was actually an attempt to create a standardized advisory product across asset classes. Its pitch is a fee of 1-1.5%, including underlying product expenses. Kotak already had a bespoke advisory service launched in 2008 which currently has assets worth around 25,000 crore. However, Optimus democratized and packaged its older tailored counterpart. RBI rules do not allow banks to offer investment advice and, hence, both services are offered through a subsidiary, Kotak Investment Advisors Ltd (KIAL). Kotak Mahindra Group started offering advisory services in 2008. The advisory moved to KIAL in 2019," said Srikanth Subramanian, head, private wealth, investments and advisory, KIAL.

Axis Bank launched its counterpart in August 2020, albeit under RIA rules, placing it within Axis Securities. Our advisory service stems from an internal survey which showed huge buying sentiment among customers but no scientific approach towards investing. Our idea was to fill this gap. Our focus is on stocks but we can encompass direct mutual funds also," said Pritam Patnaik, head, acquisition and relationship, HNI and NRI, Axis Securities. Axis offers three portfolios under this servicegrowth, contra and retirement. For portfolios above 2 crore, we will even look at setting up customized portfolios, for a fee of 2% of the assets annually," said Patnaik.

ICICIs old bespoke model which resembles Kotaks old advisory service is housed in ICICI Investment Management Co. Ltd, a subsidiary of the bank. It mostly caters to clients with more than 15 crore in assets. A spokesperson for the company spelt out a long list of services, including helping clients to draw an investment charter, offering investment solutions per charter, portfolio construction and asset allocation.

In addition, the banks broking arm ICICI Securities also offers investment advisory. ICICI Securities Private Wealth management has an AUM of around 1 trillion and an HNI client base of 34,000. HNI here is defined as clients with investment of more than 1 crore. The advisory business is focused on UHNIs and family office clients and offers bespoke solutions," said Anupam, head, private wealth, ICICI Securities. The pricing depends on the type of underlying products and the engagement level. Typically, it is up to 2% per annum. The proposition covers bonds, stocks, ETFs, mutual funds, PMS, AIFs, overseas investments, private equity and value-added services like estate planning, among others," said Anupam.

Question: In dealing with HNI (High Net worth Individuals) as a marketer one has to be doubly sure as this is a very sensitive segment. In context of above write up explain CRM Pyramid.