An engineering graduate, Dinesh Rohira has worked with esteemed organisations like HP India, IBM India and Microsoft India. During his last assignment with Microsoft India, he engaged with Reliance Money to develop an online platform to distribute third party products such as mutual funds and insurance.
Sometime during the process Dinesh had his ‘eureka moment’: the Reliance Money online platform is for the informed investors who know how to go about their money, but what about those who do not know what to do with their money and how to invest it? “In my view, only 2% Indians are financially aware. Rest 98% need handholding of advisors to invest,” says Dinesh.
Dinesh knew he had to set up an online distribution firm, but he was not sure how to go about it.
What is good for one is good for all. Dinesh was in the habit of keeping notes on his investments. He had been maintaining an excel file to track all his investment from one place. As he was going through this file, he realised that it must be so difficult for a layperson to track all their investments. Dinesh decided he would simplify the investment tracking process and provide a one-stop solution on a single platform. He was now ready to take the plunge.
In 2009, Dinesh left his well-paying job to start on his own. However, his plan got a halt due to entry load ban. He waited for eight months to understand the implications of the ban on his new business. “There were media reports which suggested that commission from financial product would go away. I decided to wait for some time to understand if it was viable to become a financial distributor,” he says.
Dinesh then figured out that the trail commission is the way forward. He started working on the project again. By now he made up his mind that he would provide the entire basket of financial services –insurance, mutual funds, loans and credit cards.
Dinesh took 5 years to develop his robust platform and get approval from various regulators to offer multiple products through a single platform. During this period, he did a lot of research and enhanced his knowledge of financial products. In 2015, Dinesh launched 5nance.com.
Talking about how he goes about acquiring new clients, Dinesh says that his company leverages social media to generate leads. “We post informative and interesting articles on personal finance on social media platforms like Facebook, Twitter and Linkedin. We also use Google adverts to generate organic traffic on our portal,” he says.
Another way of acquiring new clients is to reach out to corporates. His company approaches HR heads of companies with a proposal to hold a financial awareness programme for their employees. “Many corporate houses want their employees to learn the new concepts and gain knowledge. Advisors can help such companies by sharing their expertise and knowledge. However, you have to make sure that such an activity is not for commercial benefit. Such events will help you position as an expert and eventually help you get new business.”
Recently, Dinesh signed an agreement with MPonline.com to provide financial distribution services in semi-urban and rural areas through common service centres (CSCs). CSCs operate in small cities and rural areas. It provides services like e-governance, education, health, issuance of birth certificates, death certificates, utility payments, etc. in remote locations. 5nance.com imparts training to kiosks to help them manage personal finance of people through their platform. Currently, the company has a presence in Bhopal and in Sehore district in Madhya Pradesh. “MF distribution industry is yet to tap the semi-urban and rural sector. No large distribution house gives advisory services in such a location. Which is why we collaborated with kiosk owners to increase the client base.”
Sharing the demographics of his client base, Dinesh says most of his clients are between 22 and 50 years. While the company saw maximum registration from millennials, i.e., in the age group of 22-28 years, clients in the age of group of 28-45 years execute transaction on the platform. He said many retired persons use the platform. The average ticket size of each client in mutual funds is Rs75,000.
Another important category of Dinesh’s clients are women. He shares that 25% of his clients are women. In fact, the company has launched a separate facility for women professionals, called Women Live, to help them dealing with issues unique to personal finance of women, such as how to save for sabbatical arising out of pregnancy.
Most of his clients are salaried individuals working with the IT sector or BPOs.“Employees of these companies are comfortable using technology to manage their day-to-day stuff. Our platform can help them manage their finances at the click of a button.”
Ticket size and fees
Admitting high cost of acquisition in online media, Dinesh says online client acquisition is viable only if the ticket size of a client is Rs2 lakh. “We deal with multiple products such as term insurance, health insurance, loans, direct equity and mutual funds to increase the ticket size. In addition, the cost of acquisition is different for KYC compliant and non-KYC complaint customers. While cost of acquisition is negligible for KYC compliant customers, we have to incur costs to on-board a first time investor.
When asked why his company does not charge a fee like other online distribution platforms, he said that it is difficult to ascertain quality of advice. “One cannot say that Rs1,000 advice is not good compared to Rs20,000 advice. Financial advice is an intangible product. You cannot rate financial advice with three stars or five stars. Hence, we are better off with the commission model where incentive is linked to the growth of our clients. In my view, trail commission is win-win for all stakeholders,” Dinesh says.
Another unique feature of his platform is exit recommendations. “Before onboarding our clients, we make them identify their financial goals. We closely review their portfolios. To give you a recent example, one of our clients’ portfolio delivered 75% returns in absolute terms in just two years. We recommended he redeem the entire corpus and put some amount in balanced funds to reduce risks. We let our clients book profit whenever they near their financial goals.”
Talking about the future of online business, Dinesh feels that the shift from traditional distributors to online distributors will happen in three years. “Currently the mutual fund industry has nearly 1 lakh ARN holders and 700 RIAs. In a country like India, we need 66 lakh distributors to cater to 1.3 billion people, considering that each advisor can manage 200 clients. This cannot happen for sure. Hence, the hybrid model is the way forward where existing distributors tie up with online distribution firms to provide seamless transaction services. Only then we will achieve financial inclusion,” he says.
In future, 5nance.com aims to leverage the existing distribution workforce to grow business. The company plans to encourage distributors to use its platform to execute transactions across multiple products on revenue sharing model, just like large national distributors.