Financial planning and goal-based investing are topics most talked about for time immemorial – albeit in a hushed manner. Despite being the cornerstone topics of finance, they are seldom discussed in terms of actionable, partly because of the ‘go with the flow’ thought process. India is currently witnessing an equity wave that started in 2014 – along with the bull market emergence. Despite the pandemic, equity participation skyrocketed – surprisingly owing to the same factor.
As per global financial literacy survey done by Standard & Poor, only 24 percent of Indians are financially literate. That means 76 percent of our Indian population is not aware of even the basic financial concepts.
Assuming that half the financially literate are doing planned investments — only 12% of the population – the remaining 88% are either unaware, or have no plan to their investment strategy.
Financial wealth in India grew from 2015 to 2020 by 11% p.a. to $3.4 trillion and is expected to grow by 10% p.a. to $5.5 trillion by 2025, according to a new report by Boston Consulting Group (BCG). Funny, isn’t it? For a country that has now amassed a formidable investor base and equally formidable wealth – The topic of goal-based investing is yet to make its presence felt.
As of January, India’s total demat accounts stood at 51.5 million, compared to 40.8 million at the end of FY20 and 35.9 million in FY19. While the investor base and participation increase, thoughts about what goals are to be achieved also form simultaneously. After all, it is the inherent demand and aspiration of investors that make them queue up and financialize their assets.
At the same time, the need for goal-based investing becomes relevant. Today’s investor requires capital appreciation for a specific purpose – be it a vehicle, a home, an expensive vacation, marriage, retirement, children’s needs, sabbaticals etc. The YOLO phenomenon has truly kicked in. This mindset creates an automatic need for specific requirements of investors, young and old.
Eventually, the investors of today will get experienced as financial markets evolve. Along with this, their objectives will change over time too. So will aspirations and priorities. It’s at this stage that simple investment advice will not suffice. They will need clear cut asset allocation advice, deployment strategy and most importantly- the ability to choose which goals they wish to achieve with invested capital. Gone are the days of seeking advice from the elderly uncle about which stocks to purchase. Today’s investor craves time and attention to his/her portfolio, to be tailor made as per their personal objectives.
Human advisors for time immemorial have played and will continue to play a role. What if the right data and platform overtakes this very aspect ? Eventually, investments are to be purely data driven, while the investor focusses on their life instead. Technology can step in to help individuals design portfolios, save costs, optimize returns, reallocate basis situation and filter out good opportunities from bad. Quick accessibility and decision-making are the inherent need of the hour, for the convenience hungry, low on time consumer. Regular platform interaction that creates actionable insights and information on demand is a magic recipe for a new-age financial advisory platform. If this is the sweet-spot for the perfect investment plan, then we are in for a ride.
This leads to some key takeaways:
- Creation of a financial plan takes precedence over plain investing
- Goal identification and personal objectives to be fulfilled with wealth in hand today
- The ability to change objectives at will and receive unhindered support from the platform
- Investors must find solutions that solve not just their money, but also one which communicates with you like a human advisor
- Demand for creation of a one-stop shop for investors, where they can dump all financial data and allow the platform to meaningfully analyse.
(By Yash Poddar, Product & Marketing Strategist at GoalTeller)
