India’s investment management industry is not effectively addressing the need to manage the savings and investment objectives of the middle class. India’s model of private banking is imported from the West, requires high-cost human resources, is expensive, and is primarily geared to meet the needs of high net-worth individuals.
The Indian startup ecosystem has not been able to successfully tap this market as it has tried to deal with its requirements in a piecemeal manner. Solutions offered include financial education websites, and apps and distribution platforms for financial assets that are overly focused on equity/equity mutual funds. These options, however, don’t offer a comprehensive approach towards educating clients and marrying their risk appetite with the full gamut of asset classes.
The reality is that the middle and upper middle class comprise a large number of people who don’t know how to effectively even begin investing. This is particularly true for women, even highly-qualified working women. They fall prey to tips from so-called knowledgeable friends and relatives, local CAs, and dubious investment experts.
Startups in the investment industry will have to create a localized, cost-effective and ethically managed model which addresses the investment requirements of the mid-market. These clients need to first build confidence and require a degree of personalization of service which necessitates some element of human interface. An indigenous investment management model does not, however, require expensive private bankers from top tier institutions. Trained local bankers with affiliations to the community, backed by technology, can cost-effectively identify appropriate financial assets in sync with the risk profile of the clients and dynamically manage and monitor portfolios.