Small-town India takes to wealth advisory services in a fresh twist

People in smaller towns are increasingly signing up for wealth management services such as portfolio management (PMS), alternative investment funds (AIFs), and wealth advisory. Startups offering these services say around 30% of their new users now come from beyond the top 18 state capitals.

Founders of new-age wealthtech startups Dezerv, Centricity and Ionic Wealth, among others, told ET that multiple factors – including technological capabilities that have reduced the cost of servicing a single client, overall financial growth of the country, and improved access to information – are driving wealth advisory into smaller towns.

This comes in the backdrop of a surge in retail participation in stock markets. Leading stockbroking platforms like Zerodha, Angel One and Groww are likely seeing more than 80% of their new clients come from beyond the metro cities, industry insiders said.

Digital with a physical touch

While digital platforms are democratising access to financial services, physical presence still plays a crucial role. Wealthtech startups have created networks of on-ground investment advisors operating through small branches to complement their online platforms.

“A hub-and-spoke model has proven extraordinarily effective in addressing a critical market gap – the scarcity of qualified wealth managers and relationship managers in smaller cities,” said Sandeep Jethwani, chief executive officer of Dezerv. “We have extended our services to clients across more than 200 pin codes nationwide,” he added.

Dezerv has over Rs 10,000 crore of assets under management (AUM) including PMS and AIF. Tier-II and tier-III cities contribute about 10% and 5% of its AUM, respectively. These numbers were negligible till a year back, Jethwani said.

Lightspeed India Partners-backed Centricity has set up a network of 55 branches across the country to address increasing investor interest from small town India.

“These investors have mostly been exposed to equity investments via mutual funds and broking, but they do not get access and learning beyond these two,” said Manu Awasthy, CEO of Centricity. “Investors must distribute their wealth across multiple asset classes for superior risk adjusted return. Now, as access to information has gone up, investors are looking for customised solutions,” he added.

Wider adoption of digital financial services from payments to trading is teaching a large chunk of India to start trusting online platforms, which is helping these new-generation firms.

“HNIs in smaller cities are accessing a range of investment products, from simpler ones like stocks and mutual funds to sophisticated solutions like PMS,” said Srikanth Subramanian, CEO of Ionic Wealth. “The performance of Indian markets during and post-pandemic encouraged investors to move from household savings to financial assets.”

Mumbai-based stockbroker Angel One, which is the parent of Ionic Wealth, in its December quarter results, said wealth management is a $1.2-trillion opportunity in India, driven by 3-5% incremental growth in earnings and savings, returns from investments to the tune of 8-10%, and a 16% annual jump in high net-worth individuals (HNIs).

Increased usage of technology has also helped these firms improve productivity of their workforce, which allows them to serve many more clients than traditional wealth managers.

From undertaking number crunching on the go to creating visual data through automatic models and creating expansive profiles of the investors, relationship managers (RMs) use a host of features to customise their advisory to a wider customer base.

Local language skills are also being built to help relationship managers cater to the needs of a cross section of clients.

Previously, wealth managers needed to have soft skills like great presentation, coupled with English language skills, along with knowledge of financial markets. Now, there is increased focus on building capabilities to serve customers in regional languages.