Top of The Pyramid 2011 - Kotak Wealth and Crisil Research

Net worth of Indias ultra HNHs to grow 5 times to ` 235 trillion by 2015-16
T.O.P. India - Decoding the ultra HNI
What sets the ultra HNI as a class apart?
The power they wield Value and size of assets Networks of influence Social visibility and hierarchy Scale and visibility of spends
FOREWORD
Ultra high net worth individuals (ultra HNIs) are the crme de la crme of society, in virtually all respects be it in terms of riches, power and status, or even lifestyle. In India, over the past few years, the economic boom has propelled many already-rich people, and a few other first-time entrepreneurs and technocrats into this exclusive club, and resulted in a significant burgeoning of the number of ultra HNIs. One barometer of this is the growing number of Indians who figure in the Forbes Billionaires list that is released every year. Barring unforeseen circumstances, there is no turning back of the clock on the spectacular India growth story. As the ultra HNI segment grows, wealth managers will inevitably feel the need for greater knowledge on the segment, particularly in terms of its behaviour on spending and investments, so that they can provide suitable, timely advice. So will marketing and strategic managers of companies that specialise in ultra luxury products and services. Many others will benefit as well. It is therefore an appropriate time to try and understand the ultra HNIs, in particular their behavioural aspects when it comes to issues such as spending and investing. This report does just that, revealing new unexpected trends, debunking some lingering myths and reaffirming some well-known beliefs about the super rich. Kotak and CRISIL are extremely proud to present this inaugural edition of their report Top of the Pyramid. Our choice of the title is a reflection of who this report is about: the finest of the finest, the best of the best The ultra high net worth individual. Happy reading.
C Jayaram Executive Director Kotak Mahindra Bank Ltd.
Roopa Kudva Managing Director and CEO CRISIL Ltd.
INSIDE THE REPORT

About the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 01 Executive Briefing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 04
Key findings of the report
Graphical Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 07
Visual snapshot of the research findings
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Profiling: The Inheritor, the Self-made and the Professional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1. What sets ultra HNIs apart from other classes of Indian society? 2. What are the different routes to earning wealth? 3. How can we classify ultra HNIs based on their motivation towards creating wealth, spending and investing? 4. What are their attitudes towards leaving wealth for their family and contributing to charitable causes?
Spends: Attitudes, Motivation and the Ultra Wealthy Lifestyle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

1. What proportion of their income do ultra HNIs spend? 2. What products do they prefer to spend on? 3. What motivates their spending on luxury brands? a. Travel b. Luxury watches c. Jewellery and precious stones d. Luxury cars e. Household electronics f. Apparel and accessories
Investing: Risk, Return and Wealth Preservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

1. What proportion of their income do ultra HNIs invest? 2. What are their investment goals? 3. How do attitudes towards risk and return shape their investments? 4. What asset classes do they prefer? 5. How do they manage investments?
ABOUT THE REPORT

The phenomenal growth in the number of the super rich has laid the foundation for an unprecedented expansion of the wealth management industry in India. Inevitably, it is also driving the entry and growth of luxury brands that cater exclusively to the tastes of the ultra high net worth individuals (UHNIs). For both wealth managers and luxury brand companies, one major hurdle to their effective functioning and growth is the almost remarkable dearth of information on the earning, spending and investing trends of the ultra wealthy. 2) In this report, the first of what will be an annual edition, we have laid the broad framework and detailed the methodology to define who an ultra HNI is. Considering the attention that they have been getting in recent times, it was also quite tempting to focus on what their numbers are and who has how much wealth. Instead, the spotlight in this inaugural year is on behavioural aspects, such as what drives these individuals, what their priorities or motives are when it comes to spending or investing, and whether there is any homogeneity in their actions as a class. The conclusions are extremely revealing, and a lot of meaningful insights, some even positively surprising, have emerged from the analysis. We believe that the takeaways gleaned from this report will be invaluable for people who manage the wealth of the ultra rich, and will help niche companies operating in the segment to come up with more innovative marketing or distribution strategies for their products. Kotak and CRISIL seized the opportunity to create a report that analyses and tracks these trends year on year with specific reference to the Indian market. Kotak is a pioneer and leader in the private banking space in India. Its Wealth Management team caters to over a quarter of the 100 most wealthy (as per the Forbes India Rich List - 2011) in India. This report would not have been possible without the co-operation of all the survey respondents and the interviewees. We thank them for their invaluable support, the time they put at our disposal, and the insights they offered. CRISIL Research then undertook an extensive analysis of the results of the survey, and every conclusion was subject to the same analytical rigour and review process that is the hallmark of all CRISIL Research reports. We commissioned a market survey of 150+ ultra HNIs, with conversations lasting up to one hour. The respondents were spread across the three major metros, namely Mumbai, Delhi and Bengaluru, as well as Hyderabad, Ahmedabad, Chennai, Pune, and Kolkata (referred to as Other cities in this report). A majority of the respondents (77 per cent) were from the three major metros. The survey took place between December 2010 and February 2011. This report is based on two main strands of research. 1) A series of interviews were conducted with senior personnel at major global luxury brands, art gallery owners, product dealers and industry body representatives. CRISIL Research is Indias largest independent research house, providing comprehensive research coverage to more than 1,200 Indian and global customers.
About Kotak Group

Completing a successful 25 year run, Kotak is a leading banking and financial services organisation in India, offering a wide range of financial services that encompass every sphere of life. From services like Family Office for ultra HNIs, to Wealth Management for HNIs, to
T.O.P. India - Kotak Wealth & CRISIL Research
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commercial banking, car finance, stockbroking, asset management, life insurance, investment banking, the Group caters to the financial needs of individuals and corporates.
Our offering is customised, based on the clients profile and investment objectives. The Kotak Wealth umbrella also includes Family Office Services.
In February 2003, Kotak Mahindra Finance Ltd., the Group's flagship company, was given the licence to carry on banking business by the Reserve Bank of India (RBI). This approval created banking history since Kotak Mahindra Finance Ltd. was the first non-banking finance company in India to convert itself into a bank as Kotak Mahindra Bank Ltd. The Group has a net worth of ` 109.63 billion and a distribution network through branches and franchisees across the country and offices in New York, California, London, Dubai, Abu Dhabi, Bahrain, Mauritius and Singapore, servicing close to 8.8 million customer accounts. The Kotak Group offers the understanding, the experience, the infrastructure and most importantly the commitment to deliver pragmatic end-to-end solutions.
Through Family Office Services, we go beyond investments to provide a host of value-added services such as Estate Planning Services, tax optimisation, etc. Kotak Wealth Management was recently awarded the Best Private Banking Services Overall, Best Family Office Services - India, in the Euromoneys Private Banking Poll - 2011 and Best Private Bank - India in FinanceAsia Country Awards - 2010. We have maintained our leadership position, thanks to the macro environment, in-depth understanding of the clients requirements and of the various asset classes. This has resulted in Kotak being in a position to offer the widest range of solutions for the client.
About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are Indias leading ratings agency. We are also the foremost provider of high-end research to the worlds largest banks and leading corporations. With sustainable competitive advantage arising from our strong brand, unmatched credibility, market leadership across businesses, and large customer base, we deliver analysis, opinions, and solutions that make markets function better. Our defining trait is our ability to convert data and information into expert judgements and forecasts across a wide range of domains, with deep expertise and complete objectivity. At the core of our credibility, built up assiduously over the years, are our
About Kotak Wealth

Kotak has one of the oldest and most respected Wealth Management teams in India, providing solutions to high net worth individuals. Over thirteen years, a wide range of wealth management solutions has made Kotak Wealth Management the largest player. Our client base ranges from entrepreneurs to business families to employed professionals. On the investment scenario, we believe that no one asset class tends to perform consistently over a long period of time. Therefore, an HNI needs to be given access to various asset classes, investment styles, themes and tenures. Thanks to this focus of the Group, we have built a formidable suite of products and services straddling this spectrum.
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values: Integrity, Independence, Analytical Rigour, Commitment and Innovation. CRISILs majority shareholder is Standard and Poors (S&P). Standard & Poors, a part of The McGraw-Hill Companies (NYSE:MHP), is the worlds foremost provider of credit ratings. We address a rich and globally diversified client base. Within India our customers range from small enterprises to the largest corporations and financial institutions; outside India our customers include the worlds largest banks and leading corporations. We also work with governments and policymakers in India and other emerging markets in the infrastructure domain. We empower our customers, and the markets at large, with independent analysis, benchmarks and tools. These help lenders and borrowers, issuers and investors, regulators, and market intermediaries make better-informed investment and business decisions. Our offerings allow markets and market participants to become more transparent and efficient - by mitigating and managing risk, taking pricing decisions, generating more revenue, reducing time to market and enhancing returns. By helping shape public policy on infrastructure in emerging markets, we help catalyse economic growth and development in these countries.
About CRISIL Research

CRISIL Research is the countrys largest independent and integrated research house with strong domain expertise on Indian economy, industries and capital markets. We leverage our unique research platform and capabilities to deliver superior perspectives and insights to over 1,200 domestic and global clients, through a range of research reports, analytical tools, subscription products and customised solutions.
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EXECUTIVE BRIEFING
Seeds of a luxury revolution
In slightly under two decades, India has undergone a radical transformation from being a largely agrarian economy with a modest growth rate into one of the worlds most dynamic economies. Its GDP has grown at an average of over 8 per cent per annum over the past three years and is estimated to have grown by 8.6 per cent in the most recent fiscal year, making the country the second-fastest-growing economy in the world, next only to China. Although this is creating exciting new opportunities for wealth Propelled by this economic boom, there has been an unprecedented level of wealth creation. Average income levels have risen manifold and many individuals have suddenly become millionaires. The resultant quantum increase in money available for spending, and the countrys increased integration with the global economy have widened the populations exposure to major global luxury brands and triggered a luxury revolution. Entrepreneurship is clearly the dominant source of domestic wealth, but fast-growing service industries such as technology and financial services have also catapulted many hitherto middle-income group individuals into the ultra high net worth individual (ultra HNI) bracket. CRISIL Research has defined an ultra high net worth household (ultra HNH) as one having a minimum average net worth of ` 250 million, which, as per our proprietary tool IDeA (Income and Demographics Analysis), gets mapped to a minimum income of ` 35-40 million. The total net worth of Indian ultra HNHs is expected to reach ` 235 trillion in 2015-16 from an estimated ` 45 trillion in 2010-11. At present, there are no validated estimates of the number of ultra HNHs in the country. Kotak Wealth and CRISIL Research estimate that there are around 62,000 ultra HNHs in India as of 2010-11, with a minimum net worth of ` 250 million. This number represents a meagre Kotak Wealth and CRISIL Research undertook a survey to gauge various aspects of ultra HNI behaviour and uncover important trends therein. managers and luxury brands, their ability to perform effectively is being hindered by the absence of adequate information on ultra HNIs, in terms of their attitudes to investing and spending. 0.03 per cent of the total households in India, but is poised to more than triple to 219,000 households by 2015-16. What sets ultra HNIs apart from other classes of individuals in the country is the sheer value and size of the assets they own. The dramatic increase in personal wealth has also brought about a change in attitudes towards spending; public displays of opulence, which would have been unthinkable a few years ago, are now not uncommon.
Key trends
We found that todays ultra HNI is not, in general, a reclusive individual. On the contrary, he is more likely to be a constant feature on television channels or on Page 3 of newspapers, and is comfortable in (some might even say seeks) the limelight. They are the cream of society, know that they are, and seek to maintain a lifestyle in keeping with their social standing. Consequently, they are highly brand conscious, and in some cases, have strong brand loyalties. In many cases, therefore, price is not the only consideration guiding a purchase. In absolute terms, they are very heavy spenders, be it on high quality homes, food, clothing, or the luxuries of life in entertainment, education, travel and family vacations. They are also finding new ways to splurge, such as on buying art and artefacts, yachts, and islands, or
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even on underwater weddings, chartering aircraft to go on holidays or watch sports, entertainment events, and partying. Contrary to the belief in some quarters that they are highly individualistic, our survey revealed strong family bonds and dependence, when it comes to decision-making on spending or investments. The spending on, and choice of big ticket items such as holiday packages, luxury watches, diamonds and jewellery, household electronics (which include premium mobiles and high-end cameras), and home dcor is carried out in consultation with the family. The family plays an important role in, for instance, identifying a holiday location, or choosing a home theatre brand. Appeal and price are, therefore, important considerations in planned purchases. It is only on items such as apparel, accessories, or liquor that an ultra HNIs personal predilections and impulses come into play. Impulse purchases are usually done at the airport (duty-free shops) or while travelling, and purchases are made largely on how eye-catching the product is, in addition to the brand, the newness of the product and exclusivity. The need for the product is not a factor in impulse purchases; but having cash in hand is. Likewise, while making investments, ultra HNIs take advice from family, close friends, trusted advisors and professionals such as chartered accountants and lawyers. Legacy for the spouse and children, social security and regular income are important factors that guide their investments. Possibly because of this, they are willing to take far lesser risk on their investments compared with what they are willing to take in their business. Most ultra HNIs are distinguished individuals in social networks of power and influence. Their long-standing network of elite contacts gives them differentiated access to business opportunities, and they try to put it to good use to further expand their wealth.
Interestingly, todays ultra HNIs would typically include business people who own enterprises with a turnover of ` 750 million or above, corporate executives, established professionals, politicians, traders, builders and agricultural landowners, unlike before Independence when they were more likely to be the upper classes or the nobility. Based on the results of the survey, Kotak Wealth and CRISIL Research have classified Indias ultra HNIs into three groups: Inheritors Self-made Professionals
Inheritors are born with a silver spoon, and have inherited high net worth; Self-made are first generation entrepreneurs whose success in business turned them wealthy; and Professionals are qualified, highly skilled professionals who gained wealth because the companies that employed them grew big. The wealth dynamics and behavioural traits of each of these groups are unique, and wealth managers and luxury brands will face diverse challenges in their dealings with them.
Conclusion
Most people agree that barring unforeseen circumstances, the longterm India growth story is intact. As noted earlier, this will result in a significant increase in the number of ultra HNIs in the country. For wealth managers and luxury brands, this will mean an appreciable increase in their addressable market. This will necessitate not only an increase in the type and nature of products that they offer to this segment, but also greater awareness about behavioural trends with regards to spending and investment by ultra HNIs. This will allow wealth managers and luxury brands to evolve more innovative
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marketing strategies and target their products in better, more effective ways. It is also evident that the segment of high net worth individuals will spawn the next wave of ultra HNIs. Wealth managers and luxury brands who are able to engage this segment productively and establish profitable (in every sense of the term) long-term relationships will find that they will have a first mover advantage when these people transition from being high net worth individuals into ultra HNIs. This will entail development of a greater range of products, consistently high standards of quality of service and, critically, the right pricing. Here, to avoid familiar pitfalls, some of the new luxury entrants would do well to analyse the experience of multinational companies in India. Some of the multinational companies that forayed into India have become successful because they jettisoned pre-conceived notions and strategies that worked elsewhere and adopted techniques that took into account the local ethos, culture, and tastes to build lasting brand loyalties. Kotak Wealth and CRISIL Research believe that this report will be a useful tool in the hands of both wealth managers and luxury brands. It will help them to engage more effectively and productively with their ultra HNI clients while making investment decisions and may also enable them to gain invaluable insights that will help them increase their business.
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GRAPHICAL SUMMARY
Overview
219,000 ultra wealthy households in India by 2015-16
If we consider a household with a minimum net worth of ` 250 million, there are around 62,000 ultra HNHs in India as of 2010-11.
219,000
2015 -16 P
62,000
2010 -11 E
E: Estimated P: Projected Source: T.O.P. India - Kotak Wealth & CRISIL Research
From 3 to 55: The rising number of Indian billionaires in the Forbes rich list
Net worth ( ` billion )
India now has a record number of 55 billionaires*. The country is next only to the United States and China in the number of billionaires.
55
Indians
8 = 1,157 3 = 212
Indians billion
Indians
billion
11,090
billion
1996
* Forbes India Rich List - 2011 Source: T.O.P. India - Kotak Wealth & CRISIL Research
2004
2011
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Net worth of Indias ultra wealthy households to increase by more than 5 times over the next 5 years
The total net worth of Indian ultra HNHs, is expected to reach ` 235 trillion in 2015-16 from an estimated ` 45 trillion in 2010-11.
Net worth of UHNHs

2010-11 E 2015-16 P
` 45 trillion
E: Estimated P: Projected UHNH: Ultra high net worth household Source: T.O.P. India - Kotak Wealth & CRISIL Research
` 235 trillion
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Spending patterns
Ultra HNIs prefer to spend more on products meant for the family
A significant portion of overall expenditure goes into customised holiday packages, luxury watches, jewellery, and household electronics.
Vintage spirits 52 Home decor / Crystals 57
Art / Artefacts 36
Household electronics 90 Luxury watches 98 Jewellery / Precious stones 90 Exclusive holiday packs 100
Luxury writing instruments
56
Apparel / Accessories 73
Note: The data values have been indexed to Exclusive holiday packs. Source: T.O.P. India - Kotak Wealth & CRISIL Research
Big-ticket spends are planned in advance, often with family involvement

In most purchases, such as holiday packages, luxury watches, jewellery, household electronics, and home dcor, the family plays a paramount role, considering the huge spends involved.
Exclusive holiday packs
Household electronics
Jewellery / Precious stones
Luxury watches
Home decor / Crystals
Vintage spirits / Liquor
Apparel / Accessories
Art / Artefacts
82% 17%
1% Planned
67% 28%
5%
Impulse Both
57% 37%
6%
56%
43%
1%
54%
44%
2%
42% 58%
41% 58%
1%
39% 61%
38%
59%
3%
Source: T.O.P. India - Kotak Wealth & CRISIL Research
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Investment
Ultra HNIs invest one-fifth of their income for growing their wealth
But they put a greater proportion back into their business to fuel the engine of wealth creation. This stems from a desire for a sense of control. Most ultra HNIs would rather invest in their own business rather than in instruments where they have no control.
Ultra HNI's investing strategy has been simple so far...
37.2%
Real estate
33.1%
Equity
20.4%
Debt
9.3%
Alternate assets
28.4%
Investment in primary business
...but their investments in more complex assets are poised to rise

2009-10 E 2010-11 E 2011-12 P
22.4% 20%
Expenses
Alternate assets
9.5%
9.3%
11.2%
19.7%
Savings
Debt
20.8%
20.4%
18.2%
19.3%
Investment for growing personal wealth

Equity
31.6%
33.1%
30.1%
6.3% 3.9%
Others
Charity / Philanthropy
Real estate
38.1%
37.2%
40.5%
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INTRODUCTION
The Land of Maharajas is hardly a stranger to opulence and luxury. Before Independence, some of Indias rulers and landed gentry were among the richest in the world. If the Nizam of Hyderabad was a legend, who can forget his family of prime ministers, the Salar Jung family. Their family property was so vast that a museum, named after the household, houses the biggest one-man collection of antiques in the world, that of the last prime minister. But post-Independence, such opulence had become anathema and consumerism was a dirty word in the Indian lexicon. So, what caused this turnaround and what is driving this luxury renaissance in the country? The answers to these questions are not difficult to find. The collapse of the Soviet Union in the late Eighties ended the Cold War and coincided with a global revolution in information technology, a segment that the Indian corporate sector embraced and gained a leadership role in. Simultaneously, successive Indian governments unleashed a series of economic reforms that freed the economy, promoted entrepreneurship, From 3 to 55: The rising number of Indian billionaires in the Forbes rich list
Net worth ( ` billion )
and encouraged capital and wealth creation. As the countrys GDP growth zoomed towards the high single digit mark, growth was unleashed in the ITeS (information technology enabled services) sectors, capital markets opened up, average income levels rose multifold and many suddenly found themselves to be millionaires first rupee millionaires and then dollar millionaires. Suddenly, there were riches everywhere and money in the pockets waiting to be spent, even as the countrys increased integration with the global economy widened the populations exposure to major global luxury brands. It was, and continues to be, a situation tailor-made for the luxury revolution. So, for instance, a Mumbai-based builder is offering exclusive homes, in the nations financial capital, each with a private swimming pool and whose interior will feature some of the worlds leading luxury brands such as Bulthaup, Antonio Lupi, Dornbracht, Gessi, and Villeroy and Boch.
55
Indians
8 = 1,157 3 = 212
Indians billion
Indians
billion
11,090
billion
1996
* Forbes India Rich List - 2011 Source: T.O.P. India - Kotak Wealth & CRISIL Research
2004
2011
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The apartments are being offered at a whopping base price of nearly $1.5 million, and the really top-end ones are expected to go at 10 times that. That price is comparable to the really high-end homes in exotic locations in Manhattan, Beverly Hills and Florida. India now has a record number of 55 billionaires, according to the Forbes India Rich List 2011. The country is next only to the United States and China in the number of billionaires. The combined wealth of India's 55 richest is $246.5 billion, much higher than last year's total of $222.1 billion. It is also more than the combined GDPs of Pakistan and Sri Lanka. Today, an Indian holds the distinction of owning what is believed to be the worlds most expensive residence the Antilla in Mumbai, which took seven years to build, is bigger than the Palace of Versailles in France. It is a sign of the times that hardly a day goes by without the announcement of the entry of a global super luxury brand into India. If yesterday it was the Bugatti Veyron, today it is the Koenigsegg Agera and the Maserati. Exotic cars such as the Veyron and the Agera cost in excess of ` 120 million each. Contrast that with 25 years ago, when it needed a Ravi Shastri and his heroics in the World Championship of Cricket in Australia to make known the Audi in India. A few years ago, such public displays of opulence would have been unthinkable. But attitudes are changing and that trend is unlikely to reverse, because, barring any unforeseen circumstances, there is nearconsensus globally that the India growth story will endure in the long run. According to some projections, by 2050, an average Indians standard of living would be what it is in Spain today. More importantly, the country would be possibly home to the largest number of billionaires in the world, with the possible exception of China.
All this does, therefore, beg the question: who are these ultra high net worth individuals (ultra HNIs)? And what drives their spending and investment behaviour? Are there any lessons therein, for luxury brands, wealth managers and others?
Defining ultra high net worth households

Wealth is often measured in terms of assets and money. But defining wealth solely on the basis of assets would be arbitrary. Wealth today is also about attitudes and lifestyle. It is, thus, also important to factor in the variations in standards of living around the world, as they serve as indicators to define the luxury and privilege that a households wealth can purchase. Relative perceptions of wealth also differ according to the geographical locations, because economic factors, cost of living and concentration of wealth differ from city to city. Even within a city, these differences can be substantial. Consequently, Kotak Wealth and CRISIL Research believe that international yardsticks to define a high net worth individual are not suitable in the Indian context. For instance, inheritance is not a primary wealth forming segment in India, unlike in Europe that has been rich for over 25-30 decades. Also, India has always had plenty of enormously wealthy people such as landlords, royalty, rich farmers and traders, who do not discuss their assets with financial institutions. This is because of deep-rooted cultural moorings of keeping money matters strictly private. Indias wealth dynamics are unique and need to be explored appropriately. Keeping this context in mind, and for the purpose of this report, CRISIL Research has defined an ultra high net worth household (ultra HNH) as one having a minimum average net worth of ` 250 million (as of 201011) accumulated over the past 10 years, which as per our proprietary tool IDeA (Income and Demographics Analysis) gets mapped to a minimum income of ` 35 to 40 million.
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The total number of households which lie above this minimum average net worth of ` 250 million form a meagre 0.03 per cent of the total households in India as of 2010-11. Households above this threshold net worth would provide a sizable addressable market for luxury brands and services in other cities as well, in addition to Mumbai and Delhi, which makes it easy to gauge city-wise patterns of attitudes and behaviour for these households. For these reasons, Kotak Wealth and CRISIL Research have used ` 250 million as the base net worth for defining an ultra HNH.
Size of ultra HNHs in India

In less than two decades, India has been transformed from a slowgrowing agrarian country into one of the worlds most dynamic economies. The countrys GDP has grown at an average of more than 8 per cent annually over the past 3 years and is estimated to have grown by 8.6 per cent in the most recent fiscal year, making India the secondfastest-growing major economy in the world. This economic boom has led to an unprecedented level of wealth creation.
Net worth of Indias ultra wealthy households to increase by more than 5 times over the next 5 years
Net worth of UHNHs

2010-11 E 2015-16 P
` 45 trillion
E: Estimated P: Projected UHNH: Ultra high net worth household Source: T.O.P. India - Kotak Wealth & CRISIL Research
` 235 trillion
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The total net worth of Indian ultra HNHs is expected to reach ` 235 trillion in 2015-16 from an estimated ` 45 trillion in 2010-11. If we consider a household with a minimum net worth of ` 250 million, there are around 62,000 ultra HNHs in India as of 2010-11, estimates Kotak Wealth and CRISIL Research. Although this number represents a meagre 0.03 per cent of the total households in India, it is poised to more than triple to 219,000 households by 2015-16.
219,000 ultra wealthy households in India by 2015-16

If we consider a household with a minimum net worth of ` 250 million, there are around 62,000 ultra HNHs in India as of 2010-11.
219,000
2015 -16 P
62,000
2010 -11 E
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Profiling: The Inheritor, the Self-made and the Professional
PROFILING
It is raining billionaires in India, never mind the fact that a major chunk of the country's huge population still grapples with poverty. And these billionaires come from diverse backgrounds. Consider, for instance, a well-known industrialist, and a Forbes billionaire. In 2010, Forbes estimated his net worth at US$1.0 billion, making him one of Indias Top 50 richest persons. A farmer's son, he got his first break in his uncle's construction business in Hyderabad. The first project that he handled was to build a dam. He then started his own construction venture. Subsequently, however, he left India to set up a factory to manufacture laminated particle boards in the US. He returned to India in 1992, attracted by opportunities to help build India's infrastructure. He quickly moved into the power industry, building India's first power plant in the private sector. He made news in 2006 by winning the bid to modernise the Mumbai airport, a project headed by his son. He also has interests in hotels in partnership with a leading luxury hotel chain in India. Obviously, what sets ultra HNIs apart from other classes of individuals in the country is the sheer value and size of the assets they own. After all, it is not every day that one goes and buys an island to fulfill a whim, maybe, but there are a few Indian ultra HNIs who have done precisely that. The era of socialism has ended, at least as far as public displays of wealth are concerned. Todays ultra HNI is not, in general, a reclusive individual. On the contrary, he is more likely to be a constant feature on television channels or on Page 3 of newspapers, and is comfortable in (some might even say seeks) the limelight. In absolute terms, ultra HNIs are also very heavy spenders, be it on high quality homes, food, clothing, and the luxuries of life in entertainment, education, travel and family vacations. New money: This includes the newly rich who come from all walks of life and those who have made money through mega salaries, bonuses and stock options, and those who have started their businesses on their own and made their fortunes. Old money: This is essentially inherited money and comprises people who have inherited wealth or businesses. With such a variegated mix of people, it is interesting to delve into how they behave as a class, if at all they do. Or, are there innate differences that are triggered or governed by more latent aspects of behaviour? Kotak Wealth and CRISIL Research ventured to study precisely that. We concluded that ultra HNIs fall into two broad categories: Entrepreneurship is clearly the dominant source of wealth in India, but fast-growing service industries such as technology and financial services too have catapulted many hitherto middle-income group individuals into the ultra HNI bracket. Todays ultra HNIs would typically include businesspeople who own enterprises with a turnover of ` 750 million or above, corporate executives, established professionals, politicians, traders, builders, and agricultural landowners. In that sense, evidently, wealth is a great leveller. One interesting aspect of this class today is heterogeneity; they come from all social backgrounds, unlike before Independence when they were more likely to be the upper classes or the nobility. Wealth is power is no empty adage. Most ultra HNIs are distinguished individuals in social networks of power and influence. Their longstanding network of elite contacts gives them differentiated access to business opportunities.
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Based on the results of the survey, Kotak Wealth and CRISIL Research have classified ultra HNIs into three groups:
3) Spending patterns The expense structure or spending pattern of ultra HNIs is determined
Inheritors Self-made Professionals Inheritors are born with a silver spoon, and have inherited high net worth; Self-made are first generation entrepreneurs whose success in business turned them wealthy; and Professionals are qualified, highly skilled professionals who gained wealth because the companies that employed them grew big. The wealth dynamics of each of these groups are unique. If the way in which they made their money is interesting, even more noteworthy is the finding that these three types of ultra HNIs differ markedly in their patterns of spending and investment. To understand these three ultra HNI profiles better and deeper, we have examined them in terms of several factors.
by factors such as the prevalent lifestyle and standard of living in a particular city, in addition to individual and familial preferences of ultra HNIs in terms of products and brands. 4) Investing patterns Compared with the risks they are willing to take while acquiring wealth, ultra HNIs are typically conservative with the level of risk when it comes to their investments in stocks and shares, bonds, property, commodities such as gold, and in alternate assets, such as antiques and art. Increasingly, however, as they gain greater knowledge, understanding and confidence about alternate asset classes, many ultra HNIs are investing in vehicles that are generally considered to be at the riskier end of the financial spectrum, such as hedge funds, private equity, structured products and derivatives. 5) Attitude to giving
1) Sources of wealth There are a multitude of reasons why todays ultra HNIs give to charities. Along with the traditionally wealthy business class who have generated significant wealth from an inheritance, a new breed of ultra HNIs, who have earned their money through their job (in thriving sectors such as telecom, IT / ITeS and financial services) or through ownership of business, has emerged. 6) Perpetuation of wealth 2) Motives for wealth creation The passing on of wealth from one generation to the other is a common Spend on the present and save for the future are clearly the motives for wealth creation for most ultra HNIs. For many, financial security in retirement is paramount, followed by a better personal lifestyle, while for some others, the financial security of children and family is a priority, apart from philanthropy. human trait; some are more privileged to get substantial inheritances. Although average wealth has gone up and entrepreneurship has grown, financial legacy for dependents still remains an important motivating factor for ultra HNIs. For one, todays ultra HNI is more socially aware and feels a sense of responsibility to give back to society. Another factor is that todays ultra HNIs feel that they can make an impact on some of the global causes by giving to charities.
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Decoding the DNA of the ultra HNI
Sources of wealth
Entrepreneurship
Inheritance; entrepreneurship
Motives for wealth creation
Self-recognition
Self-actualisation Wealth preservation
Drivers of spending
Attaining luxurious living Maintaining luxurious living
Value
Informal
Approach to investing
Organised
Professional
Attitude to charity
Responsibie and conscious; gives money and time
Compassion; gives money, less time Empowerment; rarely gives time
Attitude to perpetuation of wealth
Wealth is unconditionally for immediate family
Wealth is for family, but they must strive to merit wealth
Wealth needs to remain within the extended family
The Inheritor
The Self-made
The Professional
The Inheritors
The original connoisseurs, this group comprises of people who have inherited wealth or businesses from their forefathers. Being born into an ultra wealthy family gives them an enhanced standard of living and access to a distinct set of privileges such as education in prestigious institutions, financial capital to start their own business, and access to influential social networks. And, not to mention, unique, rather expensive tastes. I travel to London to watch opera twice a year, one of our respondents said, matter-offactly. There is a flip side to this, though. Untold inherited riches can bring along with it incalculable pressure the pressure of preserving, if not multiplying, inherited wealth; the pressure of making a mark in life and proving themselves worthy of the inheritance, and ensuring that the next generation sustains the familys hard-earned wealth. I dont know how capable or interested my kids would be taking over the business, one of them wondered aloud. Having built so much, I want to pass it on into capable hands. Inheritors relish challenges, tend to remain actively involved in their business and believe that they need to keep working hard to grow their wealth, a trait they share with the Self-made. Apart from inheritance, the Inheritors surveyed for this study cited success in their primary business and economic investments notably in real estate and equity markets as the main contributors to their wealth. They are the cognoscenti, used as they are to luxury and luxury brands. Interestingly, many of them prefer to purchase their favourite international brands from abroad even if they are available in India. This
appears to be either for nostalgic reasons or because of the mental comfort associated with similar purchases abroad in the past, or in some cases because their longer period of association with luxury brand marketers gives them access to privileged or customised services. And they are likely to combine shopping abroad with holidays overseas with family. Because they are so wealthy and successful, and recognised in their social niche, they do not feel the need to make any style statements, even though they tend to identify themselves very closely with a brand, and view it as a means to reflect their social standing. So, for every one of them who dangles a Patek Philippe or a Breguet watch, or maybe even a Franck Muller or an Audemars, there will also be a I proudly wear the watch which my 11 year old daughter presented (purchased for ` 690) with her pocket money type. In general though, Inheritors are highly evolved brand users; consequently, they have higher propensity to experiment with brands or be among the earliest in their circle to adopt a new brand. Therefore, they remain clued on to the latest trends in styles and brands in their social circles. Because of their strong brand affinity, price is not really a criterion for Inheritors for owning a brand, again a trait that they share with the Selfmade. Our survey indicated that, for the Inheritors, the top spends on self are luxury watches, designer clothing, personal accessories, and luxury writing instruments. But the big-ticket spending is reserved for the family; the major spends are on exclusive holiday packages, jewellery products and household electronics. Inheritors are generally impulsive when it comes to spending on themselves, with exclusivity and brand popularity primarily guiding
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their impulse buying. They plan their spending on family in advance. Although family members are equal participants in planned spending, Inheritors keep an eye on exclusivity. Our survey indicates that they are also great followers and collectors of art, and not purely for investment purposes. A standout feature that was revealed in the survey was that although they take risks to acquire wealth, Inheritors are far more risk-averse when it comes to investment. They distribute their investments across asset classes, with a greater emphasis on real estate about 40 per cent and equity about 30 per cent. Their real estate investments are diverse villas, apartments, resorts and holiday homes, commercial buildings (which could be for their own use), agricultural land and plantations, and vacant land.
They strongly believe that possessions are a hallmark of those who have succeeded and those who havent. Responding to our survey, a majority of the self-made entrepreneurs listed success in their primary business, investment in real estate and diversification of their business as the top three contributors to their wealth. They actively engage in running their day-to-day business and intensely involve themselves in their spending and investing decisions. The Self-made are calculated risk-takers, highly driven individuals and are constantly on the lookout for new ways to grow their wealth. Having made their wealth through success in their primary business, the Self-made believe that entrepreneurship is the road to sustaining their wealth. So they tend to own multiple businesses. You will never see me as a retired person; we have already earned
Just as they utilise the services of professionals to run their businesses, the Inheritors also take the services of professionals such as wealth managers, chartered accountants, financial planners, and lawyers to manage their investment portfolio. The traditionally wealthy tend to have established systems for succession of wealth, and mechanisms for passing wealth from one generation to another. These systems, however, seem to be progressing with the times. Inheritors are still most likely to transfer the family estate to an heir. While they would retain business ownership within the family, they could leave the onus of running the business to professionals, a relatively newer practice.
enough to maintain our status and now work gives us pleasure, one of them, who qualifies to be in this group, said. The Self-made attribute their success in business to hard work and effective networking. They divide their time between running their business and networking with their business contacts. They always tend to look for occasions for networking and making new business contacts. To renew their popularity in business and social circles, they are most likely to try new themes or unique venues for entertaining their friends and business associates. They value personal contacts and people more than they value organisations.
The Self-made
This group comprises ultra HNIs who started on their own and have worked diligently to make a name in their business circles. They are constantly in search of avenues to increase their wealth and have an inherent desire to be recognised as rich.
For the Self-made, life revolves around their work, and they have very little time for anything else. According to our survey, the Self-made tend to have a latent desire to enjoy life to the fullest. However, their challenging work schedule is sometimes a hindrance in the way of their fulfilling that desire, as also their other goal of making time for family.
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The Self-made are highly receptive to product innovation and are, hence, a delight for marketers of luxury products and services. They are typically the earliest adopters of new devices or gadgets in their circle, which sets them apart as trendsetters in their social circles.
developing personal equations with specific chartered accountants, wealth managers, private financial advisors, friends and family and seek their advice on critical matters. They also tend to take calculated risks with their investments. For
I change mobiles every six months. I like to upgrade them always, one of the respondents said. The Self-made typically tend to use brands as a means to fulfill their aspirations, and show the strongest propensity for owning customised products. They are, therefore, plum targets for products based on cutting-edge technology or products tailored to their needs. Being active networkers, and inquisitive by nature, the Self-made gain access to information on the latest brands, styles and trends in the elite parties they attend. With a number of major luxury brands making their entry in the Indian market, the Self-made do most of their shopping from luxury retail stores within the country as their tight schedule of business engagements does not always give them the time to shop abroad. They are likely to be the biggest spenders on designer clothing, personal accessories like handbags, wallets and leather products, and designer mobile phones. They are also amongst the biggest spenders on luxury watches. Spending on family is confined to holidays abroad, jewellery products and household electronic products. Frequency of travel abroad is relatively much lesser than the other categories of the ultra HNIs, probably because they spend more time on business.
instance, they are likely to have the highest proportion of investments, among the ultra wealthy, on alternate assets such as private equity stake in businesses. They balance such investments with relatively less risky instruments such as fixed deposits and insurance policies. As a rule, they invest only in instruments that they best understand. Their tendency to take measured risks is also apparent in their choice of real estate assets they are more likely to own a mix of real estate assets such as holiday homes, commercial buildings and agricultural land and plantations, apart from apartments and villas.
The Professionals
These are people who happened to be in the right industry at the right time. Their numbers have grown significantly in the last couple of decades, having worked their way to wealth, in service industries such as information technology and financial services, benefitting from handsome salaries, hefty bonuses, end-term benefits and stock options. Others are self-employed. Doctors, lawyers and accountants are the other kinds of professionals for whom expertise is their originator of wealth. Compared with the other two types, Professionals are less possessed by
Compared to the other categories of ultra HNIs, the Self-made deploy the lowest proportion of their income on investments for growing their wealth. They are also likely to be the most involved, among the ultra rich, in planning their investments. The survey finds that the Self-made are more comfortable with people than with organisations. This is perhaps why many of them believe in
the idea of continuing to work hard to grow their wealth over time. They are more likely to view hard work as a means to extend their capabilities further, and view wealth as an outcome of those enhanced capabilities. It is this focus on growing their expertise that allows them to choose between working, consulting, advising or mentoring. Professionals are, therefore, able to diversify the routes to creating and maintaining wealth.
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Professionals have a greater proportion of their total income available for spending and investing than other ultra HNIs. As most of them do not run a business, a relatively lesser portion of their total income is marked for business investments. Professionals, therefore, spend and invest a greater proportion of their income than other ultra HNIs.
Professionals route three-fourths of their investments into financial assets, primarily equity and debt. Our survey reveals that they clearly try to inject more safety in their investments and diversify risk by investing across a variety of asset classes. Although Professionals may not have as much organised scale to
Spend they do, but wisely. To me, in any purchase, usability is of utmost importance. If I want to splurge on a beamer (BMW luxury car), I will ask myself do you really need one. If I am convinced then I will buy, a Professional stated.
manage investments as the traditionally wealthy Inheritors, they are the most inclined to pay for investment advice compared with other ultra HNIs. Our survey found Professionals to be the biggest users of professional
For them, their preferred brand has to be unique and has to have its own USP (unique selling proposition). For instance, when questioned on the kind of cars they aspire for, most Professionals interviewed for the survey confessed a weakness for sports utility vehicles (SUVs), crossover SUVs, ultra luxury cars, and sports cars, convertibles, roadsters all of which are big-ticket vehicles.
help, consulting wealth managers and financial planners for their investing decisions. Investing is a passion for me , it is fun to get information from different wealth managers, a Professional disclosed. In view of their background, Professionals are most concerned about
They invest primarily for growing rather than protecting their wealth. As their absolute income level and also income as a proportion of net worth is far lesser in comparison to the other ultra HNI categories, they have a greater need to grow wealth. In their investing, Professionals are concerned about social security and regular income, according to our survey. Once you are 50, all your money should be easy to (be made) liquid, one of them quipped. The Professionals, as our survey indicates, spend time on selfenrichment by pursuing their hobbies and following their passions closely, like travelling. Professionals tend to travel extensively to pursue personal interests. Befitting this passion, high-end cameras find a unique position in Professionals spending preferences. I love wild life photography and invest in upgrading the lenses, I spend quite a bit of money on this. I choose my travel accordingly, one respondent said.
social inequality than other ultra HNIs, and take time to give back to society. It is a way of life for me, one of them said. It (charity) should go hand in hand with life, opined another. They prefer to channel their giving through charitable institutions rather than contribute at an individual level. Most Professionals believe that a solid foundation of values, education and effort will stand their children in better stead than exposing them to the luxuries of life. The same logic applies to leaving behind a legacy for children. Professionals would rather have their children make their mark in life through merit. Most of my wealth I want to give to charity. I want my son to create wealth the way I have, one of the Professionals concluded.
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Spends: Attitudes, Motivation and the Ultra Wealthy Lifestyle
SPENDS
In February 1992, while presenting his second budget as finance minister, Dr. Manmohan Singh had said, To realise our development potential, we have to unshackle the human spirit of creativity, idealism, adventure and enterprise that our people possess in abundant measure. Today, nearly two decades later, it would be fair to say that the economic reforms of the early 1990s did indeed unleash a wave of industrialisation and growth. This fuelled increased levels of income and wealth among many sections of Indian society. Critically, what has changed radically due to this accumulation of wealth by more and more Indians has been their attitude towards spending. Until the 1990s, leaving aside some regional cultural differences, the average Indian was far more circumspect in spending, particularly on items or services that are generally perceived to be crassly consumerist. That is no longer the case. The average individual is today bombarded through all forms of media by focused sellers intent on peddling a variety of goods. Moreover, due to the explosion of information fuelled by the Internet, and increased global travel, there is greater awareness of global brands. And there is willingness to spend because things are within reach and the pockets are loaded. The comparison across age groups coughed up what, at first glance, appeared to be a bizarre statistic: The relatively younger ones appear to be far more conservative in their expenses. This is antithetical to the perception that the old are generally thrifty compared with the young. But it is not so remarkable if one considers that most of the younger lot are passionate about their businesses, and are highly motivated by the desire to grow their businesses aggressively, enhance their wealth and gain recognition. Consequently, a greater percentage of both their income and time is invested in their businesses. In a pattern that can be explained on the basis of widely acknowledged regional cultural traits, ultra HNIs in the North tend to be a bit more expansive with their money compared with their counterparts from the South. Not surprisingly, the latter two plough back nearly a third of their income into their primary businesses. All the three the Inheritors, the Self-made, and the Professionals save (cash savings) nearly a fifth of their total income, and invest another one-fifth to multiply their personal wealth. So, is it that the ultra HNIs, despite their millions and billions, are burdened with the same worries and concerns that trouble most ordinary folk? Or is Rockefeller just an exception to the breed? Our survey on spending threw up a few surprises to this, and other questions related to the spending behaviour of the wealthy. First, as a proportion of total income, it is the Professional and not, as popular wisdom would suggest, the Inheritor or the Self-made who, well, splurges the most, if one can call it that. This can probably be explained by the fact that Professionals derive their income predominantly from a job, unlike the Inheritors and the Self-made, both of who generate their income principally from their businesses.
Ultra HNIs and spending

Anecdotal or apocryphal, there is this story about Americas first billionaire John D Rockefeller. One day, Rockefeller made a call from a pay phone and lost his quarter. When the machine did not refund the money, he called the operator who expressed regret over the incident and asked for his name and address so that the amount could be returned to him. "My name is John D...," Rockefeller began. "Oh, forget it. You wouldn't believe me anyway!"
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The Professional not the Inheritor or the Self-made spends the most, as a proportion of total income
Inheritors
Self-made
Professionals
Expenses
21.5% 20.0% 28.8%
30.2%
32.6%
15.9%
Savings
19.0%
20.1%
20.8%
18.9%
18.6%
21.6%
6.2% 4.3% 10.4%
Others
4.2%
4.4%
2.5%
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Not so the older generation of ultra HNIs. Their passion for reinvestment into their businesses wanes as they grow older. This, perhaps, is because after they become well-known and their businesses become established, and are increasingly turned over to professionals or the next generation of family, they are left with both time and money to indulge themselves on cravings they probably sacrificed in their younger days. Our survey numbers bear this out. Ultra HNIs who are active or very active in their businesses spend nearly a fifth of their income on regular or occasional expenses, and reinvest nearly 30 per cent of their earnings in their primary business. By contrast, the semi-retired ultra HNI is far more laidback: he reinvests only 18 per cent of his income in his primary businesses, and spends nearly 28 per cent of his income on vagaries such as luxury travel packages, a luxury watch, or even high tech gadgetry. It would be inappropriate to conclude from all this that the Professional is a squanderer. According to the results of our attitudes survey, unlike the Inheritors and the Self-made, Professionals are not as overwhelmingly consumed by the desire to build up wealth that their children can inherit; based on their own experiences, they place far greater premium on success through good education and hard work, and are quite willing to let their progeny come good on their own. Equally, we found, the Professionals are acutely conscious of the environment they come from and are far more inclined towards charity than the others. Quite distinct from their regular or occasional spend, the Professionals bequeath nearly 10 per cent of their income towards noble causes, markedly higher than 6 per cent for Inheritors and around 4 per cent for the Self-made. On the flip side, as noted earlier, while putting away a reasonable percentage of his income as savings, Professionals also show greater
propensity to spend on luxurious items. But even here, caution rules: the motto is value for money. By contrast, for Inheritors, luxury has always been a way of life, and brand is often associated with societal status, and hierarchy and even familiarity as one of them said, I plan purchase of only high-value (read brand) items. It should reflect my status and price quite often plays secondary fiddle in their purchase decisions. Overall, the survey revealed, ultra HNIs as a class spend a significant portion of their overall expenditure on customised holiday packages, luxury watches, jewellery, diamonds and precious stones, and household electronics. Following closely are items such as domestic and international branded wear, high-end cameras, and luxury leather products. Ultra HNIs prefer to spend more on products meant for the family
A significant portion of overall expenditure goes into customised holiday packages, luxury watches, jewellery, and household electronics.
Vintage spirits 52 Home decor / Crystals 57
Art / Artefacts 36
Household electronics 90 Luxury watches 98 Jewellery / Precious stones 90 Exclusive holiday packs 100
56
Apparel / Accessories 73
Note: The data values have been indexed to Exclusive holiday packs. Source: T.O.P. India - Kotak Wealth & CRISIL Research
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Planned versus impulse purchase

Our survey grappled with one key question: what is the nature of ultra HNI spending? The answer: Largely planned. In most purchases, such as holiday packages, luxury watches, diamonds and jewellery, household electronics (which include premium mobiles and high-end cameras), and home dcor, the family plays a paramount role, considering the huge spends involved. For instance, an overwhelming 88 per cent of the Inheritors said the choice of destination and the length of the holiday was determined in consultation with others in the family, and the numbers were similarly high for Professionals and Self-made at 85 per cent and 79 per cent, respectively.
For the most part, price is not really a primary consideration for the Inheritor and the Self-made, whereas value for money is a major factor for the Professional, the older and semi-retired. There are certain distinct factors that guide a planned purchase. Because they tend to be big-ticket items and involve consensus decision making in the family, appeal and price are important factors in such purchases. Planned buying is usually led by need; therefore, there is a tendency to also deliberate on factors such as quality and durability of the product, particularly in Indian climates, exclusivity, brand and newness of the model. Although the preference is for well-known brands, the ultra HNI is not
In fact, the influence of the spouse or the children on such purchases is so profound that many of the respondents could not recall what their last such high ticket purchase was, because it was not a purchase driven by their own particular whim or fancy, but was more the result of family deliberations.
averse to bargain purchases. Apart from these categories, most buying is impulse-led. Most purchases are spontaneous, something catches the eye and I pick it up. I cant recall the purchase time and price, one respondent observed.
Big-ticket spends are planned in advance, often with family involvement

In most purchases, such as holiday packages, luxury watches, jewellery, household electronics, and home dcor, the family plays a paramount role, considering the huge spends involved.
Exclusive holiday packs
Jewellery / Precious stones
Luxury watches
Home decor / Crystals
Vintage spirits / Liquor
Apparel / Accessories
Art / Artefacts
82% 17%
1% Planned
67% 28%
5%
Impulse Both
57% 37%
6%
56%
43%
1%
54%
44%
2%
42% 58%
41% 58%
1%
39% 61%
38%
59%
3%
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Impulse purchases are spur-of-the-moment buying, guided by a mix of appeal and whim. New York Herald founder James Bennett once discovered and began to frequent a restaurant in Monte Carlo that he said boasted a perfect mutton chop. One evening, Bennett arrived to find someone seated at his favourite table. His solution? He immediately purchased the restaurant (for $40,000), asked the diners at his table to leave (even though they were only halfway through their meal), finished his meal (mutton chops), and returned the restaurant to its previous owner. Impulse purchases are usually done at the airport (duty-free shops) or while travelling and purchases are made largely on how eye-catching the product is. Other factors guiding impulse buying are the brand, the newness of the product, and exclusivity. Critically, need for the product is not a factor; but having cash in hand is. Despite ease of use and convenience, whether goods can be purchased online or not is not a major determinant while shopping. The online route is overwhelmingly used by all nearly 90 per cent of Inheritors, Self-made and Professionals replied in the affirmative in purchasing of air tickets, and holiday bookings. To a lesser extent, it is also used for purchase of hi-tech gadgetry, apparel and accessories. One major dissuading factor for online purchases is the fear of credit card fraud. So, even in the case of booking of travel tickets and holiday packages, a majority of the respondents said that to feel safer during online purchases they tend to use their corporate credit cards rather than their personal cards.
The Inheritors are the most comfortable doing online shopping, among the three categories. Additionally, across categories, it appears to be more popular among the younger lot.
Travel
All work and no play makes Jack a dull boy. True to adage, the ultra HNIs, many of whom have slogged it out, or continue to toil hard, in the workplace to reach the heights that they have, ranked vacationing as their topmost priority. Professionals have a penchant for travel
143
Professionals
100
Overall
94
Inheritors
91
Self-made Note: Data values for the three ultra HNI profiles are indexed to Overall. Source: T.O.P. India - Kotak Wealth & CRISIL Research
Unlike the Inheritors or the Self-made, who own businesses and perhaps employ others in large numbers to run them, workplace burnout is an indisputable factor of the Professionals. Perhaps reflecting this dichotomy, nearly 67 per cent of the Professionals confessed that their biggest weakness was exclusive luxury holiday packages, as compared to 65 per cent and 54 per cent respectively, for both the Inheritors and the Self-made. A majority of the ultra HNIs travel at least twice a year, while about 1520 per cent of the Inheritors and the Self-made travel thrice or more
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annually. For the Inheritors and the Self-made, the most common Ultra HNIs in Mumbai spend far lesser on travel reasons for travel abroad are family functions, business purposes, or leisure, not necessarily in that order. For the Professionals, it is mostly either conferences, business trips or vacations (including leisure, sports or entertainment events). The average stay of travel overseas, particularly if it is for sightseeing, is
Other cities
1-2 weeks. Weekends or short 3-4 day breaks are increasingly being
All India
116 100
Bengaluru
used for quick getaways within the country, even within familiar surroundings, if only to take a break from the monotony of routine
Delhi
99
work.
Mumbai
99 91
Note: Data values for the cities are indexed to All India. Source: T.O.P. India - Kotak Wealth & CRISIL Research
Sometimes, we just move to the Taj over the weekend and chill out. My kids carry their cycle and toys. It is good fun. Completely disconnected from work, but you are still in familiar surroundings, a Mumbai-based ultra HNI remarked.
A majority of ultra HNIs travel abroad at least twice a year
33
54%
13
%
36%
8%
10%
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Average duration of stay is 1-2 weeks, regardless of the frequency of overseas travel
Once a year
Twice a year
Thrice a year
More than thrice a year
No fixed frequency
1-2 days
11.1%
3 days - 1 week
24.2%
30.0%
15.4%
41.7%
22.2%
1 - 2 weeks
54.5%
59.2%
76.9%
41.6%
33.4%
More than 2 weeks

15.2%
8.3%
7.7%
16.7%
11.1%
Not fixed
6.1%
2.5%
22.2%
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Interestingly, economy class appears to be the most preferred mode of travel overseas for both the Inheritors and the Self-made; while nearly 70 per cent of the Inheritors and 64 per cent of the Self-made said they travel economy class, nearly 70 per cent of the Professionals said they travel business class. That may appear a trifle peculiar, but is nonetheless easy to understand if one considers that the Professionals travel mostly for conferences or business purposes, which is generally paid for by the company. Moreover, the economy class is favoured for short flights overseas, whereas the business class is the preferred choice for long flights. For short holidays within the country, most ultra HNIs choose to drive to their destinations. Besides, in the case of the Inheritors, accustomed as they are to setting the standards, there really is no one that they need to emulate or look up to. Even after he became America's first billionaire, John Rockefeller chose to operate from a very spartan office. When a curious visitor once asked him how he expected to impress anyone with an office such as his, Rockefeller retorted: "Who do I have to impress?" The motives for vacationing are diverse. Many of them, particularly those who are still active in their businesses, want to get away, anywhere, to relieve themselves of the tedium associated with work and come back rejuvenated, while others, particularly the younger ones, indulge individual tastes such as scuba diving, photography, landscape and the environment and choose the locale accordingly. I chose a wine chateau in France for my holiday. Staying and driving along the countryside was a wonderful experience, one of the respondents recalled. For some others, it is the sheer pleasure of gambling. Every time I travel, if there is a casino, I gamble. I have made my share of profits there. Why not?
If I am visiting my daughter, my holidays last for a month; otherwise, in other destinations, it is usually a couple of weeks, according to another ultra HNI. The potential market size of the luxury vacationing industry (includes hotels, fine dining and travel) was estimated to be ` 234 billion as of 2010-11. An average ultra HNI takes at least two holidays per year one short and one long. During these holidays, he spends money on business or first class air travel and best-in-class luxury hotels.
Luxury watches
Associated as they are with wealth, premium lifestyle, and brands, it should come as no surprise that luxury watches are a coveted item for ultra HNIs. Even in this high-tech age, luxury watches still easily outrank expensive electronic gadgetry such as luxury mobile phones in terms of aspiration. For those born into wealth, a luxury watch is a thing to be flaunted; a status symbol, the hallmark of a complete man. It is marginally less so in the case of a professional, and the numbers reflect that. Nearly 74 per cent of the Inheritors and 55 per cent of the Self-made professed their inclination to buy a luxury watch, whilst only one-third of the Professionals did so. Predictably, the preference appears to decline with age, with only 33 per cent of those above 55 years spending on it compared with 74 per cent of those under 40. Ostensibly, even among the supra-rich, the motivation to display and impress diminishes as one grows older. A majority of those surveyed, said they owned 2-5 or more luxury watches. Rolex, Omega, Rado, Cartier, Piaget, Breguet, Jaeger Le Coulture, and Girard Perregaux are sought-after brands . Indias potential luxury watch market was an estimated ` 15 billion in 2010-11. A majority of luxury watch purchases in the country take place
| 31
Luxury watches are a coveted item for Inheritors
Jewellery a traditional fascination for Inheritors
96 109
Self-made
73
Inheritors
100
Professionals
Overall Professionals Note: Data values for the three ultra HNI profiles are indexed to Overall. Source: T.O.P. India - Kotak Wealth & CRISIL Research
80
Inheritors
110
93
Self-made
in Mumbai or Delhi, although the aspiration for them is quite high in other Tier I and Tier II cities.
100
Overall
Jewellery and precious stones

Indians, regardless of age, class, or wealth, have always been enthralled by jewellery. Because of its dual utility as an investment, the fascination with it has not shrunk remarkably even during times of economic turmoil. Weddings and special occasion purchases and the ability of high value diamonds and jewellery to act as a store of value make this market a lot more resistant to ups and downs. The ultra HNIs are no exception to this. Wearing jewellery is the most common form of display of wealth and social status. It is, therefore, not surprising that the Inheritors and the Self-made spend more on jewellery than the Professionals. The more prosperous you are, the more the jewellery on your person.
Note: Data values for the three ultra HNI profiles are indexed to Overall. Source: T.O.P. India - Kotak Wealth & CRISIL Research
Ultra HNIs in Delhi are relatively the biggest spenders on jewellery

Delhi 111 Bengaluru 91
Other cities 109 All India 100
Mumbai 93
32 |
The potential market size of luxury jewellery was estimated at ` 229 billion in 2010-11. According to industry estimates, luxury jewellery is almost 15 per cent of the total diamond jewellery market. The really top end of the luxury jewellery market, dominated by leading family jewellers and independent jewellery designers, would be large high-quality solitaires (over 3 carat) and high-end, diamond-studded jewellery (over ` 1 million per piece). Major global brands such as Cartier, Chopard, and Tiffany have been in the country for a while now. However, given their limited range, lack of custom-made designs and reluctance of Indians to pay a premium for designer jewellery, their impact on the market has so far been muted. Today, however, there is an increased awareness and focus in the Indian jewellery industry on design; apart from designers, theme-based collection designers too are drawing clientele. Top family jewellers, in particular, focus on this segment a lot more. The jewellery industry in the country has traditionally operated on the basis of trust, and those having historical relationships with wealthy families do have a significant advantage. Driven by the complementarity of the luxury jewellery market with the apparel market, fashion designers have increasingly turned their attention to the former segment. The demand for luxury jewellery in the country is virtually insatiable, and unlike other luxury products, this market is more evenly distributed, with demand high in cities such as Kolkata and Chennai.
In February last year, in Aurangabad, while working out at a gym, a citybased property developer shared with a couple of friends his childhood dream of owning a Mercedes. He suggested that all his friends should also join in. "We laughed it off as we were not sure of even 11 people joining the bandwagon. But he continued to pursue the idea wherever and whenever he got an opportunity," reminiscences one of the buyers. The initiative burgeoned into a deal with Mercedes that was negotiated at the companys headquarters in Germany. The result: Last October, 150 Mercedes were sold on one single day to a group of buyers in the city comprising doctors, builders, industrialists and professionals. The aim, in this instance, was to showcase the citys wealthy while simultaneously availing of discounts pursuant to the mass booking. Most ultra HNIs own a number of cars to suit their diverse needs. Some of the popular brands, our survey revealed, were Honda, Toyota, Mercedes, BMW, Audi, Skoda, and Hyundai. On an average, the Inheritors own 3-4 cars, while the Self-made and the Professionals own 1-2 cars each. For regular use in cities, Japanese cars are preferred because they are trusted for Indian roads. Among the younger Self-made, luxury cars are a definite style message. In terms of aspirational cars, an overwhelming favourite is the SUV (sports utility vehicle) or the crossover SUV, perhaps in part because of the rugged, macho image associated with it, coupled with the fact that
Luxury cars
Although owning a car is now a necessity, a luxury car such as a Mercedes or BMW is still used to send out an I have arrived lifestyle statement. Luxury cars are those with an on-road price of ` 2.3 million or above.
it is ideal for short family holidays in nearby locales. Another soughtafter model is a sports car or a roadster. Interestingly, the Professionals showed the greatest desire to own an ultra-luxury car, while the younger Self-made ultra HNIs prefer an SUV.
| 33
Japanese brands the most trusted cars for Indian roads
HONDA
64%
TOYOTA
52%
SUZUKI (MARUTI)
36%
Other brands
HYUNDAI
31%
SKODA
24%
MERCEDES
17%
BMW
12%
MAHINDRA
11%
CHEVROLET
11%
FORD
9%
VOLKSWAGEN
6%
TATA
6%
MITSUBISHI
5%
Note: Ultra HNIs have multiple car ownership. Hence, the percentage values do not add up to 100. Source: T.O.P. India - Kotak Wealth & CRISIL Research
The potential size of the luxury car market was estimated at ` 140-150 billion as of 2010-11. Luxury car sales have grown at a CAGR of 22 per cent over the last three years (2008-09 to 2010-11). This growth is mainly attributed to the entry of new luxury car players in India, increasing spending propensity of the customers, easy availability of finance and improving economic scenario. India being a growth market, players have focused on increasing sales in the country and thereby have enhanced their dealership network considerably. For
instance, Audi has enhanced its dealer network to more than 15 dealers with BMW having more than 20 dealers across the country as of 2010-11. This has aided the growth of the luxury car market considerably. The growth in the luxury car market has also been driven by a number of new model launches, and an increase in the spending propensity of customers has led to high demand for luxury vehicles. Also, attractive
34 |
equated monthly installments (EMI) schemes by financiers that help reduce the EMI for customers has led to easy availability of finance, thereby leading to high growth in the luxury car sales.
Ultra HNIs in Bengaluru relatively the lowest spenders on household electronics

Other cities
109
Bengaluru
In todays high-tech era, marked by rapid changes in technology and constantly evolving products, it is obvious that many high-priced items that enhance and complement personal lifestyles will hold sparkle for those who can afford them. Although it would be fair to say that all ultra HNIs spend a great deal of money on high-end electronics, the Professionals stand out in this respect; their spend on household electronics is next only to holidaying. This is ostensibly because of their familiarity and ease with technology; due to their education and work profile, many of them have encountered or own similar products and are seeking to upgrade them to match their lifestyles. Born into the information age, the younger generation is particularly comfortable and hands-on with technology, and that is reflected in their higher spend on such items. The older ultra HNI is more likely to purchase them as gifts to family or friends, rather than for personal use. As you age you dont want to spend on frivolous things. You are more into buying things which will last for long, you want to spend more on having good experiences like holidays, one older ultra HNI underscored.
Delhi
96
Mumbai
98 100
All India
100
appliances and gadgets at home can be operated through remote control. The potential luxury electronics market in India was estimated at ` 51 billion in 2010-11. Although the market in India for luxury mobile
Household electronics resonate more with Professionals
100
109 86
nals
Self-m ade
133
Professio
high-end home entertainment systems 55 or larger television and sound systems from brands such as Bang & Olufsen; custom-built entertainment rooms or theatres costing upwards of ` 1 million and high-end mobile phones from luxury brands such as Vertu. An emerging trend in this sector is that of home automation, wherein
Overall
Inher itor
In India, household luxury electronics is a vast segment that includes
| 35
phones is still niche, albeit a growing one, there is huge demand for home entertainment units, whose demand is closely correlated to the demand for luxury homes. It has been observed that people who purchase large homes or bungalows typically convert one of the rooms into an entertainment centre with the assistance of interior designers who also help source the various components such as the television, audio systems, blu-ray players and gaming consoles, as well as design the aesthetics of the rooms. This market extends beyond the metros to emerging Tier I cities such as Bengaluru, Chennai, Hyderabad, and Ahmedabad. Although purchasing behaviour varies from place to place, buyers in the larger cities or metros are more brand-aware and engage in a lot of due diligence before buying these products. In smaller cities, purchases are driven more by the I want one too attitude. There is a high import duty on such goods, due to which grey market purchases in the segment are appreciable.
The same international brands in India dont have the same range, so I pick them up when I travel overseas. Also, apparel, especially international, better to buy them abroad. The range, the cut, the finish, is better there, even the price. The Professionals spend a relatively lower portion of their income on dressing, and they show no particular proclivity towards either domestic or international brands. The Self-made mirror the mindset of the Inheritors to some extent, although the younger ones among them, for reasons such as greater networking, are bigger spenders on clothing and accessories compared with the older lot. The three big segments of the fashion luxury apparel market are the international branded apparel, Indian designer wear, and accessories. The market is segmented on the basis of wear occasions. International brands cater to casual wear, formal western wear, and accessories, while Indian designers cater to the traditional, ethnic wear
Apparel and accessories

Dressing nattily is a common human trait, and the degree of spending on them differs only on the basis of individual preferences. Inheritors, having grown up in an atmosphere of luxury, are more knowledgeable about international designer brands and tastes are sometimes developed at a far earlier age. Price is never the dominant consideration for Inheritors while buying a dress; brand is. Most of our respondents from the Inheritor category indicated that they were drawn towards, and more aware of, international designer brands and utilise their overseas visits to purchase their favourite brands. I have not shopped in India for the last 10 years, one of them remarked.
market. International brands, with the exception of Canali, have by and large stayed away from the Indian wear market. Ultra HNIs in Mumbai are bigger spenders on apparel and accessories
Delhi 84 Bengaluru 100 All India 100
Other cities 92 Note: Data values for the cities are indexed to All India. Source: T.O.P. India - Kotak Wealth & CRISIL Research
Mumbai 119
36 |
Indian designers have experimented with western formal and casual wear, but their success rate is hardly anything to write home about. There are no major success stories among global brands in India as yet either, although the general perception is that the chances of being successful are closely related to the awareness of the brand. In contrast to mature markets, the apparel market in India for men is much larger, constituting around 50 per cent, and has seen the entry of several brands including Louis Vuitton, Burberry, Gas, Versace, and Armani. Some of them forayed into the country in collaboration with more active Indian partners such as Murjani Group, Sachdeva Group, Raymonds and DLF, and the results of these brands have been mixed while some have been fairly successful, some have exited as well.
There are some multi-brand players as well The Collective by Madura Garments, for instance. Most of these brands have ventured out of fivestar hotels, which was their first footprint, into luxury malls and the high street. Market growth has been aided by the presence and expansion of these brands. The industry sees the success of certain brands as an indication of the maturing of the consumer, and the latent demand for luxury apparel, which is being buoyed by fashion shows, new luxury store launches and end-of-season sales, and price competitiveness (compared with international prices). The potential market for apparel and accessories in India was estimated at ` 64 billion as of 2010-11, and its mainstay is Indian traditional wear, sarees and designer wear, particularly for weddings and personal collections. Most designers today have their own exclusive boutiques, either in five-star hotels or even in luxury malls. Accessories are a very attractive segment of this market, and its potential is huge. Because of the standard nature of these products such as handbags, belts, sunglasses and cuff-links, which are fast moving items certain global brands have done well in the domestic market.
Professionals show the lowest inclination to spend on branded apparel and accessories
Inheritors
107
Self-made
100
Overall
100
New trends in spending

Professionals
77
As people grow richer, they are finding newer ways to splash their money around. And where do Indians like to spend the most? The Big Fat Indian Wedding, where else! The wedding planner has arrived in India, and in a big way. And destination and theme weddings are the in-thing on the
circuit. So, marriage in Canada, reception in Morocco, and honeymoon in Thailand is not a novelty anymore.
| 37
Even losing has its virtues, apparently. One ultra HNI talked about how Ultra HNIs in Mumbai relatively the highest spenders on home dcor
Delhi Mumbai Other cities All India Bengaluru
you can be an angel investor, invest in a number of companies, and then boast at parties about how much was lost in the ventures! Further, partying has also become more frequent. People are not averse to having weekday parties, with larger groups and on the house parties. Earlier, people used to spend on expensive liquor for small gatherings or for close friends, but now even if there are 3,000 people attending, vintage wines and expensive spirits are being served, one of them commented. Owning aircraft and yachts has also become popular, although
91
118
107
100
83
teething infrastructural problems such as ports for berthing, and bureaucratic hassles are discouraging factors. One of Indias billionaires owns four yachts. Another is believed to have purchased some islands in Lakshwadeep, and a luxury mansion on a secluded island off the coast of Cannes. Some of our respondents said they had even spent a considerable sum of money on storing their stem cells. In short, the dictum is: Have money, will spend.
Destination weddings, in fact, are a hot favourite with the super rich, and event management companies are combining with the super rich to make it an affair to remember, never mind the expense. My friend had a wedding abroad, and for guests who couldnt travel with them (the wedding party), arranged for live video streaming, one of them said. Another attended a wedding on a ship in Australia. Theme weddings too are an interesting variant. The Trang underwater wedding ceremony in February in Thailand is one such, or the skyjumping wedding. Or even a beach wedding in Hawaii, or wedding celebrations spread over different days in different venues. The wedding ceremony of a model and actress with a hotel magnate was spread over 10 days in three different cities in India. The multimillion dollar celebration involved 600 guests from 26 countries being ferried around on chartered jets.
Ultra HNIs in Delhi and Bengaluru spend relatively less on luxury writing instruments
All India
Delhi
Mumbai
Bengaluru
Other cities
Chartering aircraft is not confined to weddings alone. In a cricket crazy nation, friends sometimes charter flights in groups to attend cricket matches, such as the World Cup semifinal between India and Pakistan in Mohali.
38 |
100
85
114
85
120
Investing: Risk, Return and Wealth Preservation
INVESTMENT
Driven by a slew of factors, the number of ultra HNIs in India has leapfrogged in the last decade or so. And so has their wealth. The average rise in the income of ultra HNIs has been much stronger than that of an average Indian, having grown in the high double digits over the past 5 years due to ESOPs and other innovative salary structures, strong corporate performances, buoyant capital markets, and the considerable return on investments. Around 78 per cent of the Inheritors and 91 per cent of the Self-made There is another aspect that sets the ultra HNIs apart from the average individual. Even though they may be supremely wealthy by normal standards, ultra HNIs carry their unquenchable (corporate) thirst for growing their business into their personal wealth too. But our survey on investment patterns revealed a very interesting dichotomy: as a class, the ultra HNIs uniformly exercise a far greater degree of caution when it comes to their investments compared with the kind of risks they are willing to undertake in their businesses. The difference among them is only in terms of degree, when it comes to risk aversion. So, a businessman willing to bet millions of dollars on purchasing a failing business is unwilling to show the same gumption when it comes to investing his own wealth in riskier asset classes. This is probably because the primary motive, our survey found, behind investment (including, perhaps, tax planning aspects) is legacy for the family, social security and regular income; growth comes later, quite unlike in business, where growth, and not protection, is the chief objective. With the safety of their personal wealth paramount in the minds, it is but natural that many of the ultra HNIs reiterate their desire to maintain close control over their assets. I would rather invest in my own technology-related business or real estate; why should I put money in something where I have no control, one of our respondents commented, when queried about this perceived risk aversion.
40 |
It is interesting to note from our survey that the key source of personal wealth is success in primary business; 72 per cent of the respondents cited it as a key influence on wealth accumulation. This is followed by investment in real estate (63 per cent of the respondents). And there is a tie for the third spot with 43 per cent of the respondents each stating that inheritance and investment in equity were the next key influencers for wealth creation.
cited success in primary business as the major factor. Moreover, for 73.5 per cent of the Inheritors, 58 per cent of the Self-made, and 44 per cent of the Professionals, investment in land and properties has been the key source of wealth. Earlier, inherited and landed assets dominated the wealth landscape; today, it is enterprise and business ownership that have emerged as the dominant source of riches. In India, though, enterprise culture is a more recent phenomenon. Some of the new ultra HNIs are those who have sold businesses and never felt the need to work again. It is not only in the perceived boom areas, such as information technology and telecom, that big money is being made; pharmaceuticals, shipping, manufacturing which are some of the most traditional industries in the world, have also made people wealthy. Not surprisingly, in view of the stated primacy they attribute to protection of wealth, all the three ultra HNI profiles the Inheritors, the Self-made, and the Professionals save nearly a fifth of their total income, and invest close to another one-fifth to multiply their personal wealth. The choice of asset classes, of course, varies, in accordance with the requirement. It depends on what stage you are in your life cycle. For example, if your kids are small, you invest mainly because you have to provide for their education, luxury lifestyle and marriage. Once you
Enterprise, business ownership and a successful career have emerged as the dominant sources of wealth
Inheritors
Self-made
Professionals
100
Inheritance / Rich benefactor
Success in primary business
88
103
29
Investing in land and property
83
65
50
Investing in equity
55
33
59
By diversifying into different / allied business
35
40
13
Income through job / salary
32
97
Consistent saving in low-risk investments
27
15
17
Income from sale of business Agricultural / Tea plantation income
23
33
13
17 5 3
8 3 3 4
Lottery / Gambling Others
ESOPs in the company
67
Note: Indexed to Inheritance income for the Inheritors Source: T.O.P. India - Kotak Wealth & CRISIL Research
| 41
are comfortable having saved enough, then your goals are totally Ultra HNIs invest one-fifth of their income for growing their wealth
But they put a greater proportion back into their business to fuel the engine of wealth creation. This stems from a desire for a sense of control. Most ultra HNIs would rather invest in their own business rather than in instruments where they have no control.
different, one of those surveyed elaborated. This is not to suggest that ultra HNIs are conservative when it comes to investing. Far from it. Vis--vis others, the ultra HNI is generally willing to take more risks in the hope of better returns. The difference, as noted contextually earlier, is only in terms of degree. In recent times, possibly due to increased exposure to a greater variety
28.4%
of investment products, many ultra HNIs have displayed the propensity to be more sophisticated in terms of the breadth of their investments. More ultra HNIs are also now investing in vehicles that are generally considered to be at the riskier end of the financial spectrum, such as hedge funds, private equity, structured products and derivatives.
22.4% 20%
Expenses
Of the three, the Inheritors tend to protect their wealth by diversifying their holdings. Inheritors interviewed for the survey indicated that they distribute their investments across asset classes, with a greater emphasis on real estate about 40 per cent and equity
19.7%
Savings
about 30 per cent. Probably because they are very comfortable relying on professionals to run and grow their business, the Inheritors readily take professional advice on their investments. They have teams of wealth managers, chartered accountants, financial planners and
19.3%
lawyers to manage their investment portfolios. The Self-made, on the other hand, deploy the lowest proportion of
6.3% 3.9%
Others
their income on investments to grow their wealth. According to our

market research, while both the Inheritors and the Self-made deploy around 19 per cent of their income on investments, the Professionals deploy around 22 per cent. In terms of being involved in planning their investments, the Self-made are also likely to be the most involved, among the three types, in planning their investments, followed by the Professionals and the Inheritors. As they are more comfortable with people rather than organisations, the Self-made develop personal equations with specific chartered accountants, wealth managers, and
private financial advisors and take their advice.
42 |
Compared with the others, the Self-made also tend to take calculated risks with their investments. For instance, they are likely to have the highest proportion of investments on alternate assets such as private equity stake in businesses. However, they balance such investments with relatively less risky instruments such as fixed deposits and insurance policies. The Self-made largely invest only in instruments that they best understand. God has stopped making land, so property is where one should invest, one Self-made ultra HNI said. Their tendency to take measured risks is also apparent in their choice of real estate assets a mix of real estate assets such as holiday homes, commercial buildings and agricultural land and plantations, apart from apartments and villas. For the Professionals, our survey reveals, social security and regular income are key investing goals. They route three-fourths of their investments into financial assets, primarily equity and debt. They have the largest proportion of investments in equity. The remainder onefourth is invested in real estate, a pattern which they share with the Self-made. Our survey showed interesting trends in the investment preferences and future investment plans of ultra HNIs. The survey compared the assets in which respondents are currently invested in with their investments over the past one year and their planned investment over the next one year. Two trends were noteworthy. 1) 2) There is expected to be a cyclical move away from equities. Respondents expressed a desire to increase their exposure towards alternate or less traditional asset classes, such as hedge funds, private equity, and derivatives.
Source: T.O.P. India - Kotak Wealth & CRISIL Research Real estate Alternate assets 8.5% 11.1% 8.1% 19.3% 18.8% 25.8% Debt Equity 31.9% 31.0% 39.7%
Professionals put the largest chunk of investments in financial assets

Inheritors Self-made Professionals
40.3%
39.1%
26.4%
In terms of the current investment pattern of ultra HNIs, 37.2 per cent of the investable surplus is deployed in real estate, followed by 33.1 per cent in equity, 20.4 per cent in debt and the balance 9.2 per cent in alternate assets. The Inheritors have a distinct preference for real estate with 40 per cent of their investments in this asset class. This is markedly different from the investment pattern of the Self-made and the Professionals who
| 43
currently have just a little over a quarter of their investments in real estate. In terms of the investment pattern a year ago, the Self-made have pruned their real estate investments significantly from 42.7 per cent then to 26.5 per cent currently. Our survey also suggests that regional biases to investment still remain. Wealthy investors in Delhi and Bengaluru are more focused on amassing portfolios of property (Delhi - 50 per cent of ultra HNI
investment is in real estate followed by Bengaluru at 37 per cent) as indicated by their current investment pattern, whereas the ultra HNIs in Mumbai are far more likely to put money in equity (37.2 per cent of ultra HNI investment in equity). Risk averse they well may be, but ultra HNIs can spot an opportunity if they see one. Unsurprisingly, therefore, ultra HNIs of all hues have been drawn to less traditional asset classes, even if they do not quite understand them, given the proliferation of such products in recent times. Hence, the growing popularity of hedge funds, private equity, derivatives and the like. Despite this appetite for alternate asset classes, only around half of the respondents professed confidence in their knowledge and understanding of them.
Land and property hold greater attraction for ultra HNIs in Delhi
Delhi Mumbai Bengaluru
32.8%
Around 55 per cent of the interviewees said they were comfortable

37.0%
Real estate
50.1%
with leaving the more mainstream aspects of personal finance, such as estate planning or retirement planning, to their wealth managers. Risk-return profile of asset classes
Real estate
Real estate
8.8%
Alternate assets
7.9%
Alternate assets
Return
Wealth advisory
Private equity
9.3%
Alternate assets
21.2%
Debt
Mutual fund
Equity
Portfolio management services
22.8%
Debt
Fixed deposit
Bullion
Real estate
17.4%
Debt
Debt
23.2%
Equity
37.2%
Equity
32.2%
Equity
Cash Source: T.O.P. India - Kotak Wealth & CRISIL Research
Risk
44 |
Ultra HNIs investments in alternate assets to increase
Investment advice from professional sources is most sought after
2009-10 E
2010-11 E
2011- 12 P
55.0% Wealth managers
50.4% Self
Alternate assets
9.5%
9.3%
11.2%
42.7% Friends / Family 39.7% Chartered accountants 34.4% Private financial advisors
Debt
20.8%
20.4%
18.2%
19.1% Media 13.0% CFO 12.2% Broker 9.2% Others 8.4% Lawyers 6.1% Family office Note: Ultra HNIs rely on a multi-profile team of advisors. The percentage values of the various categories therefore do not add up to 100%. Source: T.O.P. India - Kotak Wealth & CRISIL Research
Equity
31.6%
33.1%
30.1%
brokers, chartered accountants, or tax consultants. Also, traditionally, the wealth management market in India was served by those that cross-sold mutual funds and banking products to the rich. One reason for this is structural most of these investments carry a
Real estate
38.1%
37.2%
40.5%
minimum investment that is sufficiently high to restrict them to the top wealth brackets. Another reason is diversification of risk. Adding some private equity, hedge fund or derivative exposure to a portfolio can help to diversify overall levels of risk by spreading it across a wider range of assets. More interestingly, these specific financial instruments are expected to deliver better financial returns and help cushion investors against volatility in the market.
This lack of knowledge is perhaps the reason for the increased willingness to seek advice from professional investment managers. Previously, most ultra HNIs invested in a few asset classes, using local
| 45
Blood thicker than water?

In an era in which entrepreneurship and enterprise are becoming increasingly well-trodden routes to wealth, and in which ultra HNIs such as Warren Buffett and Bill Gates have decided to leave the vast majority of their estate to charitable causes, it may be tempting to conclude that the desire to leave wealth for the next generation is becoming less prominent. Such temptation, our survey indicates, is misplaced. While a minority contended otherwise, the desire to preserve wealth for the future and transfer wealth to the family was fairly universal. And it probably always will be. It is important in case of a family business. You would want your ideals, legacy to continue with your blood only, one of the Inheritors commented. Others were not quite so certain. While one said, Having put in so much hard work on building something, you need to know who will use it finally, another individual was more forthright. My company is a professionally run firm, they can always hire a new CEO, he quipped. Slightly under 60 per cent of the interviewees agreed that they want to make sure they have enough money so that they can pass it to the next generation. This is followed by social security (53 per cent of the respondents) and the need for regular income (47.5 per cent). Our survey suggests that the motivation to ensure financial security for children is the highest among the Self-made, with 65 per cent of them stating it as one of the prime motives for them to create wealth. This perhaps has to do with the fact that they are the first-generation rich.
The Professionals, however, believe that it is not a good idea to leave large sums of money to dependents; only 47.6 per cent of them agreed that leaving a legacy for the family and kids is an important motivation for them. High profile cases aside, philanthropy seems to be only a moderate motivation for investing. For the ultra HNIs who have inherited from a long lineage within their family, they feel (and are often legally) restricted with what they can do with it. As a result, they give very little away. Our survey suggests that less than 15 per cent of the ultra HNIs who have inherited wealth would want to give back to society. Some of them had pretty strong views. I dont believe in donating. My wife though does a lot of charity. I dont believe in it. Instead of giving a fish to eat, teach someone how to fish, you will be feeding him for life, opined one. On the other hand, the Professionals are more likely to shy away from passing wealth to their children; instead they are more apt to spend it during their lifetime, and are increasingly keen to apply their business acumen (and wealth) to the charity sector. Close to 29 per cent of the professionals stated philanthropic causes as a goal for wealth creation and protection. I believe that when you are comfortable you should ensure a few more are also comfortable, one Professional said. For this group, philanthropy has often been based more around giving time rather than money. Further, the tendency to shy from public recognition and a clear desire for privacy characterises these benefactors.
46 |
Legacy and social security are the two most important goals of wealth creation for ultra HNIs as a whole
Inheritors
Self-made
Professionals
Overall
Legacy for the family
60.7%
65.0%
47.6%
59.8%
Social security
54.1%
47.5%
61.9%
53.3%
Regular income
37.7%
70.0%
33.3%
47.5%
Charity
14.8%
15.0%
28.6%
17.2%
Note : As the respondents gave multiple responses, the percentage values do not add up to 100%. Source: T.O.P. India - Kotak Wealth & CRISIL Research
| 47
Disclaimer
Kotak Mahindra Bank (Kotak) and CRISIL Research, a division of CRISIL Limited (CRISIL), have taken due care and caution in preparing this Report. The information has been obtained by Kotak and CRISIL from sources which they consider reliable, including information developed in-house. However, Kotak and CRISIL do not guarantee the accuracy, adequacy or completeness of any information and are not responsible for any errors or omissions or for the results obtained from the use of such information. For data reference to any third party in this material, no such party will assume any liability for the same. Kotak and CRISIL are not liable for investment decisions, which may be based on the views expressed in this Report and the recipient alone shall be fully responsible / are liable for any decision taken on the basis of the material contained in this Report. Kotak and CRISIL especially state that they have no liability whatsoever to the subscribers / users / transmitters / distributors of this Report for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. CRISIL Research operates independently of, and does not have access to information obtained by CRISILs Ratings Division, which may, in its regular operations, obtain information of a confidential nature which is not available to CRISIL Research. No part of this Report may be published / reproduced in any form without prior written approval from Kotak and CRISIL. This Report is meant for information purpose only. Persons into whose possession this Report may come are required to observe these restrictions.
If you have a query, please contact : Harita Desai Associate Vice President - Wealth Management Kotak Mahindra Bank Ltd. Mobile: +91 9930070575 Vinaya Dongre Head - Business Development CRISIL Research Mobile: +91 9920225174
48 |

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Net worth of Indias ultra HNHs to grow 5 times to ` 235 trillion by 2015-16

T.O.P. India - Decoding the ultra HNI

What sets the ultra HNI as a class apart?

C Jayaram Executive Director Kotak Mahindra Bank Ltd.

Roopa Kudva Managing Director and CEO CRISIL Ltd.

INSIDE THE REPORT

Spends: Attitudes, Motivation and the Ultra Wealthy Lifestyle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Investing: Risk, Return and Wealth Preservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

ABOUT THE REPORT

About Kotak Group

T.O.P. India - Kotak Wealth & CRISIL Research

About CRISIL Limited

About Kotak Wealth

T.O.P. India - Kotak Wealth & CRISIL Research

About CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

Net worth of UHNHs

T.O.P. India - Kotak Wealth & CRISIL Research

Vintage spirits 52 Home decor / Crystals 57

Luxury writing instruments

Big-ticket spends are planned in advance, often with family involvement

Exclusive holiday packs

Jewellery / Precious stones

Home decor / Crystals

Vintage spirits / Liquor

Luxury writing instruments

Source: T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

Ultra HNI's investing strategy has been simple so far...

Source: T.O.P. India - Kotak Wealth & CRISIL Research

Investment in primary business

...but their investments in more complex assets are poised to rise

Investment for growing personal wealth

Source: T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

Defining ultra high net worth households

T.O.P. India - Kotak Wealth & CRISIL Research

Size of ultra HNHs in India

Net worth of UHNHs

T.O.P. India - Kotak Wealth & CRISIL Research

219,000 ultra wealthy households in India by 2015-16

T.O.P. India - Kotak Wealth & CRISIL Research

Profiling: The Inheritor, the Self-made and the Professional

T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

Decoding the DNA of the ultra HNI

Motives for wealth creation

Self-actualisation Wealth preservation

Attaining luxurious living Maintaining luxurious living

Responsibie and conscious; gives money and time

Compassion; gives money, less time Empowerment; rarely gives time

Attitude to perpetuation of wealth

Wealth is unconditionally for immediate family

Wealth is for family, but they must strive to merit wealth

Wealth needs to remain within the extended family

T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research

T.O.P. India - Kotak Wealth & CRISIL Research