Discover the key takeaways from our recent "Alternates Universe" Webinar with Sanjay Shah, Chairman and Managing Director of Prudent Corporate Advisory Services. Moderated by industry experts from Sundaram AMC, this session provides valuable Wealth Management insights.

Excerpts from the Webinar:

Vikaas Sachdeva expressed his admiration for Sanjay Shah's success, noting that Prudent Corporate Services had become larger than most Asset Management Companies (AMCs) in terms of Assets Under Management (AUM). He recalled Sanjay Shah's earlier days, remembering the cramped office space and how he managed operations from a small area. Sachdeva then asked Shah to share the origin of Prudent Corporate Services, including his thought process, vision, and focus when he started the company. He was curious about the market gaps Shah identified and how he built the ecosystem to address them.

The Genesis of Prudent Corporate Services

In response, Sanjay Shah thanked Vikaas Sachdeva for his kind words and shared the remarkable growth of Prudent. He highlighted that the company had set a target in the last two years to reach ₹1 lakh crore in AUM and ₹1,000 crore in SIP books by the end of the year. Thanks to the growth of the market, they surpassed their target earlier than expected. He explained that in 2014, Prudent’s AUM was ₹3,700 crore, and by March 2024, it had surged to ₹84,000 crore, a 22-fold increase. He also shared that their equity book had grown from ₹2,000 crore in 2014 to ₹80,000 crore in 2024, a 40-fold rise.

Shah further elaborated on his journey, explaining that as a Chartered Accountant, he began his career managing treasury operations at Jindal Worldwide. During his time there from 1997 to 2000, he interacted with senior fund managers and noticed a significant gap in quality financial advisors, which led him to start his own business in 2000 despite having a secure job. Initially, the focus was on the B2C segment, primarily in Gujarat, operating through branches and relationship managers. From the outset, they emphasized strong systems, processes, and technology.

Transition to B2B2C and Key Milestones

Shah mentioned that in 2007, Prudent shifted to the B2B2C model, recognizing that solving the challenges faced by smaller Independent Financial Advisors (IFAs) was key to growth. He identified a gap in the aggregator model as existing players had not developed robust backend technology. This realization led Shah and his team to build a platform that addressed these gaps, enabling them to support IFAs while they focused on client relationships.

A major turning point came in 2016 when Prudent launched Fund Bazar, a technology platform catering to both the B2C and B2B2C segments. This platform allowed seamless partner-initiated transactions, greatly boosting efficiency. By 2019, the company had evolved from being a mutual fund distributor to a comprehensive wealth manager, diversifying into areas like fixed deposits, NPS, stockbroking, insurance, and PMS distribution. This diversification was part of their strategic approach to offer a wider range of services as product differentiation became essential.

Overcoming Challenges: Transition to Public Limited Company

Vikaas Sachdeva was curious about Shah’s transition from a private company to a public limited company. He asked how challenging this journey was and how being listed on the stock exchange had changed their strategy or stakeholder interactions.

Sanjay Shah explained that moving from private to public was indeed challenging, but it was always part of their vision. When he started the business in 2000, he dreamed of listing the company one day, and even the name Prudent Corporate Services Limited reflected that goal. The company built a strong organizational structure early on, appointing a CEO in 2006, along with a CTO and CFO, and investing heavily in technology and team development.

In 2018, Prudent sold a 40% stake to TA Associates, a private equity firm, which brought immense strategic value to the company. The listing on the stock exchange further enhanced their credibility, transparency, and trust with stakeholders. While the listing did not change its core values, it pushed them to maintain the highest standards of governance and efficiency.

Supporting Mutual Fund Distributors (MFDs)

Arjun then joined the conversation, expressing his admiration for the early decisions made by Shah, such as appointing a CEO and other key leaders as early as 2006. He asked Shah to elaborate on the strategies Prudent had deployed to add value to Mutual Fund Distributors (MFDs) associated with the platform, acknowledging that MFDs were the backbone of Prudent’s growth.

In his response, Shah explained that Prudent’s approach had always been focused on identifying the challenges faced by MFDs, especially during the early phases of their business. He highlighted that MFDs, in addition to serving clients, often have many non-core activities to manage, which can be time-consuming. Prudent advised MFDs to outsource or handle these tasks efficiently so they could focus more on client acquisition.

Shah detailed several strategies that Prudent implemented to support MFDs. These included providing marketing tools, social media strategies, and internet-based communication methods to help MFDs acquire clients. Prudent’s platform, FundBazar, allowed MFDs to onboard clients quickly and efficiently through a paperless process. The platform also integrated various tools for portfolio creation, risk profiling, and goal-based investment planning. Furthermore, Prudent provided research-backed reports, recommended fund lists, and pre-configured investment combos tailored to specific goals like retirement or child education.

Additionally, the company offered customer reporting tools, a family mapping feature, and automated communication tools to enhance client engagement. Beyond mutual funds, Prudent also provided a wide array of products such as NPS, corporate fixed deposits, P2P lending, insurance, and stockbroking services. Shah concluded by mentioning that Prudent also provided business intelligence tools like SIP renewal reminders and AI-driven customer lead generation to help MFDs enhance productivity and focus on core activities.

HNI Servicing and Prudent's Approach

Arjun praised Prudent for its foresight in identifying market trends, particularly its focus on High Net-Worth Individuals (HNIs). He inquired about the ways Prudent assisted Mutual Fund Distributors (MFDs) in adapting their strategies to meet the sophisticated needs of HNI clients, especially in offering products like Portfolio Management Services (PMS) and Alternative Investment Funds (AIF). Additionally, he sought insights into the challenges faced during this transition.

Prudent’s Transition Process for MFDs

Sanjay Shah explained that Prudent faced significant hurdles in introducing PMS and AIF products to MFDs. The first challenge was gaining access to these products, as not all manufacturers were willing to onboard distributors. Furthermore, these products required a deeper understanding and proper training to ensure their effective presentation to clients. To address this, Prudent shifted the focus of MFDs from merely distributing mutual funds to positioning them as wealth managers. This shift in identity helped MFDs present themselves as providers of comprehensive financial solutions, aligning with the evolving needs of HNI clients.

Strategic Partnerships and Training Initiatives

Prudent partnered with approximately 34–35 PMS and AIF providers, curating a set of offerings that were easy for retail clients to understand. The company focused on avoiding complex or exotic products unless specifically requested by clients. To further empower MFDs, Prudent worked closely with manufacturers to provide resources, workshops, and regular updates. Additionally, Prudent’s support team was available to assist MFDs during client closures, ensuring they received guidance throughout the process.

Overcoming Challenges in Educating MFDs

One of the most significant challenges Prudent faced was educating MFDs about the importance of diversification and equipping them with the tools needed to engage HNI clients effectively. However, by positioning itself as a partner in the growth journey of MFDs, Prudent successfully built trust and fostered long-term relationships with its distributors.

The Growth of PMS and AIF Assets

The efforts to adapt MFDs for servicing HNI clients yielded impressive results. Prudent’s PMS and AIF assets under management (AUM) grew significantly, reaching approximately ₹14,500 crore, a notable increase from ₹8,000 crore just a few years ago. This growth demonstrated the success of Prudent’s approach in upskilling MFDs and expanding their reach into the HNI market.

Observing Changing Investor Behavior

Vikaas Sachdeva shifted the focus to investor behavior, particularly the growing interest in alternative assets such as PMS, AIFs, and REITs. He asked Sanjay Shah to share insights into emerging trends among investors, especially those transitioning from traditional mutual funds to these alternatives.

Key Trends in Investor Behavior

Shah noted that there were two key dynamics influencing investor behavior. First, the selling capability of advisors significantly impacted the adoption of PMS. Advisors handling portfolios exceeding ₹50 crore were better trained to pitch these sophisticated products to clients. Second, there was a growing organic demand from clients, especially those with an AUM exceeding ₹5 crore, who were actively seeking diversification through PMS and AIFs.

Affluent Clients and Aspirational Investment

He explained that investors, particularly affluent clients, were more likely to consider PMS as part of their portfolio when their AUM exceeded ₹5 crore. Rather than abandoning mutual funds entirely, these clients sought alternative investment options to diversify their portfolios. A key factor in this shift was the desire for products that offered unique value propositions, distinguishing them from their existing investments in mutual funds.

Geographical and Demographic Trends in Investment Behavior

As for geographical trends, Shah observed that affluent investors were increasingly inclined to diversify into alternative assets like PMS, AIFs, and REITs. These investors were not solely concentrated in metropolitan areas but were also emerging from Tier 2 and Tier 3 cities, indicating a broader trend of wealth creation across the country.

Passive Investing and the Role of Distributors

Vikaas Sachdeva also raised a question about the growing popularity of passive investing, particularly through ETFs and index funds. Shah addressed this by citing industry figures, noting that the ETF and index fund segment had seen significant growth, constituting around ₹8.5 lakh crore of the industry’s ₹67 lakh crore AUM. However, he emphasized that while passive funds were becoming more popular, the role of advisors in identifying the right schemes for clients remained essential.

Balancing Traditional and Passive Investment Products

Prudent’s strategy was to balance passive investment options with traditional advisory-driven products. While the demand for passive funds like ETFs and index funds was increasing, Prudent continued to advocate for higher-margin options that allowed advisors to deliver value through tailored financial advice. The company also recognized that, in the future, there would be a greater demand for passive products, and thus, it was preparing to meet that demand by offering cost-effective options like index funds with low expense ratios.

NRI Investments in India: Unlocking Untapped Opportunities

Arjun began by asking Sanjay Shah about the growing trend of non-resident Indians (NRIs) allocating significant funds to India. He wanted to know whether there were specific regions or sectors globally that presented untapped opportunities for India.

Sanjay Shah explained that NRIs, who have settled abroad, are increasingly looking towards India as an investment destination. The primary driver behind this shift is the emotional connection many NRIs have to India, with aspirations to return and settle there eventually. Additionally, India's robust performance over the past few years has strengthened its global positioning.

A key development contributing to this trend is the operationalization of GIFT City, which has made it easier for NRIs to invest in India in dollar terms. Previously, rupee volatility had been a major hurdle for NRIs, as the depreciation of the rupee made dollar-adjusted returns less attractive. However, with the option to invest in dollar-denominated instruments through GIFT City, NRIs can now shield themselves from rupee volatility and allocate funds with greater confidence.

Domestic Investment and Geographical Diversification

Arjun then asked about the importance of geographical diversification for Indian investors. He questioned whether Indian investors should consider international diversification or focus solely on opportunities within India’s emerging market.

Sanjay Shah emphasized that while India contributes around 4% to the global GDP, the world economy offers diverse opportunities that investors should not overlook. He suggested that for retail investors just starting their investment journey, it would be prudent to focus on the domestic market. Understanding international markets requires expertise, and novice investors might find it easier to gain returns from domestic assets initially.

However, for seasoned investors or those with growing asset bases, geographical diversification becomes essential. Shah pointed out that several funds and indices offer exposure to international markets, such as U.S. equities, European markets, or Brazilian funds. Indian investors can access these international assets through rupee-denominated mutual funds, which provide dual benefits: exposure to global markets and the possibility of gaining from rupee depreciation.

For those looking to invest directly outside India, Shah mentioned the Liberalised Remittance Scheme (LRS) and GIFT City as viable options.

Practical Examples of Investment Diversification

Arjun requested some practical examples of how investors could approach diversification.

Shah shared that his company manages two types of retirement funds—one with a global allocation and one without. Even within the global allocation fund, they recommend limiting exposure to international assets to 10–15%. This balanced approach helps investors benefit from both domestic growth and global opportunities.

The Future of the Wealth Management Industry: Growth and Transformation

The conversation then shifted to the future of the wealth management industry. Vikaas Sachdeva inquired about the potential evolution of the industry, considering factors like AI, global products, and alternative investments.

Sanjay Shah offered an insightful perspective, drawing parallels between India’s current growth trajectory and the U.S. from 1980 to 2000. He pointed out that the U.S. witnessed significant growth in its wealth management sector during that period due to the rise of the 401(k) system and a booming economy. Similarly, India is now at an inflection point, with projections suggesting that the country’s per capita income could grow seven to eight times in the next 20 years.

Vikaas Sachdeva expressed his excitement about the potential for the wealth management industry’s growth in India.

Factors Driving Growth in Wealth Management

Sanjay Shah highlighted several factors that would contribute to the anticipated growth of India’s wealth management industry. A key factor is the increase in household numbers, with India’s households expected to grow from 30 crore in 2018 to 40 crore by 2030. Furthermore, the country’s demographic shift, with a growing number of young, economically active individuals, is expected to drive wealth creation in the retail mass affluent segment.

Shah also noted the crucial role of independent financial advisors (IFAs) and mutual fund distributors (MFDs) in bringing this retail segment into the mainstream investment landscape.

The Role of Technology in Wealth Management’s Future

Finally, Sachdeva asked about the role of technology in the evolution of the wealth management industry.

Shah affirmed that technology would play a transformative role. Advances in AI, data analytics, and digital platforms are already revolutionizing the way financial advice is delivered. With the structural shifts in income levels and investor demographics, technology will significantly enhance the growth trajectory of wealth management in India.

Shah was optimistic about the future, stating that a 56-fold growth in India’s wealth management industry over the next 20 years seemed not only plausible but a logical progression given the current trends.

Shah covered all the topics mentioned above in-depth and answered questions from the audience toward the end of the session. For more such insights on this webinar, watch the recording of this insightful session through the appended link below.

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