Leading domestic broking firms, which had launched wealth management services for high net worth individuals (HNIs) in the previous bull market rally, are now finding it difficult to sustain the services amidst the current downturn.

A few among them have started facing an exodus of top executives, and are resorting to laying off their employees. Client attrition has also been dogging them.

Motilal Oswal Financial Services Ltd, for instance, is facing a depletion of its top management within less than two years after launching its wealth management group.

Hitungshu Debnath, who was director of Motilal Oswal Wealth Management Group, has joined Angel Broking as executive director of its distribution business.

Another top executive of the company, Mohit Batra, who was senior vice-president, private client group, moved out to Alchemy Wealth Management as CEO.

The wealth management business was seen as the most lucrative area to be in a few months ago as the number of dollar millionaires in India was on the rise. In fact, a Merill Lynch study mentioned that India was the second fastest market for dollar millionaires in Asia. Hence, several firms had planned extensive expansion plans to meet this demand.

Now, with the stock market tanking and real estate prices also easing off, many firms are facing the heat from clients and are scaling down operations.

According to informed sources, following the general meltdown in the market, over 200 employees from the wealth management division of Motilal Oswal Financial Services have either left or been asked to leave. They said Motilal Oswal had employed approximately 350 people for its wealth management division. Senior executives of the company were not available for comment.

Industry sources say that a few other brokerage houses are also facing similar problems with their wealth management business.

According to sources, many wealth managers across the board had sold products for which they were receiving high commissions. Now, due to the prevailing economic recession and following the sharp correction in equity prices, the wealth management business is witnessing attrition of clients.

?Clients were not bothered about the fact that the market fell from 21,000 levels. They are bothered about the fact that many brokerages did not see the signal coming through and cashed out at 14,000 levels,? said an estranged client. Moreover, clients have also got smarter and are demanding explanations from service providers.

While the going is tough for most of broking houses, some with strong capitalisation are hiring and expanding their presence.

Industry sources point towards SMC Global and Religare, which are seen to be expanding.

However, other broking forms that are rationalising their operations are said to be hiring relationship managers who can get their existing client books over.

Facing the heat

• Motilal Oswal Financial Services Ltd is facing a depletion of its top management in the wealth management group

• Over 200 employees from the division have either left or been asked to leave

• A few other brokerage houses are also facing similar problems with their wealth management business

• Following the sharp correction in equity prices, the wealth management business is witnessing attrition of clients