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Portfolio Management for Startups and HNIs

I was thinking of a way to provide investment management services to people, but this space is already crowded with brokers, banks, funds and financial institutions. 

Individuals and large corporations are served by these intermediaries, but there are two issues or gaps

– There are no customized offerings to suit startups or small/medium enterprises which have surplus cash to invest. If it exists the costs are high and the products may not suit wealth creation/growth. 

– HNIs in India as well as NRIs need reliable advice from an adviser (not a sales agent of a bank/company) to manage their investment and work as per their mandate/objectives.

Any ideas or suggestions on how to go about getting prospective customers or pitching these services to startups or medium sized companies. 

After looking at the legal requirements (prescribed by SEBI) for setting up PMS I found that it requires a net worth of Rs.2 crore in addition to application/registration fees which add up to Rs.11 lakh. The initial capital seems to be very high. 

Can someone suggest any alternative structure or format (other than PMS) requiring lesser capital and costs?

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8 Comments

  1. Hi Sridhar,

    1st and foremost, in my opinion its better if you figure out ‘A problem waiting for a solution’ instead of ‘A solution looking for a Problem’…Having said that, even if you are starting with a solution (Cash Management) which is looking for a problem (which you think some startups face), I think I can smell a market opportunity there (although most people would like to believe that startups/ SMEs face the opposite challenge – instead of surplus cash, we are always hard-pressed for cash awaiting investor money, trying to persuade bankers, chasing debtors, etc.).  But I think if you have a clutter-breaking, focused value proposition for SMEs who cannot afford full-time treasury managers like large corporates, you can work as a Certified Financial Planner, Mutual Fund Advisor & Insurance Broker (you can consult somebody more qualified on the technicalities, but surely these seem to be more capital light than a PMS manager).

    My advice to you would to stay away from stock market related tips, investment advice, etc. since its not advisable for SMEs to do high-risk trading with short-term surplus cash which is very precious. Having worked in the financial services industry as a wealth manager, I don’t have too high opinion about PMS & I think you are only going to invite further trouble by assuming direct responsibility for doing equity trades on your clients’ behalf. I suggest, strictly avoid it. For wealth creation, SMEs are better off creating value in their own businesses rather than gambling. As a startup promoter, I would be looking at somebody who can suggest great liquid mutual funds that provide better risk-adjusted post-tax yield as compared to sweep-in FDs. And you can deliver such a solution using technology instead of making it personalized since you can reach out to a wider market at fractional cost. So, first get your product right & then it would be appropriate to figure out the promotional strategies. In this process, please do not undermine competition/ substitutes by denying the credibility/ trust advantage that bankers evoke, but please accept that the market is big enough for everyone to co-exist. Also, I suggest please avoid HNIs as its really a tough nut to crack for a new commodity-like service category like financial services. The Alok Kejriwals of the world are the Apple of everyone’s eyes (Sorry, I mean its such an over-served segment, especially in urban India).

    All the Best & Happy New Year in advance

  2. Hi Nikunj, 

    Wish you a Happy New Year. Thanks a lot for sharing your views and suggestions. 

    I’m taking your feedback and will try to revise the focus of what I plan to do. However, I’m focused on providing investment advisory which will be focused on financial markets esp. equity. And I plan to also offer ETFs, Gold, etc which is not offered or encouraged by traditional brokers, bankers, etc. 

    PMS does not have a good impression so thats another point to think about. Probably CFP or adviser as suggested by you is a good option. 

    Some of your suggestions which may not suit me are Cash Management Solutions, Liquid funds, etc. These are surely not my ‘cup of tea’ or expertise. There are many people who are already offering this and I dont see myself having any advantage/edge in these areas. 

     I used the word ‘startup’ probably wrongly here, I should have said ‘SMEs’. Whether cos would use my service is debatable, so i think ill drop this idea for now. 

    Probably I could focus on HNIs, NRIs and other individuals as of now. 

  3. Nikunj, very practical insights. Agree with you that active participation in the market should be avoided if possible. We are building a personal finance portal (DIY) to help people manage money better. We focus on long term wealth building by helping clients manage their basic things right. We are in private beta right now and will be going live soon. Do have a look at futurewise.co.in

    Ronak

  4. Sridhar, would agree with most of the points Nikunj has harped upon above. We are in the personal finance space as well (although catering to the masses rather than HNIs). Do let me know if you need any help in understanding that market better. 

    Ronak

  5. Hi Ronak,
    I agree with the points mentioned by you and Nikunj.
    I am just exploring this idea and various possibilities.
    Personal Finance is also a space that interests me.
    I am keen on doing something in the personal finance or investing space whereby I can provide customized solutions to clients (not selling any product/fund).
    Can we take this discussion offline over email? My email is sridharcw@gmail.com
    I have a few questions and I also want to see if I need to start something new or work with people like you before venturing in to it all by myself. Any suggestions, comments or help will be appreciated.

  6. Sure Sridhar,

    I am available at ronak.hindocha@futurewise.co.in.

    Ronak

  7. Hi Nikunj,
    Please dont think I’m disagreeing with your ideas/suggestions. To be honest here, I do not have the experience or expertise in some areas like Cash Management. Based on what I researched so far I think I should stick to individuals as a market and provide them customized advisory services, who have this need/requirement. This also fits within my capability.
    Let know if this is broadly okay. Later I ll try to further restrict my focus to specific segments as per the customer requirements. Thanks.

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