Kunal Bajaj, Head of Wealth Management at MobiKwik, shared his views at the Morningstar Investment Conference held in Mumbai on October 23 & 24, 2018.
Below is an excerpt from that discussion moderated by Dhaval Kapadia, Director - Portfolio Specialist at Morningstar India.
There is a perception that robo-advisers offer very basic advice and they may not be able to stick with an investor through their lifecycle. Your thoughts.
These are two separate questions and I'll try to address both. Firstly, will robo-advise serve the need that the people have? Yes. At the end of 25 years after the first mutual fund was launched in India, we have only 1.8 crore unique investors. On the MobiKwik app, we have 4 million daily active users. There is a large market which has just not realized that they have an option to save their money outside of their bank account, physical gold, real estate and fixed deposits.
It is possible to serve customers through a large part of his life journey by offering him complete convenience. What the customer is looking for is very simple stuff. The first problem that the customer has is where do I find an adviser. There are 1,000 RIAs, and 50,000 distributors for a 400 million millennial population.
Where do I find an adviser? I find an adviser where I live or where I work. The other place to find an adviser is on your phone. If you can answer that first question, where do I find an adviser, I think you've got the customer for a fairly long period of his investment life.
The second question is, how good is my adviser. You've never met an adviser who tells you I am a terrible adviser. No one walks in with a visiting card saying, hey, I've just started a new advisory firm, I am a terrible adviser. You can only find that out post facto.
You have to be transparent with the investor. You are not hiding behind false data. For example, you go to an adviser today and say, how's my portfolio doing, he'll talk about how he has made great money for you in last three years and not talk about the last one month. What an app or what technology forces us to do is to be transparent with the customer 24x7. And so, it helps answer that question how good is my adviser over time.
The last question the customer has is how much does my adviser cost. By selling direct plans we are not earning any commissions. We are providing this as a service. Just as banks provide a service for bill payments that they don't charge for, it cost them money to pay every bill. Banks provide us service for clearing a check. It costs them money but they give you that check clearing service free.
There is a monetization plan. It's something that we won't want to talk about at this juncture. For the vast majority of people who never had an adviser, this is a very good alternative.
What's the biggest disadvantage of robo-advice?
Lack of human touch. But that can be easily addressed by appointing a relationship manager. It's a combination. When you say hold customer's hand, the investment adviser doesn't need to hold the customer's hand. The relationship manager can and that can be addressed by a call center.
What asset classes do you include in a portfolio? Are equities, fixed income, cash and gold part of the portfolio? Is that true diversification?
We have heard Dr. Mobius speak today. He is the pioneer in emerging market investing. Most of us wouldn't have careers without him leading the way and holding the torch many years ago and getting investors to look at these emerging markets as an asset class. And why was he successful? He was basically making a case for diversification outside U.S., which is the largest and most liquid capital market. If you have a story for EM as a diversification tool from the developed markets, then you have to look at other asset classes or other markets as diversification tools away from your home market. I think that's fairly obvious. If you are not providing diversification to your investors, you are doing them a disservice.
For example, this is an extremely large consumption market, but an extremely poor tech market. Our technology companies are not technology companies; they're IT service companies. They don't really create IP. So, you have to find asset classes elsewhere that will give you that diversification and that long-term growth.
Robo-advisers like Betterment in the U.S. disrupted the traditional advisory model forcing the likes of Fidelity to start a robo-adviser themselves. What's the panel's view on MobiKwik or Paytm being doing that in the Indian market?
The biggest advantage is personalization and the biggest disadvantage is the personal touch. Not having a human touch. The amount of things you can do to personalize the experience of that customer on an app is just outstanding. You can deliver bespoke advice that is needed to that person's peculiar situation, to his needs, to his particular goals and personalize it for all the 5 million people that open up the app today. That's the level of personalization that can be delivered and that level of personalization can only be delivered by technology. And let's also understand that technology has its own spiral that gets better over time.
The fundamental law for me about technology is very simple. Technology ensures that anything that can be standardized will be commoditized. So, an execution service which used to be a service where you help someone fill out a form and then take that form and drop it off, help him purchase his mutual fund or whatever other investments, it's a standard form today. The KYC is a standard process today. It is completely commoditized, and an adviser cannot charge for that any longer. To the extent you're providing a personalized service, of course, you can charge for it. But technology will slowly creep into that as well. An adviser who does not adapt to that is an adviser that is servicing a client of yesterday and not a client of tomorrow.
