The Millennial Wealth Management

The mass affluent segment in India has been undoubtedly on the rise. A large proportion of this segment constitutes of the Millennial (Gen Y) population who have entered/entering their prime earning years. This will result in a sizeable increase in their liquid assets. Additionally, with government's focus on “Startup India” , a disproportionate number of people have taken to entrepreneurship in recent times and this has resulted in a further accelerated increase of financial assets. These new generation affluent class have their own unique style of seeking the information on the financial products & services. Nearly all of them expect online and digital functionality in all aspects of their lives. For them, online technology has already become an essential means to manage their financial lives from banking to investments. These trends will drive an evolution of a whole new paradigm in wealth management in the near future.

Since demonetization, there has been a “Tsunami” of money flowing into Equities and Mutual Funds as against other asset classes. It appears that the Indian population, which has traditionally favoured physical assets like real estate, gold, art, etc, is drifting from physical assets to financial assets due to the rising equity market, better liquidity and relative under-performance of other asset classes. The retail population in India, however, still remains inclined towards investing through Mutual Funds rather than pure equities, a trend which is in sharp contrast to the investments pattern in developed countries. Mutual Fund investments have seen huge growth in India with the Assets Under Management swelling 200% in last 5 years to 22 lakh crores as on Feb, 2018.

Banks and other financial institutions, including startups, have tried to benefit from these developments. Banks, through their Securities arm, have expanded their web in order to reach more customers, mostly through traditional channels. Newer financial institutions such as Angel Broking, Anand Rathi etc. have enhanced their product suite by adding Mutual Fund support and acting as distributor for these services. Startups like ScripBox and FundsIndia have also garnered sizeable Assets Under Management (AUM) by promoting Regular Plans (only) of various Mutual Fund houses and earning the distributor commission in the process. Yet there are others namely, Invezta, Groww, Kuvera, Karvy, CAMS who now are promoting Direct Mutual Fund plans and their longer term benefits in terms of higher capital appreciation for the customers. Interestingly, some of the m-wallet companies such as Paytm and MobiKwik are also planning to foray into wealth management by providing a single platform to invest and track various Direct Mutual Funds. Some of these distributors are associated with multiple Mutual Fund houses and hence provide the ease of investment and tracking across various products under one single login.

With changing times, these players would also need to look at their existing business models. Banks and their Securities arms, possibly have the maximum relevant customer base and their complete demographic and spend information. However, due to their lack of agility, these firms have failed to implement new age tools and capitalize on the information base. Moreover, the traditional approach worked well for a smaller chunk of HNI/UHNI customers which will not be able to scale up to the needs of the new tech-savvy mass affluent segment. On the other hand, the Regular Mutual Fund distributors will soon find their inflows getting dried up due to the heightened competition from Direct Mutual Funds distributors. The business model for these Regular Mutual Fund distributors itself is at threat since their margins and customer acquisitions will get significantly impacted in the new era. The Direct Mutual Fund distributors, also, will need to design their revenue model since a Fixed fee Income model may not last for too long. Clearly these firms will have to look at Cognitive Computing and Artificial Intelligence tools to complement their offerings in wealth management. At the same time, all these players will have to keep wealth management simple for its customers.

Advances in technology such as Artificial Intelligence and Cognitive Computing have already started to make inroads in the wealth management industry, as the players realize the importance of creating value for their customers. Players across the spectrum are looking at a well-designed Robo Advisory platform to help them with real time customer insights. The rise in passive investing and move towards lower fees have also led these players to adopt Robo Advisory technology to reduce operating costs, expand reach and comply with regulatory norms. These intelligent engines can integrate with the existing platform and help in providing customized services based on the customer's risk appetite and current investment profile. And thereby, can help the new age Direct Mutual Fund distributors to develop a fee based revenue model. Besides, it can also pave the path for the app based Mutual Fund distributors to transform into Virtual Family Offices.

Dravyaa is designed keeping all these aspects in mind. It has something for everyone and provides value to the whole spectrum of wealth management players. The genesis of the tool is based on keeping it :

1. Simple for retail customers
2. Transparent, automated advisory
3. And providing 360° theme based portfolio management based on user’s risk profile.

The core engine, a truly Robo Advisory platform, runs a sophisticated logic taking data from multiple sources and packages the output in a simple way. The framework has several differentiating features such as bouquet based portfolio creation, online portfolio assessment and rebalancing. All these services are customizable based on the risk profile of the users across the asset classes. There are many intelligent use cases possible on top of this framework to improve the customer experience.

Come explore the world of robos!