CJ George is the founder and Managing Director of listed-brokerage Geojit Financial Services. French financial major BNP Paribas acquired a large stake in the firm in 2006. He talks to Nesil Staney on the quick and sharp rise of discount brokerages, regulatory environment, trends, and the industry’s reliance on products distribution as a hedge to capital markets cycles. Excerpts:
1. Now that Groww is a 1-lakh crore listed entity and Zerodha is the most valued unicorn, how do you view the stellar rise of discount brokers?
The discount brokers, particularly the top three to four will continue to do well as they focus on trading which is a technology business rather than investing. There will always be a segment of population in any economy, who wants to take high-risk bets. Discount broking offers an excellent, cost-effective platform for that. While trade is an end for discount brokers, for us, trade is only a means to an end, the end being the creation of wealth for our clients. So, both segments serve different needs and hence will have a different growth path.
2. How is your products distribution business augmenting the brokerage?
In FY 2020-21, we heavily relied on equity and equity-related business, which accounted for 75% of our total income. In Q2 FY 2025-26, this business contributes only 47% of our total income. The shift has been towards financial products and Portfolio Management Services (PMS), which now contribute a substantial 41% of our total income. Over the past five years, we have strategically transitioned from transaction-based assets to recurring revenue-based assets, enhancing our business stability and growth.
Our third-party distribution business has been a significant contributor to augmenting our brokerage operations. It acts as a cushion whenever capital markets cycle hits us.
George’s advice to young investors
3. What is your advice to young investors? How much should they ideally allocate to MFs and ETFs?
We encourage young investors to adopt a long-term investment mindset to build sustainable wealth. Over the years we have conducted thousands of investor awareness classes among young investors towards building a young and vibrant investing community around us. India’s stock market performance is expected to re-rate in the short to medium term as soon as a tariff agreement with the US is announced.
It is advisable for young investors to start investing in Systematic Investment Plans on a regular basis irrespective of market cycles. Even small monthly investments can compound significantly over time to create wealth. Those with high risk tolerance can opt for an aggressive portfolio and those who do not want to take much risk in the equity markets can go for lower allocation to equity. However, for any young Indian investor, a high exposure to equities will help them in the long run to create substantial wealth.
Young investors can also opt for equity portfolios, especially model portfolios that are available in various platforms these days fitting their risk appetite. They can make changes to their portfolios and monitor them regularly. Geojit also has robust curated baskets of stocks – Smartfolios, which have been very well received by many young investors.
4. What are your strategic goals? How are they aligned with equity markets performance in the next few years?
Right from inception, Geojit’s purpose of existence has been to create wealth for our clients, and our strategic goals are aligned to this. We plan to continue assisting our clients through relationship-led investing and be their wealth creation partner rather than just offering trading platforms. This is one of the reasons why Geojit stayed away from actively converting our clients to derivatives traders, a majority of who have seen their wealth destroyed. Our focus will be on a real wealth model rather than a transaction-based model.
With a focus on making capital market accessible to potential young investors from Tier 2 and 3 cities especially in South India, Geojit is expanding our presence by opening easily accessible small branches.
5. What operational changes are required to comply with Sebi’s new regulations on technology? Have traditional brokerages fully modernized to advancements like algorithmic trading and mobile-first platforms?
Cost of compliance has gone up significantly post the regulatory changes. We agree with the regulators that these changes are of extreme importance for the running of a technology platform. A brokerage that has not invested in advanced cyber security systems capable of monitoring algorithmic trading patterns and securing mobile/platform access would be in direct violation of these regulations and unable to fulfil its reporting obligations.
Along with this significant cost of investment in technology the general cost of compliance has also gone up leading to a potential consolidation in the broking industry. This can ultimately result in higher cost for investors.
George on targets for their wealth management business
6. Is your wealth management business targeting HNIs and regions beyond captive brokerage clients?
Our private wealth business is relatively new, and we are building a long-term business model, which is an organic extension of our mass affluent retail wealth business. Over time, our retail wealth clients have created significant wealth, and this has changed their risk appetite, which in turn has created a demand for new, sometimes more complex products and services. We are building this business organically and we are seeing reasonable growth in AUM and the number of clients.
7. What has led to recent surge in MTF activity across the brokerage industry?
The leverage lost in derivatives is now flowing into MTF, driving some growth across the broking industry in this particular segment. MTF comes with its own benefits. For investors, MTF provides holding power with transparent funding, not just a derivative bet, while brokers earn recurring income and remain aligned with regulatory norms.Industry wide, MTF books have surged to nearly ₹1 trillion, absorbing much of the leverage demand.
At Geojit, we offer stockWallet, a product for traders, wherein, they can access recommendations with clear targets and stop losses. It gives them flexibility and reduced risk.
8. How will distributors absorb the hit from Sebi’s change in MF fee structure?
Traditional retail wealth players have higher costs compared to the deep discount online broking players as well as the platform providers for direct distribution of mutual funds. These players take the cost of developing the market by converting savers into investors by handholding them, advising them, opening branches near potential investors etc.
While this being the case, Sebi proactive changes in the commission structure of Mutual Funds are a big concern for a large number of small distributors. These entities are necessary and have to be encouraged as the last mile delivery partners for investors.
If the commission structure is reduced on a regular basis because of regulatory changes, the distribution business is likely to be eventually concentrated in the hands of a few national distributors with significant AUM for whom the marginal cost will be less.
For the benefit of investors and Indian economy, it is important to have many competing distributors in the interiors of the country, with full-fledged support system, and a genuine share of the revenue flow. So, regulatory interventions in their commercial operations may be considered as high risk for the future of MF industry in terms of market depth.
Even in the case of depository participants, Sebi had mandated that free service has to be extended to investors with less than Rs.10 lakh holding which is something very strange in a free market like economy. Most of the clients of a new DP will be small clients so they will not seek to develop the market or develop this business unless they are able to self-sustain.
So, this again leads to the concentration of retail custody and broking business into the hands of a few, eventually that will increase the cost of servicing those clients who hold more than Rs 10 lakh. It is important to consider that equity investors are those with the intelligence and knowledge to go through the commercial tariffs of various entities and choose the transaction cost that suits them. In a free market this kind of interventions with commercial tariffs are likely to create a distortion in the market dynamics.
9. Can Sebi use investor education funds more efficiently ?
Sebi and stock exchanges have been doing an exemplary work in terms of extending investor education. From my experience, what I have seen is that all those education exercises, other than advertisements, are consumed mostly by the same set of investors who have already invested in the markets. The message is largely fashioned to educate the investor that Sebi is watching, Sebi is regulating, Sebi is in control, so Sebi will protect.
There is scope for a change in the messaging. While it is true that Sebi mandate is to protect the investors, the investors should understand that it is their primary responsibility to protect their investments and Sebi responsibility is secondary.
With the current messaging tone, whenever there is a financial scam of any kind, there will be a tendency for millions to write to Sebi, asking the regulator to solve all their problems. This is because they believe that Sebi will protect them, regardless of their wrong choices or lack of understanding of the capital markets. Sebi may consider promoting ‘buyer beware’ messages, if not, when any scam happens in the country there will be a tendency to blame Sebi and the market participants generally.