We plan to double participation of retail investors in India in capital market: Sarvjeet Singh Virk

Founded by Ex-Wall Street professionals with deep financial expertise, Finvasia is making affordable financial ecosystem accessible to investors vertically and horizontally across the globe. In conversation with Sarvjeet Singh Virk, co-founder and Managing Director at Finvasia, Indian Retailer uncovers how Finvasia acts as one stop shop for various funds and services, what is it like to have your sibling in the business gear and more.

How was the idea behind Finvasia incepted in Canada and when was it brought to India?
Finvasia was initially focused on various US based institutional investors such as Hedge Funds, Fund of Funds etc looking to diversify in other global markets including India. Initially we were providing investment advisory and execution services in over fourteen countries. We first filled our company in Canada in 2009 and moved to Indian in 2011 as we believed that Indian financial markets will experience unprecedented growth, similar to what we had experienced in US after 1990’s.

After coming back to India, what financial solutions in retail industry did you have in mind that didn’t already exist?
After coming to India, we had been majorly involved with Advisory, execution and other technology solutions for Institutional clients. Most of the financial advisors had either a brokerage target to meet or selling products not relevant to the reason of client investment. So, finally we did GAP analysis of retail clients to address the key issues. Over a period of time, we realized how lack of technology and vested interest of Middle man had demotivated and pushed the retail clients out of the capital market. We realized that brokers in capital markets were unknowingly using business model that was working against their very own client. For example, it is a well-established fact that higher transaction volume causes lower return on investment due to associated costs and laws of probability.   But the only way a broker can make money is if he is able to make his client trade more or generate more transactional volume. We realized that this was one of the biggest reason why retail investor is also consistently losing money in the capital markets. Furthermore, clients wanted single access point for all their financial assets instead of hopping from one relationship manager to another.

Keeping all our findings in mind, we realized that the only way forward would be to do a complete elimination of these conflicts of interests and hence we introduced our zero commission financial ecosystem. Finvasia is the only broker in India to charge ZERO commission to its client, furthermore, since we are among one of the only few non-banking clearinghouses in India, our clients don't have to pay any “Other Charges” or “Clearing Charges” for any investments done by them.

What were the challenges in creating your own ecosystem and making products in-house?
Though in-house development gives a lot more flexibility and control about the products customization yet it comes with expected and unexpected challenges. Our corporate office is located in Chandigarh, which has limited resources due to lack of similar industry. Acquiring talent was one of our biggest challenge but as we built our initial team, we experienced a much lower iteration of employees and stability of our team is now our biggest strength. Going forward, we plan to keep most of the development in-house yet there are many integration points with various technology partners. Also, India is a very highly regulated market and getting new licenses is a challenge, so for technologies that need regulatory approvals, we might have to initially find middle grounds as to where we take an already approved technology versus create our own technology and get the required approvals. The dependence on other’s effect the expected Go-Live plans and can potentially push the product delivery timelines.

On the other hand, policies such as demonetization and Digital India came as a blessing in disguise.

What was the mantra behind the firm having a successful diversified business model?
To have a successful diversified business, a firm should create complementing ecosystems wherein there can be cross selling of products and services. In addition it needs to position itself such that every product and service in its ecosystem should be self sustainable as well so that any adverse change in one product line should not impact the other product line adversely. To put things in perspective, let’s take an example: We have created our robe-advisory as MFGenie and our brokerage products as ScalperT and our FPI and clearing business is directly managed by Finvasia Securities. Now, all these products are powered and managed by parent company, Finvasia, but they cater to different target audiences and can self sustain. However, when a trader trades on exchange, he is more than likely to also invest in mutual funds and that’s where our MF arm comes in handy.

How bumpy is the ride when you have a sibling as a business partner?
The best part about us is that I am not good at what he is and he is not looking to interfere at my line of execution. We both have distinct background. Tajinder is more Financial Technologist and his knowledge of working with prominent hedge funds gives us knowledge and insights in product development whereas I, Sarvjeet, have prior functional consulting background which helps in business development and extrovertly pushing the business engagements.

Better known as professional brothers in the industry, we discuss everything but the decision is eventually left to the person who is directly responsible for that specific arm of business function. We have a common vision but possess very different style of working. This gives us a very holistic approach to our problem solving approach. There is an old saying that “If two people agree on everything, one of them is probably not required.” Hence, we respect each other’s different opinions and take that as an opportunity to improve our decision making.

How do you cope with the downfall due to one sibling’s mistake?
We come from a service background and entrepreneurship comes difficult. There were instances, where we learnt a lot from each other yet mistakes taught us better. We feel, in case of siblings’ mistake, family plays a vital role. Someone rightly said once, “If good times don’t stay, nor will bad times.” So, keep pushing, works.

With your business already sprawled across the globe, what are your further expansion plans horizontally and vertically?
Currently, with offices in London (UK), Canada and recently started in Australia, we are looking to focus on India for next few quarters. We plan to double participation of retail investors in India in capital market while integrating various key asset classes. AI and Robo-Advisory shall replace middlemen and open avenues for everyone to not keep money in the bank. Secondly, we shall be promoting zero brokerage and zero clearing services to FPI and other institutional investors to add their ROI. Our next plans include NBFC and related upcoming Fintech products in lending space. In global markets, we are looking to expand our commission free financial ecosystem.

Which are your upcoming fintech products/solutions?
Our objective is to replace middlemen with technology and offer products without any brokerage/commission. Currently, we have involved in saving and investing with capital market driven products. Moving forward, we shall extend to lending and spending using our fintech products.

Also, we shall include Robo-Advisory so clients can simulate, rebalance & diversify.

SMART is our artificial intelligence based, Social Mutual Fund Analyzer for Research & Trading.

SCALPERT : Currently providing an in-house charting based advanced trading Web & Mb platform. This shall evolve as a single login for all assets using Depository Participant along with other services.

What makes you stand out in the industry?
We envision various in-house fintech products to provide one stop for all financial needs using single access. The commission free ecosystem shall allow investors to invest in all assets such as Stocks, derivatives, currencies, commodities, Mutual Funds, IPO, Bonds etc. The best part is that there is no disparity between retail clients, high frequency traders, HNI, NRI or Foreign Institutional Investors. Everyone pays zero brokerage and zero clearing fees.

Lastly, our expertise to build everything in-house gives us a lot more flexibility and control for customization. We can foresee and connect the bridges within the same ecosystem for the convenience for clients.