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Financial planning is not very well known in India as it is more like distributors understand what the clients want, and then they give them a product for it. It takes time for people to understand and pay money for this, said Priyank Shah, Chief Executive Officer (CEO), The Financialist.
In an interview with BW Disrupt, Shah said, “One thing we have realised is that people now are time-poor and money-rich, and they want somebody who is trusted to do everything for them. And that's the insight that we are building the business on.” Edited Excerpts:
Could you share the core challenges you faced in the early stages of your company, considering your vision to make financial planning accessible and transparent for every Indian household?
It took people major time to trust us with their hard money because we were pretty young and financial planning typically has been considered an industry where veterans are respected. The other thing is that financial planning is not very well known in India. In India, it is more like distributors understand what the clients want, and then they give them a product for it. Financial planning as a concept is very well renowned in the western part of the world but not in India. So, it takes time for people to understand and pay money for this.
How do you manage to maintain quality while serving a growing customer base?
We understand what actually the needs of the customer are and we hyper-personalise the financial plan and the investment strategy according to that. So it is not like a cookie cutter approach or one size fits all. On the discovery call, we understand that what are the goals, milestones and cash flow [inflow and outflow] of the clients.
If the client has any loans, or insurance, whether that insurance is adequate or not, we understand everything about their finances and debt. After that, we have built our own financial planning engine. The advisors work on that or make a financial plan for the client. And then we present the financial plan to the client. It's a one-year service wherein for a fixed fee, we help the clients with all their insurance, investments, taxes, everything.
Can you give an example of how you have adjusted your services to meet the evolving needs of your client?
One thing we have realised is that people now are time-poor and money-rich and they want somebody who is trusted to do everything for them. That is the insight that we are building the business on. We at the Financialist are the trusted partner for a client when it comes to all their personal finance requirements, from an honest and unbiased perspective, we are evolving, catering to these customers.
What is your target audience? What patterns have you observed in the 20 to 40 age group regarding health insurance? Are people more reluctant to get health insurance, or are they becoming more engaged and seeking insurance, whether for health or other needs?
Our target audience is individuals in the age group of 28 to 40 and in a white-collar job and a professional.
It is not as if they are reluctant. It is just as if they are not 100 per cent aware of the pitfalls of not having health insurance. Once you educate them, they become more cautious about it and want to take corrective actions.
Our target audience, is they are used to having their family manage their money. They trust their dad and they trust somebody senior in the family. And one generation before this generation has looked at health insurance premiums as a wasteful expenditure. So that notion is also getting passed on to these folks.
Any particular reason that HNIs are not your core audience?
There are already very big established players who are doing great. We do not want to be just another player in a red ocean market.
Are more women showing interest in investing? Can you provide any data or percentages?
We want to keep it under wraps that what percentage of our clients are males and females, but we do see increasing adoption from female professionals.
From your experience in wealth management, what are some common financial mistakes individuals or families make, and how can they avoid them to build a more secure financial future?
The most and foremost important thing is people do not have a plan. Now let's just say they do not know what they are saving for or what they are investing for. Their asset allocation strategy is not done efficiently. What happens is, let's just say that if I don't know what I am saving or investing for, I might take aggressive bets and put all that money in equity. But what if in a couple of years, I may need that money? Then asset allocation goes for a toss and people might have to liquidate that money to fulfil their needs.
And the second thing is, what we observe is that people look at health insurance premiums as something that's a wasteful expenditure and are not adequately insured. So we advise the client that they should have more of a health insurance. Because what is happening is that health insurance is not going to make you bankrupt. There's a quote from Jack Ma that having insurance is not going to make you bankrupt, but not having can make you bankrupt.
When it comes to health insurance, agents sometimes mention terms and conditions that can confuse beneficiaries. How do you simplify these aspects for your clients to ensure a smooth and clear experience for the beneficiaries?
We have a thorough understanding of the norms. What are the peds? Which insurance policy is good for the client, and which insurance policy is not? And we are merely an insurance advisor. Now, as per Sebi regulations, we have stayed away from basically ensuring that we make some money off insurance premiums as well. So what do we do? We recommend our clients to work with the best insurance agents.
With ESG investing being a hot topic right now, and considering you manage clients aged 20-40 in white-collar jobs, do you recommend or advise them to invest in the ESG sector at a micro level?
We trust that the fund manager at the AMC will take the relevant bets for the mutual fund for the stocks held in the mutual funds. However, I personally believe that clean tech and renewable energy is a great sector. However because we are very straightforward in our investment strategy, there is no question whether we recommend ESG or not. Because it's a thematic fund at heart we stay away from investing in thematic or sectoral funds.
Legacy planning is often associated with the wealthy, but it's important for families of all income levels. How do you approach legacy planning, and what advice would you give to someone looking to pass on wealth to future generations?
It's a function of how much assets a client has. If a client has assets that are more than how much they will need through their lifetime, then we park that money into long-term securities. We also ensure that relevant nominees are added for all the assets so that, going forward, if there is any help required from the next generation, there is no court intervention.
But again, legacy planning is a function of how much assets you have. When one flies, if the flight is in trouble, one needs to first save oxygen and then look for the next generation. So similarly, we ensure that a client does not have to compromise on the quality of the lifestyle that they're living. And if they're very good assets, then we plan it in a way that it's getting passed on to the next generation.
How do investment patterns differ across tier 1, tier 2, and tier 3? Are tier 3 investors becoming more educated, and who is your target audience across these tiers?
We are not distinguishing whether somebody is in either tier one, tier two, or tier three, because we are focussing on white-collar jobs. And because we are focussing on professionals as a byproduct, it has led to us having clients from metro and tier 1 cities. We also have clients from tier two, because what ends up happening is that If somebody is in Bangalore, and he's our client, if they're going to their hometown in Diwali, they will refer us to a few people. So those people also end up becoming our clients.
Just advice, should one repay one's home loan or invest in mutual funds?
Home loans typically span 20-30 years, and during this time, equity markets tend to compound well. With an 8.35 to 8.4 per cent interest rate for those with good credit scores, coupled with tax benefits, the cost of borrowing remains manageable. Over long tenures, it's often recommended to invest in mutual funds instead of repaying loans early, as equity markets can offer higher returns (11.5 per cent-12 per cent). However, this strategy requires a long-term mindset, avoiding panic during market downturns and treating investments as long-term commitments.
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