[Exclusive Interview] This Wealth Management Firm Manages Rs 800 Crore Funds Of 17,000 Clients Across 1200 Cities

Mohul Ghosh

Mohul Ghosh

Mar 29, 2023

Recently, we interacted with Mr. Harsh Gahlaut, Chief Executive Officer, FinEdge – India’s leading wealth-creation and financial planning platform.

[Exclusive Interview] This Wealth Management Firm Manages Rs 800 Crore Funds Of 17,000 Clients Across 1200 Cities

Here are the interview highlights:

  • Discuss in brief about the company.

FinEdge was born to solve the core problem of the “advice gap” in India. 

Almost every investment company / platform start their investment advice by giving product or investment recommendations. This made them sales centric and their advice unusable for most investors, as it was missing several key ingredients required to ensure investing success. 

Good advice requires in-depth understanding of the individual investor. Before offering advice, the advisor needs to know the financial health (income – expense), financial habits, leverage ratios, investing behavior, risk profile, financial goals and then comes the product recommendations and portfolio reviews. Without following the entire process as is, any financial advice is worthless.

Unfortunately, great financial advice was (and remains) unavailable for retail clients. This is mainly due to the lack of financial viability of a human-centric, advisory-led business proposition revolving around small ticket investments. Hence, these clients generally end up getting sold high revenue products such as life insurance, or invest through DIY apps and burn their fingers. 

Though we were among the first in the country to deploy digital financial planning as a business model back in 2011, we have remained steadfast in our core belief that technology alone (without human expertise) cannot solve the behavioral problems related to investing – and therefore cannot lead to long term wealth creation.

This belief led to FinEdge evolving, over the years, into a leader in terms of bionic investing expertise – by building world class tech to enable humans to make people better investors!

Today, FinEdge manages investments for more than 17,000 investors across 1200+ cities in India – all from a single captive office in Gurugram, managing close to 800 crores of goal-based investments!

Our proprietary software and processes provide the necessary tools to enable our investment managers to create a unique investing experience for investors. This combination of tech, processes and people make our business model unique and ensures a much higher chance of investing success for investors.

  • Describe the growth trajectory of FinEdge since its inception.

We spent the first 6 years of our existence testing the market, understanding exactly what the investor needed and how can we create long term value for our clients. The next 4 years were consumed in building out our tech platform, process enablement and setting ourselves up for growth. 

While it took us 5 years to get to the first 100 Cr of Assets under management, we added another 700 crores over the next 5 years, in fact we added 200 Cr of AUM in the last year alone. This was despite the fact that we had not yet earnestly begun our scale up journey!

We expect to add 10,000 Crores of investments made through us in the next 5 years. Our growth curve cannot be measured linearly, rather it’s like a chess board where the number gets doubled for every square. The first 10-12 squares don’t show a considerable number but doubling the next 10 squares can throw up some eye-popping numbers. We strongly believe ours will be a hockey stick curve in terms of growth. Our business model offers infinite scalability. This is because we have a potent business model supported by cutting edge tech, fabulous processes and people, a country with fantastic demographics, huge advice gap and our ability to have infinite geographic reach. It was just a question of putting all the tools in place before we started our scale up journey!

Since all our investments are goal linked, our leakage rates both in terms of SIP stoppages and folio redemption are at aspirational levels for the industry. In fact, we were recently ranked among the top 50 boutique MFD (Mutual Fund Distributors) in the country by Café Mutual, India’s leading Mutual Fund Industry centric media portal. 

We are proudly bootstrapped, consistently profitable, self-reliant, and have achieved all this without selling any high revenue products to our investors – something that very few advisors across the country can say today!

  • How is FinEdge helping in filling up advise gap in the financial market.

An overwhelming majority of investors in our country remain unadvised despite all the technological breakthroughs we have seen over the past decade, and this is working to the long-term detriment of their financial goal achievement. At FinEdge, we are bridging the advice gap by combining fantastic technology with great people, because we believe that neither of them in isolation can solve the problem fully.

Over the past decade, we have managed to fine tune our “bionic“ investing model by creating software and processes that are completely aligned to our business model. We believe that our journey of growth has just begun. Our “why” (core beliefs) and “what” (processes) were always strong, and now with the “how” (tools) firmly in place – we believe that we can tap effectively into the huge community of under served investors that are dispersed across our country today.

Its interesting to note that our unique offering is part of the course curriculum at IIM Kolkata as a case study called “FinEdge: Bionic Advisory for a Digital India”!

  • What are company’s goals for next 4-5 years. Where do you see FinEdge in next 4-5 years?

We strongly believe that the “advice gap” presents an explosive scale up opportunity for FinEdge over the next few years. As we have just started scaling up our business now, we are poised to rapidly cross 1,00,000 clients, organically and without raising capital, in the next 5/6 years. We will do this without compromising on our core value of being completely client centric and non sales oriented!

Over the past 3 years, the number of active demat accounts have gone up from 4.09 Cr to 10.6 Crores. Unfortunately, the intent for most of these accounts is not to invest but to trade -and 89% of traders globally end up losing money.

There are an estimated 10 Crore+ crypto investors in India as on date – these are all speculators who are now sitting on heavy losses

Many new equity Mutual Fund folios are direct & unadvised – anecdotal evidence tells us that very few of them actually go on to earn long term returns. Most investors end up redeeming or stopping their SIP’s when markets do not give great returns.

In addition to the above, we are witnessing a steady increase in keyword searches for advisor focused phrases. We believe we are at the cusp of an explosive revolution in the digital wealth management and advisory space, with a huge amount of latent demand building up. We have dedicated the past 3 years to fine tune our tech platform to benefit from this burgeoning trend.

Our fantastic tech platform (DiA) is uniquely positioned to catch the fallout from the above (massive) pool of speculators who will appreciate the importance of the role of an expert in their investing journey. We foresee massive tailwinds that will drive our next phase of growth over the next 5-10 years.

  • Here are the company’s mid term plans in numbers:

5/6 yrs
10,000 Cr
75 Cr
SIP Book
100 Cr
  • How does FinEdge helps their clients in achieving long term goals.

Although goal-based investing sounds great in theory, it is actually a very difficult business model to execute efficiently across the length & breadth of a client’s investing life cycle! Many have tried and failed – or succeeded partially at best.

Pretty much all platforms or advisors today limit their efforts to the initial financial planning process (the goal discovery phase). Many of these platforms even use the goal setting exercise as nothing more than a product sales tool/hook to position high revenue products such as life insurance plans that are wholly unsuitable for long term goals.

This is where FinEdge is different. Our live financial planning platform facilitates collaborative and joint decision making between the advisor and the client, thereby ensuring a high level of commitment from the investor to their goal based financial plan from the word go. After all, they participated in its creation – it wasn’t handed to them in the form of a bland PDF report like a prescription from a doctor! 

Next, the journey itself. Even the best intentions to save for goals can fall by the wayside when “life” happens! In fact, many investors will not even recall which investments are aligned to which goals in a years’ time. DiA, our platform, bucks this trend because it necessitates the coming together of the advisor and a client for all future transactions – be it a redemption, a switch, an STP, a SIP Stoppage or a new investment. The impact of each transaction on the mapped goal is computed and discussed before proceeding. Sometimes, the goal itself will need to be revised for the platform to permit the transaction to go through!

And lastly, we have built in a fantastic “scenario analysis” tool into DiA that is part of the co-browsing process. This tool allows investors to visualize the impact of one or a combination of investment actions on their goal achievement and take informed decisions accordingly. For instance, an emergency redemption of Rs. 2 lakhs may well be compensated for with a simple annual step up of Rs. 1,000 in a goal-based SIP. This tool is once again invaluable in helping advisors customize their investor journeys – which is the biggest strength one can possibly have as an advisor today, in today’s age of commoditized financial advisory propositions!

As a business, we are obsessed with customer success and hence, in a marked deviation from industry practices, we have kept no sales targets for our advisors. Their only success metrics revolve around their levels of engagement with their clients. This further helps align advisors with their client interests and encourages them to “co-own” their client’s goals.

  • What role does investing goals play in a successful portfolio for returns?

Investing goals play a critical role in building a successful portfolio and generating long term wealth from your investments. Primarily, this happens because “investing with purpose” instead of “investing for returns” helps automatically manage the behavioural side of investing – which is probably the most important determinant of your long-term investing success.

When you invest for returns, you will end up getting swayed by day-to-day market movements, often becoming panicky or greedy to time the market. You may also become impatient during low return phases (such as the one we are witnessing now for the past 12 months or so). In other words, your chances of generating great returns will paradoxically become quite small if you fixate on returns all the time! 

If, on the other hand, you invest keeping clear goals in mind – you automatically align yourself to the big picture and are therefore able to insulate yourself from a lot of noise, thereby allowing your investments to grow and compound over time. That’s how wealth creation happens!

Goal based investing also automatically ensures that your choice of investment is in sync with your time horizon. For instance, you may choose to start an SIP in a small cap fund for your retirement which is 25 years away, but stick to liquid funds for accumulating money for the down payment of a new car two years down the line. In a sense, you stop fixating too much on your personal attitude to risk and start understanding the delicate interplay of risk/reward and how it affects your long term goals. In other words, you become a smarter investor!

  • How is FinEdge disrupting the financial market with the help of technology?

FinEdge has built a technology solution (DiA – Dreams into Action) that is unparalleled in not just the domestic but the global financial planning industry. Our disruptive solution is based around the concept of “co browsing” for financial planning as well as ongoing investment management. 

Our platform keeps the advisor at the heart of the proposition, and instead of handing the steering wheel over to the client – it enables advisors to deliver live, collaborative, and customized experiences for every client at every step of their investing journey. 

This approach helps to solve a multitude of problems that the investment advisory industry grapples with daily. For instance – though financial goals tend to be well defined and understood during the initial financial planning discussion, how can we ensure that clients remain aligned to those goals for 5,10,20 or 30 year long periods? Through one life event after the other, through one market cycle after another? 

Most financial plans are just fancy goal setting exercises with the singular intent of “selling” a product at the end (for instance, how the life insurance industry operates). A year later, hardly anyone remembers their goals, let alone which investment is mapped to which goal and which ones they are on track to meet/not meet! 

DiA provides an innovative solution here by bringing clients and advisors together for a conversation every time a transaction needs to take place – be it a lump sum investment, a SIP or a SIP stoppage, or a redemption. 

Deep discussions take place around various scenarios that are modelled in real time by the advisors and reflected live on the customer screen. In this manner, not just is the advisor-client relationship strengthened tremendously, but clients become much “better” investors as they are goal focused instead of returns focused.

  • What impact does the pandemic has on FinEdge’s growth?

Being 100% digital was a big advantage. While most investment firms struggled with transactions etc, for us it was business as usual. In fact, the acceptability of digital investment advice has irreversibly gone up since the pandemic.

In a sense, our business model proved to be “antifragile” during the pandemic, as we came out of it stronger while a lot of our other peers foundered. Our biggest lesson from the pandemic was the importance of goal based, disciplined investing. 

As markets went into a tailspin, we witnessed an extraordinary degree of resilience from our investors who were investing based on clearly defined financial goals.

This lesson drove us to accelerate the development of DiA and develop/launch the world’s first and only live, co browsing led financial planning platform that enables advisors to manage a clients entire investing journey – from onboarding to financial plan development, to investment execution, portfolio reviews, goal reviews and transaction processing.

We now have a vibrant in-house tech team as well as a capable set of outsourced partners who are building and scaling the platform to new heights. Our digital transformation journey is set to continue and make our business more resilient and scalable over the next 5-10 years.

Mohul Ghosh
Mohul Ghosh
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