Next wave of wealth management lies in Tier-II and beyond in India

Financial technology as an enabler is extremely important as we progress towards financial inclusion. "Financial awareness is fairly low in India while the need to save is high," says George Mitra, Co-founder and CEO, Fintso, in an exclusive interview with Bizz Buzz

The vast majority of people have small financial assets or are just starting on the path to save beyond FDs. As they traverse this journey, they require someone who is an expert. This crucial role can be from a local person who is already in the business of financial advisory/distribution

Wealth managers, especially individuals, who are known to the prospective savers, are the "bridge of trust" who not only provide the framework but also help along on the path, making sure that the new investor stays the course towards goal achievement

What is expertise-based financial technology? How can it guide wealth managers as well as investors to make more informed decisions as per their goals and how can Tier-II and Tier-III cities have to access it?

Fintech as an enabler is extremely important as we progress towards financial inclusion. Financial awareness is fairly low in India while the need to save is high. As the move from physical assets (real estate and gold) happens in saving patterns, the need to guide people into more productive, and regulated, avenues have increased. This starts from the simple formalisation of goals (financial planning) to quantifying the risk appetite of that person, to recommending portfolios that are customized for those needs.

Wealth managers, especially individuals, who are known to the prospective savers, are the "bridge of trust" who not only provide the framework but also help along on the path, making sure that the new investor stays the course towards goal achievement?

With the growing complexities and volatility, managers themselves need to be enabled by leveraging the advanced technology to deliver efficiently. This can help in finding the right investment, monitoring, and taking corrective actions. Technology act as an enabler here, however, it cannot replace the knowledge insights and trust that has been built with the investor. It helps immensely in freeing up their time, focusing more time with prospective and existing investors, as well as reducing their operating costs. This helps them increase their outreach, and as a result, accelerate financial inclusion.

How can infrastructure and backend support empower wealth managers to cater the rural investors?

As you know, 90 per cent of the population is in Tier-II and beyond in India. The vast majority of people have small financial assets or are just starting on the path to save beyond FDs. As they traverse this journey, they require someone who is an expert, as well as someone familiar to them. This crucial role can be from a local person who is already in the business of financial advisory/distribution, or who is looking at setting up this business.

In either case, what wealth managers need are the tools to help them cost-effectively run the business, but at the same time, having all the tools to access, recommend, and execute that their counterparts in organised wealth platforms.

This is where fintech platforms come in. They provide engagement tools to help in all segments of the lifecycle like financial planning, recommendation engines like Robo-advisory, access to products and execution like Mutual Funds and quality corporate FDs, portfolio monitoring and alerts. The platform provides them the backbone to manage their business cost-effectively, allowing them to reach out to more prospective investors efficiently.

Which are the towns that have potential if you had to arrange it chronologically?

Data on this is very well tabulated. One way of looking at this is to see the savings and FDs in banks from a geographic level. RBI collates this data at a sub-district level. Ranging from metros -- urban and semi-urban, and semi-rural and rural. Overlaying this data with Mutual fund penetration data gives extremely good insights to identify potential.We have been working on this and are sharing our insights with existing entrepreneurial wealth managers, to help them in increasing penetration.

How the adoption of mutual fund products in the rural community will shape the country's wealth management industry?

After FDs, provident funds, and insurance, mutual funds are the investing avenue that is adopted. But MFs are a much higher level of complexity given the various type and the risk associated. As a result of this, the penetration of Mutual Funds has followed the pattern of where entrepreneurial and organized wealth managers have started from metros and a few Tier-I cities. More than 75 per cent of the present MF AUM is concentrated in T30 cities.

The adoption of mutual funds in Tier 2 can only happen with education, accessibility, and setting goals. We feel that this would happen if we have a growth in people who are qualified to act as the last mile connectivity. We feel that the entrepreneurial wealth management section will show a supernormal growth. This growth would also prompt many people from the established wealth organizations to move out and set up firms on their own. Especially as platforms are created that will provide at least the same level of support that the large organised players give the RMs.

How much are these markets are expected to contribute to the overall industry in the coming years?

MF data shows 75 per cent of individual AUM is from T30 locations. With 90 per cent of the population being in Tier 2 and beyond, as financial inclusion increases, the per cent age contribution from T30 would come down.

Various studies have done in-depth analysis on this. The BCG AMFI study is one of them that can be referred to.

How is Fintso creating the bridge of trust between wealth managers and investors?

The bridge of trust already exists. What we are trying to do is to help wealth managers with the tools and the latest technology that will strengthen this bridge. We are effectively making them future-ready, and equipped to reach out to a wider network, with a wider product basket.

What are the company's plans for 2021 as well as plans for an industry-wide impact?

We have seen digital adoption increasing significantly over the last 6 months. The way of communication moving from only meeting in-person to WhatsApp and apps, has increased significantly. The other interesting aspect has been that the share-of-wallet of wealth managers has grown. An investor would like to do more with a person who they trust, rather than someone who they have not yet established trust with.

Due to the above, Fintso is accelerating our outreach to entrepreneurs, especially in Tier-I and Tier-II, increasing the product bouquet, but most importantly, rolling out the latest advisory technology for recommendations and monitoring, using AI and ML.

Our plan continues to be the same, to empower and enable the sector that can increase financial inclusion the fastest i.e. entrepreneurial wealth managers who are upgrading and expanding.