What is the share of millennials in the mutual fund industry? Has trading activity actually increased in the months of lockdown? Is it the same with mutual funds too?
We have seen people continuing their SIPs and that is very heartening. There has been more activity in terms of customers who were nervous and were trying to time the market and come in. But overall, the mutual industry, at least from our perspective at Scripbox, has been a pretty steady ship. In early or late March, we did see some increase in withdrawals but otherwise, customers have continued with their SIPs, one time investments have held steady and the withdrawals have come down substantially. This has been across categories. I would not say this is specific to any age group, at least in our portfolio.
We see a very different behaviour between people who are 25-30, who are just starting to invest, 30-35 who have got used to the investment patterns and 35-40, where people have a lot more responsibility, are probably married and have children.
So people are investing for very different needs and depending on why you are investing, your behaviour changes with time. People who are just getting started, are looking to just dip their toes whereas the people who are between 35 and 40 have much longer term plans investing for their children’s education and are thinking about their retirement. Depending on the life stage and wealth stage, people take different actions in the markets and that has been our experience not only during the lockdown, but historically over the last seven-eight years that we have been helping customers invest.
What has been the reaction from customers on the debt side? An episode like Franklin is bad PR for Franklin, bad PR for the industry and has created a lot of disruption for debt investors who think that debt is safe. What has been the experience at Scripbox?
It has actually been very, very good. Unlike most other players, at Scripbox, our solutions are curative. We are not a transaction platform which allows you to buy whatever you like. We give you curative solutions depending on your needs. We have got something called long-term wealth which is for people looking for long term needs where we give between 4 and 8 funds across categories and different sub-asset classes.
Similarly, in short term money, which is equivalent to debt, we have got three funds which we recommend and for emergency money, we recommend a couple of liquid funds. Historically, while selecting these funds using math and science, we have preferred very low risk funds. Our portfolios did not have any Franklin Templeton — especially those six funds which suffered. So, our customers were very pleased. We ourselves were very assured that we have done the right thing. Our customer investments in debt funds have actually gone up over the last two months.
Digital investing platforms’ share in the market pie have been going over the last few years vis-a-vis traditional investing. Is there a cost advantage here?
Obviously, digital-led solutions are far more cost effective and the cost advantages can be passed on. But I think, even more than cost, it is the convenience, access which we are able to provide to customers which is the real benefit.
The customer’s time, peace of mind, the ability to see what they have all the time, is the real value you are delivering, apart from a pure cost play. This plays out for our customers because we are able to offer them more solutions at the same price.
In terms of the value that online platforms are able to add, it is a full stack wealth management solution and you can use technology and digital solutions to do that. Whether it is financial planning or goal setting, you can keep changing your goals because we have got all these asset allocation tools using optimised portfolio theory.
For fund selection, at Scripbox, we look at say 800 equity funds and recommend eight through various filters. The ongoing monitoring matters a lot apart from the whole convenience of transaction which I think is just the stage to play in the space. Also investing through a single gate rather than signing forms, makes it easier for customers to play.
The basket of conveniences and transparency which we are able to bring to the market is really the benefits which online investing brings. Obviously we are able to use science much more and give a very standardised and customised service to the extent that risk management, asset allocation is very customised to the person’s needs. You are also able to provide a very standard level of service to all customers so that personal biases do not creep in at all.
Some of our investors have more than a couple of crores invested through us because they find it convenient as there are experts behind what we offer and so they are able to trust us.
There are tens of thousands of families who invest through the Scripbox platform in approximately 50 countries in the country. That is not easily achievable for somebody who has a bricks and mortar model only. That said, this is a trust business apart from a great online experience.
Your current AUM is roughly about Rs 1000 crores, talk to us about the growth opportunity. We have been of course, listening to some of the advantages and you have pointed out what is the opportunity or the outlook then going ahead?
Our AUM is closer to Rs 1,500 crore. We have been growing steadily and probably the number is slightly dated. We expect it to double every so often. This is driven by three pillars; one is more customers trusting us as they come on through the early savers and mature investors. This is a trust business and as I said tens of thousands of families telling their friends and family to come on because they trust our relationship. So as we get more customers we grow. We are offering more solutions as our customers have grown with us.
As I said, we started eight years ago and built the category. Nobody else was offering online wealth management before we came along and as our customers have grown with us, their needs have grown. So, we are able to offer more solutions and get a larger share of wallet from them and that is our second pillar of growth.
The biggest pillar of growth in any asset management business like ours is the snowball effect. A customer starts with Rs 10,000 in month one and invests say Rs 1.2 lakh over the first years that grows to Rs 1.4 lakh and then every year they increase their commitment to Rs 1.6 lakh, Rs 1.8 lakh and so on. Over a 10-year period, you are suddenly looking at a person with a Rs 25-lakh portfolio. So, these are our pillars of growth. We expect to continue to grow very rapidly as the market grows. India is a hugely underpenetrated market, retail fixed deposits continue to be a large player and we expect people to move that money to inflation beating returns increasingly through people like us.
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