• How have the wealthy reacted?

While the growth in the economy explains the surge in HNWIs, their changing asset allocation explains where the growth has parked itself. The fact that equities are and for sometime will remain a key asset class for investors comes out clearly in the report. However, even though equities held the maximum allocation — 31 per cent — real estate was seen as the emerging asset class in 2006. While the share in equities moved just 1 percentage point up over the previous year, real estate saw the allocation rise from 16 per cent to 24 per cent.

The reason for this shift has been due to the increase in commercial real estate prices coupled with great returns from real estate investment trusts (REITs). This resulted in a reduction in alternate investments — structured products, hedge funds, derivatives, foreign currencies, commodities, private equity and investment of capital — to almost half to 10 per cent in 2006 from 20 per cent in 2005.

• What is the emerging need?

Robust and efficient advisory services, an impediment that has been recently addressed by the UK and India, certainly needs attention. With complex financial products and growing volumes of wealth, wealth management firms and advisory units have to revisit their service models by client segmentation, adoption of more advanced tools that would enable knowledge gathering, analysis and delivery to forge long term relationships with HNWI clients.

• What is the forecast?

... contd.