FundsIndia Investors Savor Value-added Services at Low Cost Date:   Tuesday , December 01, 2009 Pay for convenience, or go cheap and live with the consequent inconveniences? This dilemma confronts us in a variety of situations in our daily life. When it came to investing, Raja Bahadur, an avid mutual fund investor in Hyderabad, typically chose the latter – to be frugal – and suffered the irritating inefficiencies that ensued. That was until he discovered FundsIndia.com a few months ago. A brand new financial services portal in India, this platform offered the best of both worlds – it allowed investors to operate in the highly convenient online world that offered a variety of services and it allowed them to do so at an unbeatable no cost. Bahadur grabbed the opportunity with both the hands, and has not regretted his decision since. Though initially the offer sounded too good to be true, making him skeptical – he had seen a lot of these fly-by-night agencies that want to make a quick profit and run away rather than serving the real need of the investor. However, he has grown to love the FundsIndia platform and is now convinced of the great value it provides; “these guys deserve a pat on the back”, he says, “for having come up with a zero-transaction cost platform for the investors in the country.” “These guys” referred to by Bahadur are two entrepreneurs Chockanath Chandrasekar and Srikanth Meenakshi who saw an impending need for an efficient and cost-effective platform that catered to small investors in India. They brought in their expertise in the financial domain and created Wealth India Financial Services Pvt. Ltd (WIFS), the company behind FundsIndia.com, the integrated investment platform for the retail investors in India. Today, hundreds of investors enjoy the value-added financial services – services like trigger options, portfolio-SIP, alert SIP, pre-packaged portfolios, and easy transfer that are not available in any other financial services portal in India – at an unbeatable low-cost in this platform. The former allows an investor to set triggers on their mutual fund investments and take actions based on them. For example, if one has invested in a diversified equity fund and wants to cash out when Sensex reaches the 20K mark, all that he would need to do is setting a trigger for that, and FundsIndia will monitor the market and take care of it. This facility is currently available only in very few funds in the country and that too only in a restricted fashion. FundsIndia has enabled it in all the funds that it makes available to the investors. Similarly, while SIP investments are available on per-scheme basis today, the notion of portfolio SIP, which allows an investor to invest a set amount of money regularly in a basket of funds as opposed to a single fund, is available exclusively in FundsIndia. High Service, Low Cost What makes all this even better, of course, is that they are all offered at no cost to the investors. While other online outlets like ICICI Direct and HDFC securities charge either a transaction fee or an account maintenance fee of some sort to service mutual fund investors, FundsIndia has kept all its services completely free of cost. How do they manage to do it? Are they simply eating the cost? “Absolutely not,” says Chandrasekar with a smile, “We have a business model that is sound, and an enterprise that will be profitable.” Their idea of the business is two fold: * They are an online only service provider, which means two things: one, they will be able to save enormously on the costs of physical infrastructure and staff salaries, and two, they will be able to provide unique services via their platform in a highly-scalable way at a very low cost. Also, they will be able to serve the customers without geographical limitations. * Every single product they offer in their platform has a revenue model – in the case of mutual funds, the fund companies provide a small up-front fee, and a recurring servicing fee. Although these fees are small, when combined with low-operating cost, and wide customer base, they are more than sufficient to run a thriving enterprise. So, how did Chandra and Meenakshi strike up this idea? First, they believed in the online model for financial services. “Nowadays, a customer visits the bank branches only for the occasional need of a Demand Draft. The demography that we are targeting does not care about physical presence. They need the convenience and cost advantage rather than the physical presence,” says Chandra. Next, they thought the investors would see the tangible value-proposition and like it. “Simply put, we are providing more for less. More services, easy access, the convenience of consolidation, all at a cost less than that of anyone else,” adds Meenakshi. Trading in Mutual Funds than Stocks Also, from a business perspective, there were some definite advantages to working with mutual funds over stocks. “This is investment money, which stays in the account over a long term, as opposed to trading money that usually is lesser and stays for a shorter period,” says Chandra. When the market is bad, or is moving sideways, trading activity stops and revenue from stock trading plummets. In MFs, the new investment activity stops, but there is still a 50 bps per year trail revenue that continues to pour in. Herein lies the benefit of being more concentrated towards the MF market. “Idle MF accounts make money even when no activity takes place. This is a huge untapped market waiting to take off and we are at the right place at the right time to take advantage of it,” proclaims Meenakshi. There are 36 fund houses in India, of which 27 have made FundsIndia their online channel partner. Currently, a small investor can lay his hands in the platform on a wide range of Mutual Fund schemes and Fixed Deposits from corporates. If the schemes still arouse a question in the mind, the investor can always seek advice from the Independent Financial Advisers (IFA) under the IFA platform. The company provisions every investor with free phone-consults with professional advisers. They are launching their equity investment platform in December, and in January their insurance platform. The prior entrepreneurial experience of the founders in running successful financial services companies internationally and in India has bolstered the faith of their 1,700 investors. They are backed by a team with a wealth of Indian financial services experience, both from the operations and marketing perspectives. With a well-laid capital implementation strategy the company, which launched its platform in April 2009, expects to widen its base up to 70,000 customers in the next year. Thus, the company reiterates its goal to be the number one online financial services provider in India. It aptly fits into the ‘all comprehensive’ financial platform criteria that will offer the most economical full lifecycle investment process to the investors.