Depends. On intent.
“If the intent is to bring technology only for distribution, then it might not be so successful. Such platforms will just remain a transactional medium. But if they are able to combine it with good advisory, there will be a lot of traction,” says Deepak Shenoy, founder of Capitalmind, a portfolio management services provider.
Is it really worth?
Several experts The Ken spoke to arrived at a consensus on emulating China—not worth it. The concentration of debt in the portfolios of Chinese investors is, at the very least, disconcerting to regulators. As Beijing steps up to shine some light on the debt situation, there is another competition brewing in China.
More so because despite their lack of credit history, they currently seem more in line with the authorities than banks – this is Alibaba’s Alipay and Tencent’s WeBank. While the former wants to take over the market, the latter wants to link entrepreneurs with banks.
Does the US then provide a better model? Well, ETFs are still a minority in India, and most investments happen through equity mutual funds. Robo- advisory is where, the two can find common ground, to some extent.
Reflecting the truth
Besides, the Robo-advisor model in India is very far from that in the US. There’s a lack of understanding and willingness to pay for Robo-advisors such as Arthayantra. The US includes advisory fees within the investment – tough to make Indians pay up the same way. Experts who have seen this industry closely say that it is the hybrid model that will work in India, which is a robo-advisor plus physical advisor to help and explain.
“Financial literacy levels in India are extremely low. The not-so-savvy investors need a lot of handholding especially during the market downturn,” says Sreekanth Meenakshi, Founder, and COO at online investment platform Fundsindia.
Right now, Paytm Money does not offer advisory. It is just offering transactional ease. But Jadhav says that by the end of this year, they will launch Robo-advisory to customize a portfolio for clients.
ET Money is also considering it, but it promises to do it differently. “We have a lot of insights from millennials who feel that traditional financial planning does not work for them. We will do Robo-advisory, but in a way that is easier for millennials to understand,” says Mukesh P Kalra, founder, and CEO at ET Money. Kalra says that he is well-funded for the next 12-18 months.
Critics are skeptical though. “For any kind of advisory, you need to match resources with aspirations and take a holistic view of that person’s finances. Doing just mutual funds or insurance is not the way to do it,” says Nitin Vyakarnam, founder of the Robo-advisory platform Arthayantra.
What about the winner?
No matter which model succeeds, the winner might be the mutual fund’s industry.
With the entry of Paytm money and its self-professed target of 25 million customers in 5 years, the most significant change industry players see coming in is penetration. After Paytm having become a household name for payments, even in tier-2 towns, it wants a redux in financial management, too.
The potential is vast since mutual fund investments account for only 3.4% of total investment in financial assets by individual investors, according to a 2016 report on mutual fund industry by consultancy Ernst & Young.
But by the July-September quarter this year, according to the Association for Mutual Funds in India (AMFI), the asset base of mutual funds rose to over Rs 24 lakh crore ($330 billion), a 14% surge from the same time last year. This was driven by participation from retail investors and a spirited investor awareness campaign by the industry.
Those hooked to primetime TV in India would remember AMFI’s “Mutual Fund Sahi Hai ” campaign.