India's wealth boom spreads to smaller cities amid LRS cap
The rapid creation of wealth in India's smaller cities is reshaping the wealth management industry, even as pressure on the rupee locks offshore investment limits in place.
India's wealthy are multiplying at an unprecedented pace, with the number of individuals crossing from affluent to high-net-worth status doubling over the past two to three years, according to Centrum Wealth MD and CEO Sandeep Das. This acceleration is no longer confined to the traditional six metropolitan areas. Instead, wealth creation is expanding rapidly into Tier II and Tier III cities, creating a new demographic of regional millionaires.
As this new wealth seeks geographical diversification, demand for offshore investments has surged. Over the last two years, resident Indians have increasingly routed money into developed and emerging markets through the Liberalised Remittance Scheme (LRS). However, investors should not expect the current LRS limits to rise. Das explicitly stated the caps will not increase in the short term, citing ongoing pressure on the Indian rupee.
The cross-border dimension is further complicating portfolio management. The expansion of Global Capability Centres (GCCs) is drawing non-resident Indians (NRIs) back home, creating a segment of professionals who frequently flip between NRI and resident status. Managing their wealth requires navigating complex multi-jurisdictional tax filings, particularly for the wealthy Indian diaspora in the United States.
Industry adapts to three client cohorts
Wealth managers are now forced to cater to three distinct profiles. The first is the traditional first-generation patriarch, who often defers succession planning due to behavioural bias. The second is newly wealthy entrepreneurs, such as technology graduates who have recently experienced startup liquidity events. The third is the cross-border client, whose regulatory requirements demand teams of tax, succession, and investment specialists.
To navigate these shifting demands, firms are rethinking internal incentives. At Centrum Wealth, relationship managers are compensated on a product-agnostic basis, removing the inherent conflicts found in traditional product-led models. Das noted that this structure, backed by 12 years of steady and profitable growth, eliminates the "rice bowl" issue where advisors are incentivised to push specific in-house products.
