Journey
The financial distribution space, which has been dependent heavily on physical transactions, is witnessing a slow revolution. This is evident by the mushrooming robo-advisory platforms in India. While a lot of the current crop of online advisory firms are catching up to the trend, we spoke to Srikanth Meenakshi and C R Chandrasekar, both technology experts from the US, who sensed an opportunity in online MF advisory space way back in 2009.
Hostel mates Chandrasekar and Srikanth pursued Masters in Computer Applications (MCA) at the University of Hyderabad, Andhra Pradesh in 1990 after which they moved to US to pursue their postgraduate degree in computer science. After working for top financial services companies for over a decade there, they returned to India to start something on their own.
Filling the void
Chandrasekar and Srikanth observed that while there were many platforms available for direct equities in India, a similar platform was missing for mutual funds. So in 2009, the duo started FundsIndia.com, a B2C platform, which offered investments in a host of products like mutual funds, equities, insurance, company fixed deposits and National Pension Scheme (NPS). “It was mostly stock trading online. While stock brokers were offering mutual funds as secondary products, there were no portals offering mutual funds as their core products. So we spotted an opportunity in this space,” recalls Chandrasekar.
Funding
While Chandrasekar and Srikanth started their firm by investing from their personal savings in 2009, they realised that they would eventually need more capital to improve their technology and hire manpower to build scale. They approached venture capital firm Inventus Capital Partners in 2010. But raising funds from investors was anything but easy. The company asked the duo to approach them when they achieved reasonable success.
Chandrasekar and Srikanth worked hard and their platform started gaining acceptability among the digitally savvy investors. Impressed with the company’s performance, Inventus Capital Partners invested in their firm. The company used this capital to fuel its further growth and received second round of funding of from Silicon Valley-based venture capital firm Foundation Capital in 2012.
B2B platform
Another factor which has helped the company is its sub-broking business. Realising that distributors did not have a robust online platform, the duo started a business-to-business (B2B) platform in 2012. The B2B firm handles the administrative, back office and compliance requirements of investors while the distributors focus on relationship building and financial planning.
The company now manages Rs. 900 crore under its B2B vertical which is channelized by IFAs. Under this model, the company has entered into a revenue sharing agreement with IFAs for providing its platform and other value added services.
In just seven years, the company has seen stupendous growth purely by adopting technology. The firm today manages a combined asset under advisory of Rs. 2,500 crore under its B2C and B2B platform.
Robust product
The Chennai based company has created a good user experience for its customers through its platform which speaks for itself. Chandrasekar says that customer feedback has helped them design a superior product. “The early customers have formed our system. They wrote emails to us suggesting how we can improve our platform. A lot of features introduced on our platform are based on our customer feedback,” says Chandrasekar. Recognising its growth and technological prowess, the company has been bestowed with three awards in a row which includes the Best Promising Brand award by Economic Times and Silicon India. The firm’s co-founder Chandrasekar attributes their success to their team. “We got good talent in all our departments,” says Chandrasekar.
Acquiring and serving the client base
A superior product helps the company get referrals easily. It gets about 40% of its new investors through referrals. Needless to say, the company’s marketing spend has historically been 90% on digital marketing. “We are a FinTech company and technology has been essential to our existence and growth. Technology is our face, body and soul,” says Srikanth.
Digital marketing helps the company reach out to a vast number of people across India. “Our service is digital and our marketing is digital too. This ensures that when we market our services, we reach exactly customers that can use our services,” says Srikanth.
The firm keeps in touch with its over 80,000 investor base through phone, email, chat and video calls. They manage their portfolios through a mix of automated (robo-advisory) and human advisers. When asked about investors comfort with human versus digital interface, Srikanth says that people still rely on face-to-face interactions when it comes to seeking fund recommendation. “The Indian financial consumer market place is evolving. As of now, the adoption of digital interface is very high when it comes to transactions and tracking but on the lower side for advisory. When it comes to fund recommendation and portfolio design, people still prefer some human touch to their interaction.”
Shift in investor behaviour
While the company also offers company fixed deposits, bonds, direct equities and other products on its platform, its predominant focus has been mutual funds. Srikanth says that acceptability of mutual funds has been gaining traction “In the last three years, investors have moved markedly towards accepting mutual funds as a primary and preferred destination for long-term investment. The inflexion started around Nov-Dec 2013 and has sustained more or less since then.” Also, Srikanth says that the adoption of smartphones and digital mode of transactions in mutual funds has been a visible trend in the industry.
Dedicated research team
The company which has a staff of 300 has a dedicated research team to pick the winning funds for investors. As far as qualitative aspects are concerned the research team looks at the process, performance, fund manager and brand. It also lays a lot of importance of quantitative factors like fund’s ability to stick to its stated strategy at all times, choice of sectors and stocks and the potential they hold in current markets, and fund manager's performance consistency across funds he/she manages.
When asked about his personal investment style, Srikanth says that he is a balanced investor. “I prefer to 
move between 60:40 and 70:30 (Equity: Debt) in terms of asset allocation ratio regardless of market condition. I stay invested, rarely redeem and let the market do its gyrations. It’s a good thing that I have easy access to great counsel from my research team,” says Srikanth.
Going ahead
From Rs. 2,500 crore AUA, Chandrasekar plans to take the company’s AUA to Rs. 10,000 crore and increase its customer base to 2.50 lakh by 2018. The company received third round of funding led by Faering Capital in 2015, with follow-on investments from current investors Foundation Capital and Inventus Capital Partners.
Chandrasekar believes that reaching Rs. 2,500 crore AUA is just the tip of the iceberg. “About 5 crore people file income tax. Even those who don’t file returns are our customers. So the potential is huge. As the opportunities grow the players offering the best services will win. I think there will be only two to three players will succeed in the online advisory space,” believes Chandrasekar.
Srikanth believes that his company will see much higher volumes as the fintech landscape evolves and infrastructure improves. “Things like Unified Payment Interface (UPI) will greatly enhance our ability to deliver digital solutions to our customers,” says Srikanth. UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing and merchant payments into one hood.
Srikanth and Chandrasekar have been one of the earliest entrants in the robo-advisory arena and have been able to reach a reasonable scale within a short span of time. Having received three rounds of funding so far, they have grown to become an inspiration for new and upcoming online advisory firms in India.
