What is fuelling the growth? How can digital public infrastructure & fintechs accelerate wealth creation among the masses? What are the unique opportunities & challenges for the ecosystem to flourish?

The Highlights

Impact on Capital Markets

· India’s wealth creation story is structural, not cyclical. Transitioning from savers to investors.

· Meteoric rise in Public & Private equity markets, due to fractionalization & lower entry barriers.

· Personalization using AI can unlock long term wealth creation.

Impact on Retail Investors

· Retail investors are entering markets with high savings, low leverage, and rising discipline.

· Capital markets are becoming the default transmission layer for household wealth.

· Retail investors are not only from urban cities, 55-60% of new investors are coming outside of B30 cities.

Impact of Technology

· Technology has a compounding effect on the investing momentum, however key drivers continue to be macro-economic factors i.e. Income level growth, inflation, interest rates etc.

· Huge opportunities for tailored & personalized financial products. Client servicing will be key, but technology can bring scale & efficiencies.

Are the emerging market conditions structural and favourable for long term investing?

is a notable quote used to describe the Indian saving mentality and investing approach.

  Bimal Jalan,

Former Governor, Reserve Bank of India

  C Rangarajan

Former Governor, Reserve Bank of India

  Bibek Debroy

Chairman, Economic Advisory Council to the Prime Minister

The resilience of Indian financial markets is a well-established financial behaviour. India and China are large economies with high household savings rate. High household savings rate is a key indicator of financial health of an economy as it provides the cushion during market volatility, lesser dependence on foreign flows and patient capital for deploying over long horizons.

In comparison with global peers, China is the only other country with higher household savings (HSA) rate 35%, India’s HAS is ~25% much higher than western economies.

Indian household savings have remained steady over long periods, these savings especially parked in conservative asset classes such as fixed income instruments, CASA, life insurances, provident funds etc are being invested in riskier and high growth asset classes i.e. Capital Markets, Private Equity, Alternate Investments etc.

India’s capital flow into equity and Mutual Funds have overtaken China and accelerating to reach the stable state mix of western economies. This progressive shift in investing approach is validation of a strong and resilient investing climate.

There are various underlying factors contributing to this structural transformation, let us dive deeper to understand this further.

There are significant macroeconomic factors that underpin the growth of the wealth creation.

· Demographic Scale + Growth: With 1.5B people and ~6% annual GDP growth, India remains the fastest-growing large economy, creating outsized opportunities for savings and long-term wealth creation.

· Digital Infrastructure Advantage: Platforms like UPI, Aadhaar, e-KYC, and digital lending have built a scalable foundation for financial inclusion and capital access accelerating upward mobility and investor onboarding.

· Reform-Driven Access: GIFT City’s IFSC has streamlined cross-border investing with simpler regulation, multi-currency flexibility, and tax breaks making India more accessible to global capital.

· Corporate Earnings Power: Over 15 years, listed Indian companies have grown profits ~6x (13–14% CAGR), doubling the profit-to-GDP ratio and shifting the earnings mix toward private capex-driven sectors.

· Global Macro Tailwind: High inflation, slow earnings, and geopolitical fragility in developed markets are pushing capital toward high-growth, stable economies positioning India as a preferred allocation.

Rise of Equity Markets, SIP, Mutual Funds

Financial awareness & Investor education: “Mutual Funds Sahi Hai” campaign launched in 2017 under the guidance of SEBI has played a large role in investor awareness. The effort significantly boosted retail investor participation and SIP adoption since then.

It is very clear that sustained educational initiatives have resulted in accelerated growth of capital flows into mutual funds and capital markets. This has provided much needed liquidity of listed companies to raise capital from domestic investors. This momentum is not cyclical, but structural.

· Small Ticket, Big Impact: SIPs have a disciplinary impact on long term investing.

· Young Investors, Big Shift: Millennials, Gen-Z are entering the investing sphere earlier than previous generations.

· Rise of New-Age Products: MFs, Listed & Unlisted equities, IPOs, AIF, Bonds, Crypto the options are exploding.

· Advisory: Rise of trust in professional wealth managers and financial planners is a leading indicator of formalization of investing culture in India.

· Equity & MF in spotlight: Mutual fund inflows grew 6.5× from FY20 to FY25; direct equity 2.7×. Equity now accounts for ~10% of household financial assets vs. ~2% a decade ago. Demat accounts have quintupled in 5 years.

· Alternatives & IPOs booming: AIF commitments crossed INR 14 lakh crore in 2024, driven by HNIs and family offices. IPO fundraising touched INR 1.2 lakh crore in FY24, with retail participation at all-time highs.

· Traditional assets lagging: Bank deposit share in household assets dropped from 56% (2014) to ~41% (2024). Real estate and gold remain large, but their dominance is slowly eroding.

· Behavioural shift underway: Indian savers are cautiously diversifying from safety-first assets (FDs, insurance) to market-linked options (MFs, AIFs, IPOs), signalling deepening financialization.

Digital transformation in financial services

· Apps: The streamlining of workflows in personal finance have been greatly simplified by the role of apps. What used to be a cumbersome paper-based forms and multiple visits to the branches are done away by few clicks. We have all witnessed the transition from online banking to mobile banking thanks to the penetration of mobiles and cheap internet.

· Standardization: Customer onboarding is standardized based on Aadhar, PAN. All folios are linked with depository service providers and intermediaries i.e. CDSL, NSDL, MF central etc. This has enabled all retail users to visualize their personal portfolio on a single dashboard and evaluate their performance. UPI has enabled micro transactions

· Fintechs: Fixed income, Equity, Mutual funds, Insurance, Loans are all digitized and reduced the effort of accessing and operating the investments at very low or no cost of transaction, thanks to the zero MDR policy by the central ministry. This has significantly increased the investor participation from all walks and democratized investments. Digital distribution platforms have penetrated tier 2/3/4 cities with ease and paved way for personalized financial services to young investors.

· Embedded finance: The ubiquity of apps & ability to integrated with APIs has led to the creation of an ecosystem of financial products & services. This infrastructure provides opportunities for embedding affiliated products at run time i.e. check-out, landing pages to investors in the user journey. This eliminates the need for reinventing the wheel every time and achieve scale via partnerships.

Personalization at Scale - From Inflection to Acceleration

For the sake of this discussion, we will not delve into institutional investors as much has been written on their investment strategies and thesis by various industry experts. We will focus more on the evolution of the investment landscape for individual investors.

We believe that currently the investment climate in India is at a pivotal stage ready for a long bull run and that presents the investors various opportunities and challenges to be addressed in the long term.

The 20% Tipping Point

History shows a clear pattern: when mutual fund AUM crosses ~20% of GDP, markets enter a long, structural growth phase.

o   US (early 1990s): At ~20% AUM/GDP, the MF industry began a multi-decade run, compounding ~10% annually and eventually crossing 120% of GDP, driven by 401(k)s and retail advisory expansion.

o   Developed APAC (early 2000s): Australia, Japan and South Korea crossed the same threshold and saw 15-18% CAGR in MF assets, powered by pension reforms and digitised access.

o   India (now): India sits just 0.1% below the 20% AUM-to-GDP mark, a level that has historically signalled structural take-off in household financialization.

In this backdrop, we delve deep into some of the structural issues i.e. financial planning, wealth management, role of technology etc. that need to be addressed to catalyse retail investing globally & more so for India.

The major differences between UHNIs and Small retail investors are ticket sizes, risk appetite, investment products. The U/HNI pool belong to a specific investor classification known as “Accredited Investors”. Typically, they can be individuals whose annual income are above 2 Cr INR or a net worth above 7.5 Cr INR. Corporations with a net worth above 50 Cr INR also belong to this category.

The classification is important because the nature of client advisory, portfolio management and access to curated financial products i.e. PMS, AIFs and other riskier securities.

SEBI, the financial investment regulator in India defines policy, rules and regulates the financial intermediaries accordingly to protect the interests of both investor groups.

The regulatory aspects and investor profile widely influences the approach and positioning of products and services catered to them.

Financial intermediaries, fintechs and service providers of small retail investors typically follow standardized and scalable approach to reach large customer pools. This is also limited due to the unit economics of selling to small retail investors as the incentivization in the form of commissions are extremely low (~1-2% of AUM). Hence mutual funds, insurance providers, fixed income instruments create a generalized financial product to suit to a wide audience.

This approach takes away the personal touch and customization required to optimize and provide a wholesome financial solution of an individual investor.

Technology has added lot of value in the form of automation of customer onboarding, KYC, e-NACH, integrations with broking platforms, depositories etc. Tech has eliminated significant manual effort in this area in the last decade, credit must be given to the policy imperatives, adoption by regulators and customers.

The results are very clearly indicated in the meteoric rise of inflows into mutual funds, stock markets, crypto currencies, insurance penetration etc.

The diagram below explains the divergence between the level of personalization in financial services provided to small investors versus wealthy ultra and high net worth individuals.

Personalization is a factor of risk, as it involves regular advisory, balancing and rebalancing of portfolio, the associated risk management, compliance and taxation of investors.

Foundations of personalization

In the digital era, information exists in various fragmented systems and platforms, various initiatives have certainly improved the accessibility of information i.e. Account aggregators (AA, CAMS, Finvu, Kfin).

Utilization of Account Aggregator (AA) framework since 2021

The penetration is still quite low at present and increasing very fast, however the real challenge of personalization relies on the following.

· Dynamic profiling: The incoming investors are profiled based on basic financial information i.e. Age, Gender, Marital status, income level mostly at the point of onboarding to generate the investment roadmap, the limitation of this approach is the lack of lifestyle and investment goals which are evolving regularly, but the onus is on the investor to make the decision of changing the investment philosophy over the lifetime.

· Customer knowledge beyond financial information: The financial inputs received by the investor is only relevant for asset benchmarking & optimization. Other behavioural information about spending patterns, health, travel, tax savings, estate planning which are needed for a wholesome wealth advisory and management is often overlooked.

· Actionable insights: Excluding discretionary PMS, Hedge funds, SIF, AIFs the decision making of balancing portfolio still exists as a recommendation or advisory by the fintech platforms. This is partly due to the regulatory framework of protecting small time investors avoid the risk of mismanagement and misaligned incentivization from exuberant fund managers. The key missing piece of the puzzle is the lack of “Liquidity profiling” based on the need of the investors and personalizing the asset mix accordingly.

· Accountability & Incentivization: Majority of investment platforms currently operate based on the distribution commissions received from the AMCs. Therefore, the platforms are incentivized to increase AUMs of better paying AMC’s than the actual need of their investors. Distribution platforms operate in razor thin margins and hence do not have the privilege for providing personalized support or advisory services. The model works well for large pool of retail investors who look to diversify their investments rather than the emerging “Mass Affluents” who need personalization for long term outcomes.

· Privacy: Access to personal information beyond basic financial information is a sensitive area where users may not be comfortable to share. This creates a unique challenge of crafting personalized investment strategies at scale while creating a reliable safety net.

Future roadmap of Personalized Investing

The future of retail investment platforms relies on balancing “Scale” with “Personalization”. The current approach of portfolio management at scale works as below.

Scale = Automation of manual tasks (digital workflows) + Standardized rules for customer cohorts.

Standardized rules are generally implemented as business rule engines, robo-advisors, quantitative models based on attributions. The missing piece of the puzzle is the scope of personal attention to individual investors. Wealth management business is based on trust and relationship. How do wealth managers solve for this?

Artificial intelligence (AI) has been in the limelight for the last 4-5 years with the introduction of LLM’s into the mainstream. While every model is trying to outdo the others on various facets speed, accuracy, price, accessibility. The real test is in adaptation to real use cases.

In this case, the rise of artificial intelligence (AI) will be tested more in the value it delivers than the underlying technology. The future investors are young, digitally native, well informed and demanding. Personal finance will have to be more contextualized and nimbler.

Customers will expect differential value than traditional marketplace models for investment. As it can already be seen, Players like zerodha have stopped charging broking fees for trade execution, this will only grow further as workflows become streamlined and technology becomes commoditized.

The pricing and incentivization models will evolve more towards performance-oriented outcomes like PMS & AIFs with more responsibility on the platforms. It will not be surprising to note a “Per model per customer” variant emerging soon in the investment landscape.

Agentic frameworks for generating user specific documentation, policy, risk management, embedded research, are low hanging opportunities ready to be introduced to the mainstream.

Algorithmic modelling based on client’s risk appetite, Access to private market opportunities, Fractionalized stacks, Hedging will be key areas of innovation with the advent of AI.

Big players are already making the play towards micro personalized investing, Jio Blackrock recently announced the launch of digital PIA (Personalized Investment Advisory, Economic Times). Investors can start with a minimum investment of ₹10,000, the company said. Advisory fees are set at ₹350 per year, or 0.35% annually for assets under advisory above ₹1 lakh, with an introductory free three-month period.

Otto money has raised 1.3 million USD to build AI models to provide personalized financial solutions and not focus on the distribution layer.

The transition from pure play distribution to Wealth Advisory & Management space will continue to be long gestational play, as the core drivers will be real growth in income levels, inflation, interest rates & other macro-economic factors, technology will be a efficiency tool for bringing efficiency, improving accuracy and transparency.

The role of technology will enable faster discovery, niche research, quick order management, fund accounting & portfolio management while bringing transparency for quick decision making. This will allow more specialized and stratified set of wealth management and advisory services across investor segments.

This trend is clearly emerging as a whitespace and looking to provide opportunities for financial investment platforms and wealth managers to differentiate themselves from being pure play advisors or core distributor of financial products to technology led platforms and product manufacturers.

This is an interesting phase of evolution to wait and watch as newer operating models challenge traditional frameworks. Will the AI buzz capture the imagination of the next generational investors?

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