Account Aggregators to foster Investment Advisory Services in India
As of March 2024, an analysis of the primary use cases of Account Aggregators (AAs) by SEBI-regulated Financial Information Users (FIUs) revealed distinct trends across various segments. Personal Finance Management (PFM) stands out as one of the most promising use cases from SEBI entities in the Account Aggregators (AA) ecosystem. Out of all the cumulative consents taken by SEBI FIUs by March 2024, almost half of the consents have been utilized for Personal Finance Management (PFM).
RIAs offering PFM in India
Registered Investment Advisors (RIAs) are the foremost FIUs offer PFM tools and services in the ecosystem. RIAs have consistently maintained a substantial volume of consent, demonstrating a steady growth rate of 17% per month over last year. In the past two years, RIAs have witnessed 28% quarterly growth rate in the number of consents taken for PFM. A digital-first RIA reported saving nearly INR 250 per customer on customer acquisition costs (CAC), leading to significant savings and improved operational efficiency. At the same time, we found out that a significant chunk of customers have used PFM tools and services, not only by RIAs but also by banks.
Way forward
Currently, personal finance management (PFM) tools & services fall into cash-flow analysis, expense management, and budgeting categories. However, the AA ecosystem can enable an evolution in the PFM space towards discretionary financial products like investment advisory and wealth management. PFM as offered today can serve as stepping stones for customers to progress toward discretionary advisory services.
Given a low-advisor-to-population ratio in India benchmarked against developed economies, the ecosystem presents avenues to expand the advisory services market. By providing RIAs with scalable and effective business models and enhancing operational efficiency, AAs are set to democratize personalized and data-driven advisory services in the foreseeable future.
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