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Everyone is constantly looking to sell a product to the investor rather than thinking from customer’s perspective

Author: Kumar Shankar Roy/Wednesday, May 22, 2019/Categories: The Finapolis Conversation

Everyone is constantly looking to sell a product to the investor rather than thinking from customer’s perspective

Mutual funds are big business for Indian financial service companies, individual advisors and banks. When investors put money in mutual funds, these MF distributors get a commission. But, there are a few companies that charge zero commission. One of them is Orowealth, a new age Fintech company that has built a Direct Mutual Fund platform. They have helped investors save Rs 30 crore in commission till date. Instead of MF commission, Orowealth makes money as a fee-based advisor as a registered investment advisor with SEBI. Founded in the year 2016 by a team of IIM and IIT alumni, the company is transforming wealth management leveraging technology, data analytics, and regulatory changes. In conversation with Kumar Shankar Roy, Vijay Kuppa, co-founder of Orowealth talks about his journey that evolved from investing for an institution like L&T to helping ordinary investors put in over Rs 3000 crore. Competing with the likes of Paytm Money, Kuppa is confident about winning in this market. Else, we wouldn't be in this industry, he says. Read on to know more.

How did you go from investment experience in equity and fixed-income markets at L&T to founding Orowealth?

At L&T, I used to be an active investor in the Indian market, but from an institutional perspective. I used to make observations about the fact that the way institutions invest vs. the way retail invests is very different, even though the basics of finance were the same. Retail investors typically make two mistakes while investing — not investing as per risk profile and failing to make diversified investments. Mis-selling is also a major issue in retail. Everyone is constantly looking to push or sell a product to the investor rather than thinking from a customer’s perspective. Given mine and my team’s background, we felt like we could solve these pain points successfully.

You take Zero Commission from investors for selling mutual funds. How do you make money? Without solid revenue, how will you survive and help investors?

We have a fairly robust business model. We are a fee-based advisor (we are a registered investment advisor with SEBI). So we provide a personalised service to our clientele for which we charge a fee. Ultimately wealth is a trust-based industry and it is always best to be transparent. Hiding and surreptitiously earning commissions will not take you very far. We are confident that our business model will ensure the customer’s trust and transparency will ensure our survival.

Tell us about your goal advisory services.

We’ve realised that setting up goals is one of the most important things in personal finance. It not only creates the discipline of savings and investments but also brings in a systematic way to invest. Our goal advisory is powered by the state of the art algorithms, derived from the Nobel Prize-winning Efficient Market Theory. This will help maximise your portfolio/ goal returns for your preferred risk level.

For e.g. retirement is probably one of the most important reasons to save. Most people have some sort of idea regarding how much they want to save towards their retirement, but they don’t know how to systemically plan or execute it.

We have an efficient feature in goal advisory which not only takes in users ‘Pre-Retirement’ need but also ‘Post Retirement’ needs into consideration. A general synopsis of our pre-retirement goal is that when the user is younger, he/she can take more risks and hence their portfolios will be equity oriented, but as the user approaches retirement, our underlying algorithm takes an ‘Asset Drift’ i.e. moving from high-risk assets to low-risk assets. 

We have focused a lot of our product efforts on ‘Post Retirement’, which we personally think is the most critical. In the post-retirement phase, user not only has an income to rely upon but also they have to combat the jaws of inflation with their saved retirement corpus. Our underlying algorithm advises users to keep most of their post-retirement money into low-risk assets; such as ‘short term debt funds’ that will help to combat the inflation effect, and some part of their portfolio in equity, which will boost returns at the later stage of retirement. We have about 9-10 different goals, that cater to a broad audience, so we don’t have an ideal target audience. We would say ‘long term investors’, who want to invest 7+ years are ideal since they will actually see returns on their portfolios. That said, we also have some short term goals for investors who want to invest under 3 years.

Do you also do portfolio health analysis. How do you accomplish this?

Yes, we do ‘Portfolio Health Analysis’. We actually started portfolio analysis 2 years ago. We read user’s CAS statement and give meaningful insights on their portfolios. We give users reports and action items after reading their portfolio. Them being: portfolio details, XIRR reports, commission reports, asset allocation graphs, sector, and company graphs. We also give action items such as switch report and harmful fund reports, where the user can switch from regular funds to direct funds instantly or redeem low performing funds.

PayTM Money has a bigger reach than you. Can you compete with them? How?

Yes, of course, we can compete with much bigger players and are confident about winning in this market. Else, we wouldn’t be in this industry. We provide personalised experience that is very unique and tailored for each customer, innovative products and solutions that are especially found in Orowealth and maintain customer excellence and complete customer satisfaction. We truly believe that if a customer is content, he will stick with us in the long run. And if he has gone someplace else, it is because he is unhappy with your products & service. We also provide finance expertise. Ultimately, this business is about making money for your clients and delivering the best expertise on core finance. Given our team and expertise, we are very confident of doing this the right way.

Can the Direct Mutual Fund space handle any more disruption? If yes, where?

There is always scope for more disruption in any field. Specific to this space, confirmation regarding the investment advisor regulations will go a long way to create a robust Direct MF market. Another disruption is disseminating finance advisory at scale. Can we deliver the same customer experience for a million+ clients? One more is in the potential to completely change the face of our business. Proper applications and execution of disruptive technologies like blockchain and natural language processing have the potential to completely change the face of our business.

How can investors rate your advice? Is there any quantitative way to assess the accuracy of your advice?

We create bespoke portfolios for each customer. The portfolio is a mix of equity, debt, and gold. Hence there is no set benchmark over which we can show outperformance. However, we have seen that on an average we add about 2-2.5 per cent extra returns per annum for our customers. The additional returns come from three components: 1. Asset Allocation 2. Scheme Selection 3. Investment in Direct plans.

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