Jaideep Hansraj, CEO – wealth management and priority banking, Kotak Mahindra Bank shares his views with Asian Private Banker in the ‘Final Word’, a ten-part series where the industry’s leaders share their thoughts and opinions on key issues around industry trends, business performance, investment solutions, regulations and compliance, and technology.
Industry trends | What is the state of Asia’s talent pool and did your firm pay significantly higher for new talent? What is your view on private banking talent development in Asia?
We have seen multiple new players as well as the expansion in terms of existing players. Both these factors have brought in fresh talent to the market.
As our compensation model is aligned to individual performance over a period of time, we ensure high-quality performance and long-term commitment.
Meanwhile, the industry demands high standards and we are constantly learning and evolving with the help of academics and training, which provide us with an opportunity to improve our expertise.
At Kotak, fresh talent is procured from educational institutions, existing institutions across multiple businesses are leveraged on to provide talent with a strong platform for growth, and individuals from other financial services are provided private banking expertise with the help of lateral training programmes.
Business Performance | In the midst of what has been construed as an increasingly difficult macroeconomic environment, how do you think the private banking and asset management industry will perform in 2019? Will it be a year to separate the wheat from the chaff?
Like all market downturns, this period should also bring about the consolidation of players and push businesses to refocus on models that are relevant to and aligned with client interests.
We at Kotak have been a consistent leader in our business for the last 20 years by putting forth our clients’ interests first and using our past experience to grow in strength by compromising short-term gains for a long-term leadership.
Business Performance | What is the one revenue line that you must build up significantly in the coming few years to ensure business sustainability? What is your view on the revenue mix of the industry in general?
Clearly the need of the business is to move towards advisorybased annuity models that align advisors’ interests with the interests of their clientele. A majority of the industry functions on transaction-based fee and income-based models that work when the markets are doing well and tend to struggle in downturn.
Investment Solutions | Though continued geopolitical uncertainty and volatility pose a challenge for DPM performance, will this ultimately prove to be a boon for the discretionary business, converting clients from trade to delegation? In these same market conditions, how critical will the alternatives business be for private banks in Asia moving forward?
The success or failure of any strategy cannot be predicted. We are in a constantly evolving world that has more information than what can be processed. Thus, systematic models and disciplined rebalancing should work in market volatility.
Again, going back to fundamentals, we look at ourselves as asset allocators and think that we need to design portfolio strategies that take into account both market forces and client risk profiles. Alternatives may thus be relevant on a case-by-case basis.
Investment Solutions | Ten years on from the GFC, how has your product shelf evolved and how has clients’ perception of structured products changed since then?
The product shelf for Indian investors has witnessed an expansion. However, we have always believed in the simplicity of products. If our clients can’t understand a product completely, it is not fair to allocate such products to them. Having said that, we do have investors who not only understand structured products but also run their own models. While we see a larger demand for customisation in each portfolio, we do find limited acceptance of structured products.
Regulations & Compliance | What’s the essential tool you have or are planning to create that will help your firm tackle the uptick in regulatory stringency and scrutiny? Do you think that the compliance costs of your business have peaked?
Regulations are changing in line with the market evolution and we think that such changes are relevant and important for a market like India. We are also adapting to those changes accordingly. However, regulatory changes also bring about a great amount of reassurance to investors and acceptance becomes that much easier to communicate to investors. While it may increase compliance cost in the interim, it helps leaders like us grow in the long run.
Regulations & Compliance | Are you satisfied with how regulators interact and solicit the industry for feedback?
Yes, they actively engage and take feedback. We appreciate their effort.
Technology | What is your view on robo-advisors and is your firm developing robo-capabilities of its own? Have you observed any robo-advisory developments that could materially disrupt the industry?
Robo-advisory is great at providing seamless execution capabilities to investors. However, in a market like ours, there are a large number of clients who do not have the time or the understanding to use these technologies. Thus, the role of robo-advisory is limited in our market as of now. However, we do expect that technology will be the next driver of industry growth and we actively build solutions to expand our business.
Technology | What emerging technology applications do you expect to reach an inflexion point in their convergence with private banking and wealth management? What impact will they have on the operational models of private banks and wealth managers? Who will be the biggest industry disruptors?
There is a growing number of tools that provide solutions to different parts of the market. Without getting into specific names, some of these will be used in the near future in India as well.
Meet 2018’s industry leaders in the full round up of of Asian Private Banker‘s the Final Word 2018.