Outlook Money Interview | In conversation With Gaurav Rastogi, CEO, Kuvera.in (Part 2)
In this interview Gaurav Rastogi, CEO, Kuvera.in is talking about Kuvera, the idea of investment and options available for this.
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#GauravRastogi #Kuvera.In #OutlookMoneyInterview #OutlookMoney #Money #OutlookGroup #OutlookMagazine
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00:00 So, when you started in 2016, now it's 2019, so what kind of reactions you have seen, what
00:08 are the patterns that you have observed so far till 2019?
00:12 Massive change, I think till the end of 2016, the conventional wisdom was this is not going
00:17 to work.
00:18 You know, most of the investment that has happened in this space is last year and this
00:23 year, 2018 and 2019.
00:26 Till I think middle of 2017, no one was convinced direct is going to work, to be very honest.
00:31 Most of the feedback we used to get was, why will this work?
00:34 You know, everyone needs an advisor and while we said, yeah, everyone needs an advisor and
00:38 we are a digital advisor.
00:40 We don't want to be a transaction platform.
00:43 We want to be able to tell you these, invest in these funds, rebalance in this way, so
00:48 on and so forth, right?
00:52 And that started changing once people started kind of, you know, experimenting with different
00:57 platforms, not just ours.
00:59 So it was a collective effort.
01:01 At one point, I think there were some 30 plus odd online investment platforms, probably
01:07 five to six are still talked about or are still in the fray.
01:11 But everyone put in a lot of time and effort to educate users that robo advisory does not
01:17 mean that this is just a transaction platform and that then we are not going to help you
01:21 with anything.
01:23 And slowly we started seeing that change.
01:25 I think there were early adopters.
01:27 Word of mouth has been a very big factor for us, maybe not so far as some of our other
01:32 competitors.
01:33 Some other guys really innovated on how you market a robo advisory services, right?
01:39 Using different channels to kind of reach the end user.
01:42 So over time, and I think because of the effort that a lot of people have put in, awareness
01:49 has gone up a lot.
01:50 A lot of big players have come into the market recently, right?
01:53 Like last year, ETmoney went direct and also free, Paytm launched a free direct plan platform.
01:59 So that awareness has started to now tilt the tide.
02:04 The backdrop in all of this has been that SEBI has firmly kind of said, not in so many
02:11 words that direct plans are here to stay.
02:14 They want to see a long term future where an investor can decide to either pay commission
02:20 or not pay commission.
02:22 So regulatory backdrop has been very helpful for us.
02:24 So that's how the narrative has changed.
02:26 Now it's almost common to be using or to be evaluating two or three different robo advisors
02:34 and then deciding this one is the best for my needs.
02:37 And among your customer base, who forms the largest chunk of your consumer base, like
02:42 who are investing through Caveira and all?
02:45 So for us, a typical investor profile, I would say about from the data we have so far, 32
02:52 years old, married, unfortunately, still predominantly male, 85% men, 15% women, I think that is
02:59 a number that needs to grow.
03:01 A lot more working women should be investing directly.
03:05 We try and kind of push for it as and when we can.
03:09 Usually rents, has kids.
03:12 So that's kind of the average.
03:13 What about profession?
03:14 Do you have categories?
03:15 Service, service.
03:16 So fewer businessmen, more of them are getting monthly paychecks.
03:21 We do not break it down into which industry they are working in, but service.
03:27 And have you ever come across, you must be getting reactions and the queries from the
03:31 different like among your consumer base, have you ever come across queries that reflect
03:36 the misconceptions people are harboring in relation to the investment and all of the
03:40 things?
03:41 All the time, I think mutual funds have not been missold as much as insurance has, for
03:50 example.
03:51 But people do try and find an edge.
03:59 I'll give you a very simple example and that will become very clear to you.
04:03 So direct plans and regular plans.
04:05 So for those who don't know the difference, in India, a mutual fund can be a direct plan
04:08 mutual fund or a regular plan mutual fund.
04:10 The regular plan mutual fund, the expense ratio has an inbuilt commission that goes
04:16 to the advisor.
04:18 So for example, what is that expense ratio?
04:21 Can you tell us?
04:22 So a regular plan expense ratio, say if it's around 2.25% or 2.5%, the regular, the direct
04:29 plan, the expense ratio for the same fund will be about, say, 1.5% or 1%.
04:35 So there will be a 1% to 1.25% differential in the expense ratio of a direct fund and
04:41 a regular plan fund.
04:42 So now what that means is that your direct plan fund NAV will grow faster than your regular
04:48 plan NAV because your direct plan is effectively returning 1% more or 1.25% more per annum.
04:56 All good, all great, good maths.
04:58 Now we have had many questions where a broker will come in and say the direct plan is more
05:04 expensive because its NAV is higher.
05:06 So you should buy a regular plan.
05:09 Now for a user who does not understand the compounding and the fact that the direct plan
05:14 NAV is higher because it has given higher returns and that gap is going to increase
05:18 because the direct plan is going to continue to give higher returns, will be sold on that.
05:23 They will say yes, direct plan has 30 NAV and regular plan has 25 NAV.
05:26 I'll buy the 25, it's cheaper.
05:29 So that still happens.
05:31 Very surprising, but that still happens.
05:32 So a lot of education is still around these minutes on how compounding works.
05:39 How just because it has a higher NAV does not mean it is the expensive product.
05:44 Actually the cheaper product and the higher NAV and that NAV gap will keep on increasing.
05:51 So this is one example.
05:53 So a lot of that still happens.
05:56 We keep writing a lot in our blogs or whenever we get a platform to talk about it on some
06:03 of the mis-selling that still continues.
06:05 It's coming down though.
06:07 I definitely think that with all the effort that we have spent, that the entire ecosystem
06:12 has spent on educating the end investor is working, will continue to work.
06:19 But you know there will always be challenges here and there.
06:23 Moving away from these investment questions, my next question is that we are seeing a downturn
06:28 in the economy, like the slowdown and we are witnessing that people are not spending much.
06:34 So are you seeing a downturn in investment as well because people are not spending?
06:40 So are you witnessing a sort of pattern in which people are not investing much?
06:44 So the data so far does not suggest a slowdown.
06:52 It is plateaued.
06:53 So if you look at the SIP investment, it is plateaued at around 8200 crores per month
06:59 for the last three or four months.
07:01 It's not going up as it used to on a month-on-month basis.
07:05 But people are still investing.
07:06 If we look at our own data set, we don't see people stopping SIP or people looking to withdraw
07:13 any more than the churn we used to see earlier.
07:16 There is a steady state churn.
07:19 People will stop one SIP, start another SIP or people will withdraw money because they
07:22 have cash flow needs.
07:23 That's why you are investing.
07:25 So we are not seeing any material jump on any of those numbers.
07:32 There was some data that came out that there is a consumption slowdown.
07:34 I think the story started with auto and then there was this whole big debate about Parle-G.
07:41 But then the recent data you have gotten around the whole festive season is that Chroma, the
07:48 year-over-year sales are up 20% in the festive season.
07:52 Maruti is selling some 60,000 cars over the past 10 days.
07:58 One of the constructs that we are now thinking of is something that happened in China is
08:02 happening in India.
08:03 So China has this November 11 sale.
08:05 It used to be called single-stay sale and now it's become this massive day where all
08:10 e-commerce sites and even offline retailers have their sales on that day.
08:15 And what was seen in China was that there was a seasonal shift in spending to align
08:22 to that sale.
08:23 So basically saying that if I want to buy a car in August and then I know that in October
08:29 a big sale is coming, will I postpone my purchase?
08:34 Will I wait for that?
08:35 And more likely than not, I will.
08:38 I will not postpone it from January to October.
08:40 That's too big a gap.
08:42 But one or two months people will wait.
08:45 So now the question for us that we want to get an answer for, and I think we'll have
08:49 to see at least three or four more data points for the trend to emerge, is whether what we
08:53 are seeing in the Antares is green shoots or is there a shift in purchase that is happening
08:59 because people already know that a discount season is going to come.
09:03 It has happened in China.
09:05 So people's behavior can materially change if there is a big event that is going to happen
09:11 and everyone knows it's going to happen.
09:13 In August you already know that the car you are going to buy will be running a discount
09:18 in October.
09:19 It's not a question of will they, won't they.
09:21 You know they will.
09:22 So you're better off waiting.
09:29 It's not very clear in our head that there is a structural slowdown yet.
09:33 I think a few more data points will probably make it clear.
09:36 So at this point of time, as Cuvada is a financial advisory platform, so at this point of time,
09:42 what would be your suggestion for people in which venue they should park their money in?
09:47 In which platform, in which venue they will get good returns?
09:51 What are your various suggestions to the people?
09:53 See platforms of course goes with that thing.
09:56 But I think the biggest thing here is have a well diversified portfolio.
10:02 If anyone who does goal planning on our platform, we recommend a five fund portfolio.
10:06 Two of them are index funds.
10:07 There is an international fund.
10:10 There is a value biased fund and there is a liquid fund, which is a debt component of
10:15 your portfolio.
10:16 So the first thing is don't have a very large portfolio.
10:20 If you have 15 funds, then it's very hard for you to track or make any sense of it.
10:24 Have four or five funds.
10:25 Ensure that the funds are taking different kinds of risk.
10:30 So simply put, four large cap funds is not adding any value to your portfolio.
10:35 So if you have one large cap fund, one mid cap fund, one ELSS multi cap fund, it makes
10:42 sense.
10:43 Do have some international exposure.
10:45 Do try and diversify to risk sources which are outside the country.
10:50 We include one international fund in our model portfolio.
10:54 Have some allocation to gold.
10:56 Gold has been known to be a very good diversifier, especially in bad times.
11:01 When the economy tanks, when the stock market is doing very badly, gold will shine.
11:05 Gold also has INR depreciation benefits because it's priced in USD.
11:11 If INR depreciates, the price of gold in Indian rupees goes up.
11:16 It balances out that INR depreciation.
11:19 Real estate is also a good part of your portfolio, but size it correctly.
11:27 Don't have 80% of your wealth in real estate because real estate has always been a multi-generational
11:33 asset class.
11:35 Someone in your lineage will get benefit from owning real estate.
11:40 For example, no one ever complains, my grandfather bought so many properties.
11:44 They might complain they bought a lot of properties and now nothing is appreciating.
11:49 But everyone whose grandfather bought a lot of properties are probably just rent seekers.
11:53 They're living out of the rental income and have great life.
11:56 So remember that about real estate, size it correctly.
11:59 15-20% of your portfolio makes a lot of sense.
12:02 But if real estate becomes 70-80% of your portfolio, then you're too dependent on real
12:07 estate performing in the near term, which it may not.
12:10 Over generations, it will perform.
12:14 So that's how we think about it.
12:15 I think have a well-diversified portfolio, have multiple sources of risk and size them
12:19 correctly.
12:20 And at last, I would like to ask you in next 3-4 years, where do you see Kuvera?
12:26 So we will keep on evolving.
12:29 We recently launched gold as a new asset class, digital gold as a new asset class on our platform.
12:33 We are going to keep on evolving on that paradigm.
12:36 We want to become a more holistic personal finance manager for our clients.
12:41 Something that ultra-HNI's had access to where there would be an individual who could come
12:45 in and say, you have so much in real estate, so much in gold, so much in stocks, so much
12:50 in international stocks.
12:51 We want to be able to do that for the mass market, where we should be able to kind of
12:57 tell them you have so much in FDs, maybe you have too much in FDs, maybe you want to reduce
13:01 it or maybe you have nothing in FDs or liquid funds, maybe you want to change that.
13:06 So we want to use technology to be able to bring that holistic overview of what your
13:12 portfolio looks like to any and every individual.
13:16 And I think that's where the biggest delta is in terms of how people manage their portfolios
13:21 or how people get better outcomes in their life.
13:26 Thank you Mr. Gaurav, thanks for talking to us.
13:28 Thanks Rajat, happy to be here.
13:30 (upbeat music)
13:33 (upbeat music)