Better Capital Gains Tax Treatment Encouraged Greater Participation For Financial Assets: Soumya Rajan, Founder & CEO Of Waterfield Advisors

How is Wealth Management set to evolve over the next decade? Are we looking at a more “high tech, lower touch” kind of proposition by 2030? If yes, how will the role of the traditional Wealth Manager evolve?

India is at a very exciting stage in terms of wealth creation. We account for US$12.6 trillion or 3.3 per cent of Global Wealth. Over the next 5 years, the wealth of High-Networth Individuals (defined as individuals with more than US$1m in financial assets) is expected to grow at a CAGR of 27 per cent. This is unprecedented growth. Technology will play a big role in democratising the access and lowering the cost of financial products. However, there will parallelly be a movement to seek holistic wealth advisors or firms that can support the financial well-being of clients across global investments, estate planning, tax advisory and philanthropy. Earlier generations worked with multiple service providers to address specific needs. The current generation, will value their own time more greatly and look for providers that support integrated, collaborative solutions. The new Wealth Manager will therefore need to understand the interplay between trust, technology and traditional human interaction.

You recently raised a fresh round of $ 6 Mn. How do you plan to deploy this?

Over the past 8 years we have strived to be the standout financial advisory firm in India, deeply committed to ensuring a no conflict of interest approach in all our client dealings. This has resonated incredibly well with our clients and investors alike. The new fund raise enables us to scale the business further, augmenting our advisory platform through talent acquisition, elevating the overall client experience through best-in-class technology and analytics; and building our international presence across key geographies in the US, Singapore and the Middle East. The capital will strengthen our first-mover leadership position.

What’s your client sourcing strategy? Is it just word of mouth or do you actively source new accounts too?

We primarily source our clients through client referrals. We also have an enormous amount of goodwill with various product and service providers, namely, Asset Management Companies, Venture Capital and Private Equity firms, Investment Banks, Law firms, Tax Advisory companies etc. Each one of them has appreciated the quality of the practice that we are building and our “client- first” approach. And importantly, our Investors have also always been extremely helpful and early adopters of our ethical business model.

In today’s era of open architecture, how does a Family Office outfit differentiate itself in terms if it’s product proposition?

If you are a Family Office, you shouldn’t be manufacturing a product! You should be serving the needs of a family without a conflict of interest. True open architecture means no product manufacturing; the financial services universe should be your oyster and you should have the capability to assess any global product for your client, wherever it is. At Waterfield, our role is to be able to assess the risk, conduct due diligence and peel the onion of the product; and determine its suitability for a client. Consequently, we are open to work with any financial institution / fund manager that manufactures a good financial product.

Tell us a bit about your Development Impact Bond. What was the thought process behind launching it?

In July last year we launched “Lakhpati Kisan” to address the issue of agrarian distress. The bond was aimed at increasing the annual income of farmers threefold over a three year period in certain districts of Jharkhand, Gujarat and Odisha. Traditionally, till date, all DIBs for Indian NGOs was financed through foreign capital. At Waterfield, we thought this needed to change. There was also considerable leakage in terms of what was being raised and what was finally provided to the NGOs. This varied from ~25-40 per cent. So the aim of the domestic DIB was twofold – to bring in domestic philanthropic capital to create a sustainable financing product for the social sector and secondly, to ensure that close to 90 per cent of the funds raised through the DIB were channelised to the NGO. The other great by-product of the DIB is that it focuses on outcome driven funding, something donors have traditionally sought. It took us a year to determine how to develop the DIB with domestic capital. What makes me personally proud is that it can be a blueprint for any NGO that is committed to raising money through outcome-based results.

What’s your Budget Wishlist for the Wealth Management business?

Wish-lists are always long! But having said that, would be happy to see better and less ambiguous tax laws for the Alternative Investment Funds and investments into Unlisted Companies. As a country, we are encouraging entrepreneurship, which in turn creates a virtuous cycle in terms of a need for credit (as the business scales) and job creation. Not all entrepreneurship can be self-financed, so we need to encourage investors, perhaps through tax incentives to participate in the growth of young companies. This is not dissimilar to the better capital gains tax treatment given to public markets over the years that encouraged greater participation for financial assets.

Lastly, do tell us about your business goals for the upcoming fiscal.

We have ambitious plans for FY21. This summer will see us launch our international offices in New York. Our business goals are to reach US$5bn of assets under advisory, grow our revenues by 30 per cent and be a firm of choice for clients and employees alike.