'Top of the Pyramid' is an annual survey on the lifestyles, mood, and aspirations of Indian ultra HNIs. Kotak Wealth Management is proud to present the sixth edition of the report.
We have titled this year's report "Optimism, Uninterrupted" to factor in the unabated positive sentiment that carried forward from last year, despite a few setbacks. Besides covering the spending and investment patterns of ultra HNIs, Top of the Pyramid trains its lenses on their increasing interest in art, collectibles, and wearable devices.
The report also covers two powerful trends - the keen interest that ultra HNIs are showing in renewable energy and their increasing bent towards investing in companies that make a sustainable difference to the larger society - also known as impact investing. Increasing social and environmental awareness by India's premier families spells good news for our country's future.
With extensive primary and secondary research, Top of the Pyramid remains a great measure of Indian ultra-HNI sentiment and provides incisive insights into the experiences of luxury brands and service providers.
This is the fifth edition of 'Top of the Pyramid (T.O.P.)’ report with specific focus on the Indian ultra HNIs which now form a considerable share of the billionaires around the world.
The mood in India’s last financial year was celebratory with the advent of the new government and the economy clocking a relatively high growth rate. Indian ultra HNIs shared the excitement by increasing their investments into their businesses in anticipation of stronger growth in the coming years.
The current financial year has been great for India in terms of economic growth — the GDP growth was better along with faster growth in manufacturing. The new government is widely credited for ending the policy paralysis of the previous years. India was the best performing equity market in the world until third quarter of FY15.
This is the fourth edition of 'Top of the Pyramid (T.O.P.)’ report with specific focus on the Indian ultra HNIs which now form a considerable share of the billionaires around the world.
Five years following the global financial crisis, the world economy is showing some signs of looking up and acceleration of the overall growth in the economy. There is a sense of renewed optimism in the economy, which has picked up particularly in the second half of 2013, with the indicators being strongly visible in the western economies and India as well. This improvement has buoyed the overall growth in wealth globally. Download IPad
Domestic economic conditions remain dreary but India’s ultra high net worth individuals (ultra HNIs) are getting richer and many more are joining the exclusive club. The confidence of ultra HNIs in the economy’s ability to rebound swiftly is still low but they are re-investing a lot more into their businesses vis-à-vis last year. They are increasing their spending horizons but simultaneously exercising a degree of caution on ultra high value spends. They say they are less risk averse compared to the previous year, yet invest a lot more in debt instruments.
This year, nearly 90 per cent of the respondents said that there is a downturn and a sixth of them are not optimistic of an early recovery. Yet – and that is where the contrast lies – there has been an increase in the money ploughed back by ultra HNIs into their primary business. Last year, most ultra HNIs viewed the slowdown as a temporary blip and were gung ho on spends. This year, the pessimism on the economy is inducing a degree of caution in spend. And, that is curious because it is an attitude that goes against the very grain of ultra HNI behaviour. Some of them are biding time to see which way the economic wind is blowing before embarking on high value purchases such as top-end luxury cars, home mini-theatres etc. An overwhelming 20 per cent of our respondents revealed that they had altered their vacation plans due to the economic downturn. Perhaps, they are just being street-smart because non-discretionary spending continues unabated on apparel, luxury watches and high-end electronics. And the list of non-discretionary items is growing.
This edition covers special focus on Luxury Homes and Estate Planning.
The economic downturn, we found, had little or no effect on ultra HNI spending and understandably so. One distinct facet of the ultra HNI is his lifestyle and he goes to great lengths to maintain it. Our respondents did not seem to feel that the circumstances warranted any cutbacks in spending. In fact, many of them even justified the increase in expenditure, in absolute terms, by pointing out that the number of non-discretionary items too was on the rise, to support that lifestyle. For instance, a product such as the iPad (customised, high-end versions) may have been a discretionary item very briefly, in the early days of its launch, but is today a non-discretionary spend. And the list is growing.
In the context of Special Focus , we looked at luxury cars in some detail this year. And here, we came across one trait that is central to the spending behaviour of ultra HNIs in not just cars, but overall: exclusivity.Also there was emphasis on Education. The survey revealed that the brand name or pedigree of the institution and the curriculum were the most important factors while deciding the school.
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.
We have classified India’s ultra HNIs into three groups:
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.