– By Shashank Singhal
India’s Fintech ecosystem and underlying opportunities have gained global recognition. According to a report by RedSeer Consulting, India’s financial technology companies are expected to triple in value over the next five years, hitting a valuation of USD 150-160 billion by 2025. While digital payments and lending have been critical in the foundation of Indian fintech base however the strong performance of equity and mutual funds led to strengthening and entry of several Wealth management models, with ‘Wealth-tech’. The Indian Wealth-tech market is expected to expand to over $60 billion by FY25.
India currently has 4 million Wealth-tech investors (FY20), which is expected to triple to 12 million by FY25 driven by rising investors, high digital platforms awareness and usage across equity and mutual fund investments, financially literate millennials etc.
The Wealth-Tech Model
Different players are offering different services to investors starting from zero commission plans to customised plans to subscription based modes.
Tarrakki, a wealth management platform enables its customers to subscribe to premium models or invest in zero commission plans directly. Saumya Shah, Founder at Tarrakki said, “Tarrakki pro is a premium model where you get a dedicated financial advisor providing services like financial planning, portfolio creation and asset allocation and assistance at all stages. We also provide equity advisory plans containing model portfolios designed especially for retail investors, selling plans and mutual funds assistant plans.”
Leading player Scripbox believes wealthtech is all about creating, conversing and accumulating wealth. Prateek Mehta, Co-founder & Chief Business Officer at Scripbox describes his business as getting rich slowly. He said, “The Scripbox provides a two-fold advisory model to the customers where they can directly invest in mutual fund plans from several AMCs and above a certain threshold advisory plan opens for customers. Plans and advice are built on customer goals, aspirations, time horizon.”
As digital and smartphone penetration goes deeper across India, access to financial services and markets becomes easier for the underpenetrated segment. Experts believe many people switch to an advisory model or subscription model after burning their fingers after trying it on their own driven by tips and lack of awareness.
Ranjit Sinha, Co-founder of MyWealthGrowth says that the advisory model works on a model portfolio.
He adds, “We have 2 aspects, First; in the back end, the system itself creates a library, under the supervision of analysts. Second; the client interface, where certain questions like age, risk, returns, tenure are asked, and the persona of the person is created and then matched and mapped with the model portfolio. Customers can invest their money in direct plans of mutual funds or purchase a plan where customers get services like financial planning, not only in mutual funds but other avenues.”
Phygital models also exist as not all customer segments are tech savvy, Moneyfront in 2016 was India’s first platform to offer direct plans of mutual funds. Mohit Gang, Founder, Moneyfront said, “We are a “Phygital platform, a unique blend of Digital plus physical assistance model. We offer our client a DIY digital interface for all transactions, reporting, research etc. and then complement it with a fully-engaged service and advisory teams. These teams’ hand-hold and assist the clients in every step of their investing journey and also guide them depending on their unique circumstances.”
Customer Trends and Behaviour
Saumya informed that the average age of Tarrkki’s customer base lies within the range of 30-40. He believes the age of 30-40 is the key to wealthtech as targeting the customers above the age of 50 is not feasible because of limited technical know-how. Also, people get serious about wealth management post 26-27 years of the age. According to Saumya, most of their customers have invested before and require assistance in long term planning and the income bracket of their customers is wide with average investment ranging from 25k-35k rupees to even 2 lakh rupees per month.
Scripbox said most of its customer base reflects the Indian workforce and have a higher share of women customers with average age around 30s where people become serious about wealth management and spread across 2500 cities and towns. Prateek said, “The average amount invested by our customers significantly rises by 5x to 10x compared to the first year. We stress up on the importance of financial awareness and run multiple programmes to improve knowledge and awareness for our customers.”
Ranjith of MyWealthGrowth has presence in top 4 cities but technology has led to expansion to ground level even in the villages. The average of customers falls within the range of 32-38 years. He adds, “Usually, customers invest around 70k-80k rupees in lump sum per month. Customer growth is around 20%-25% YoY, while investment increment growth is high. The average amount invested by our customers rises by 15% to 20% every year. We have been putting efforts in educating investors and providing newsletters, video links, pdfs to our customers on a regular basis.”
Mohit said, “Most of the clients on the platform have international exposure which gives a differentiating edge and hedge to the overall portfolios. We have successfully helped clients route over Rs 3500 crore of investments through our platform and client profile is a mix of all groups with a larger proportion being serious investors in the age group of 30-45.”
Managing Uncertain Times
It is important for people to have an emergency fund in case any uncertainty arises. Earlier, six month emergency funds were considered by many advisors but given how the pandemic has unfolded in the last one year, experts have been recommending investors to double their emergency funds to 12 months.
Saumya said people have become more receptive to advice than before and learnt the importance of asset allocation and emergency fund for adverse times. He said, “We have asked our customers to continue their investment on a long-term horizon with some minor changes and not to time the market. Equities and debt allocation are good options of wealth creation in future. We are aiming to target people within the age group of 25-40 in future by building products like digital gold, P2P lending assets to provide a more diversified experience.”
Prateek of Scripbox explains uncertainty exists in the market but being a young country there is opportunity to grow and the economy will keep growing. Because of the pandemic there is an increase in the importance of emergency funds. People must remain patient, invest for a longer period, and should not try to time the market. “We aim to cater the underserviced in the market in future and build products based on customer needs. Also, tech has helped us to reach masses, scale up our operations and remove human bias.”
According to Singh of MyWealthGrowth the opportunity to create wealth is always there but discipline must be maintained and investments shall be made for a longer horizon. India is still unpenetrated in the investment market and there’s a lot of headroom to grow. He said, “The need for financial planning among people has increased. We aim to grow our prospect base by targeting rural customers. On the product side we are planning to add Digital gold in their portfolio. Use of robo-advisory, algo-trading and technology will continue to rise in the wealth management space in future.”
On how the current times are shaping, Mohit said, “Till the time that global interest rates continue to be low and bond yields remain subdued – the surge could persist. However, one has to be cautious of valuations and be pragmatic while investing. At all points, following a proper asset allocation approach is the right way to navigate these markets.”
Moneyfront is looking to expand its reach in the B2B market and analytics space, Mohit added, “We have partnered with over 4000 partners across smaller towns and cities to enable them to offer financial products digitally to their clients.”