With the advent of Paytm entering the stock-broking space via Paytm Money, the discount broking space is gaining traction. Below are my thoughts how Paytm Money (obviously not restricted to Paytm Money alone) could innovate purely on my understanding of the traits, pains of individual investors over the last couple of years, largely based on myself running my own Equity Advisory business as a side-hustle. Since Wealth management, especially Equity Advisory & Equity Brokerage business is built on trust over the long term, some of the below may take time to bear fruit, however, feel strongly about it.
- Stock Portfolio Due Diligence: Investors who invest in the equities are either first timers, re-entering, usually after having burnt their fingers or have been veterans. While the first timers need a different approach, however, the ones who have already incurred losses in the past, they have their own baggage; they have their own existing portfolio, which they would want some expert to have a look and conduct a dude diligence. This equity advisory does 3 things:
– Enables these investors to look at their stocks a little more objectively
– Gives them some liquidity when they sell the old portfolio, thereby enabling them to trade on the platform immediately.
– Considering that they would have shared their existing portfolio, Paytm Money would be able to gauge the risk profile of the customer without he actually filling up the details (We all know we tend to over-estimate our strengths and play down our weaknesses)
More importantly, it enables Paytm Money to build trust, since these investors have already shared their portfolio details with it (if not full)
2. Training / Advisory: With respect to first timers, one can segregate the customers into couple of buckets:
a. Customer who wants to understand in-depth: There should be training / advisory to be provided more from fundamental analysis. This can be synchronized with some of the articles which are written about companies; however, some basic stuff like Fundamentals of Investing, Accounting concepts can be provided as well (Tie-up/In-house, etc.). This is the Do-it-Yourself type.
b. Customer who wants to revalidate the stock which he has already chosen/got a TIP from someone, etc.:
i. Can Paytm Money share how many analysts are giving buy/sell/hold recommendations of the stock.
ii. Can Paytm Money provide a note on the company (apart from company profile) some like this: Have you considered the following? Viz. probing questions, with answers, etc.
1. Did you know management sold XX shares in the last quarter / year?
2. The profits of the company were down due to XX, XX and XX
3. The company has a debt of XX on its Balance sheet; considering the cash flows and current environment, would the company be able to repay the current portion of its debt?
iii. Can Paytm Money provide a platform wherein analysts/investors can ask/resolve queries – semi Quora kind of platform, etc.
3. Prop Book: Most people don’t know which stock to choose and how much to invest in. Having calculated the risk profile/risk assessment of the first timers, Paytm Money can showcase its own prop book (we eat our own pudding!!) and showcase performance/thoughts, etc.
Stocks selected in the prop book run through a screener, which is made accessible to all.
The first-time user at least gets some direction to begin with and eventually builds incredible trust with the first-time investors.
4. Financial Freedom Journey, rather than Product sales in terms of MF/Equity trading, etc.:
Can customized Wealth plans be generated for the investor, which basis his age, profile, demography, risk aversion, etc. can be drawn of a yearly basis? This could take into consideration the customer’s financing needs as well, which comes up either unexpectedly or in an unplanned manner. (Funding obviously opens a different revenue stream) Long-term plans and goal completion dashboards can be put forward, enabling the customer to usually take a long-term view.
5. Collaboration with Content Providers: Can Paytm Money look at collaborating with content providers or build content in-house, global and local, enabling it to become a financial eco-system.
6. Invest in outside markets: Can Paytm Money look at providing this opportunity to investors who want to invest in markets outside of India?
7. Side-car Investing: Can Paytm Money look at providing advice based on what some of the marquee PMS houses are recommending.
a. This can either be democratized by suggesting to the entire masses
b. or can be made available only to select few.
A lot of investors try and emulate side-car investing, basis what some of the marquee investors buy or sell. This obviously needs to come with disclaimers, etc. and need an understanding of the reason of the trade by the marquee investor and at what price the stock was purchased, etc.
8. Thematic Advisory: While MFs come out with sector specific MFs, can Paytm Money look at providing advisory based on various themes, sectors, etc.
Some immediate steps/improvements which can be looked at in the Paytm Money app are:
1. Fundamental Numbers: The app only provides technical charts; financial numbers should be made available. Also, valuation metrices should be made available.
2. Watch-list may be tweaked: The Watch-list should have all stocks getting displayed as a default, other parameters like high/low can be shown subsequently.
While scaling up is the key, I also believe in what Brian Chesky of AirBnB, had said “In order to scale, you have to do things that don’t scale.” While this may seem counter intuitive, but unless Paytm does not get to know or meet each of its first few customers one-on-one, its difficult understanding the softer nuances and scaling up.
Happy to get views!!