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Democratizing Concierge Wealth Management | WealthDesk
Most headlines celebrate unicorn valuations of startups, but what we really need to celebrate is when a startup generates a healthy return on investment for its investors and founders. This episode is a celebration of a founder who raised less than 5 mn dollars while building his startup which eventually got acquired for 75 mn dollars!
Ujjwal Jain is a veteran FinTech professional with a track record of accomplishment working at the intersection of Computer science, technology, finance, trading, & investment management.
Ujjwal Jain is a veteran FinTech professional with a track record of accomplishment working at the intersection of Computer science, technology, finance, trading, & investment management.
Passionate about blurring the lines between computer science and finance, his exposure to Indian Capital Markets laid the cornerstone for an India-focused investment technology firm and thus began his entrepreneurial journey in 2016.
WealthDesk is a one-of-its-kind platform that on one hand helps retail investors access high-quality investment advice and on the other hand allows financial advisors to scale up their revenues. It’s building the Unified Wealth Interface (UWI) for the Asset and Wealth Management ecosystem on top of broking.
Through its Embedded WealthDesk Gateway (EWG), users of the platform will be able to invest in stocks, ETFs, and WealthBaskets from any app or website.
Ujjwal believes a Unified Wealth Interface, or UWI, can transform the investment and wealth management ecosystem in the same way that UPI enabled the formation of a seamless payment ecosystem.
Other Ways to Listen:
Some of the things he shared:-
Treasury and its importance after 2009 financial crisis
Choosing a wealth basket for greater diversity
Platform strategy and customer journey
Acquisition by PhonePe
Read the complete transcript of the conversation below:-
[00:00:00] Ujjwal Jain: Hi. My name is Ujjwal, I am founder of Wealthdesk. [00:01:00] So I did my Engineering in Computer Science and I was always fascinated about working at the computer science and capital markets because at the seeds of that interest or confidence was sawn way back when I was in school, when I used to look at markets because my father used to trade a lot, I used to see how market prices went from back pages of newspaper to news feeds on news channels and then to mobile phones. So I always looked that technology is driving out of that and I started programming in very early class, seventh grade. So I was clear that I want to take up science and finally get a Computer Science seat in Engineering and then eventually join a capital market for focused business. So that clarity was coming up gradually, obviously it was not that clear, but that intent was becoming clear. The passion was coming out well. So after my engineering, I joined a Wall Street hedge fund D. E. Shaw. Fortunately it's run by computer [00:02:00] scientist. So D. E. Shaw is one of the technologically advanced hedge fund page out of New York. So I was fortunate enough to join that, hedge fund, which completely run with a computer science mindset, right from like fund management to investor relationship. And I was part of the treasury team there and we were building we ended up building in a post crisis where treasury became a very critical function. So I was involved building the code treasury platform, which has a renewed focus post financial crisis in 2009, that's when I joined.
[00:02:26] Akshay Datt: What is treasury and why did it become important post financial crisis?
[00:02:30] Ujjwal Jain: So most of the hedge firms actually they trade in markets in their different funds structure through prime brokers.
[00:02:37] And prime brokers run a very dedicated, there's a very comprehensive margin equipment around which their portfolios are margined in the sense how much money you need to put to trade a particular instrument. So this prime brokerage agreement which are called counterparty margin agreements, these are modeled by prime broker because they are taking the risk of the funds, instruments portfolio. So what a smart hedge fund does like a typical scale, they also [00:03:00] meet this margin agreement that they're in. So that they know their incremental capital cost when they're trading with these prime brokers or when they're through these prime brokers, when they route their tradings, their security. So they know what is the incremental capital they have to deploy and that becomes a very critical function, create alpha at the strategy level, at the fund management level.
[00:03:18] Akshay Datt: What is the need for a margin? If I buy a stock, then that money is going out from my account. Now if I buy, let's say, $1 million worth of Twitter stock, $1 million goes out from my account. What is this margin?
[00:03:29] Ujjwal Jain: No. So typically in a prime brokerage relationship, especially with the hedge fund, when you buy a 1 million dollar worth stock, you need not give 1 million dollar. So you can put, let's say X percent and the remaining is funded by the broker and we are just talking about here, you are just talking about twitter stock. Imagine complex listed options, futures over the counter securities, which are modeled synthetically, margining for these are very complex. For example, you can hedge a US portfolio when let's say another developing economy's portfolio. So that hedging will give you capital advantage [00:04:00] from a margining point of view. So globally hedge funds have very complex margin agreements with their counterparties, where even margin of these portfolios, you give it a global level and the prime brokerage ensure the regulatory margin requirement at different exchanges. For example, there's something called span margin. So regulatory requirement to put it at the exchange level for individual accounts and like whichever account is trading. So all that prime brokers take care for a hedge fund prime brokerage relationship. So as of hedge fund, what you do is you try to optimize your capital to when you're investing, because they use leverage also as a very important factor to create alpha.
[00:04:32] Akshay Datt: So just explaining with an example, like if I can get exposure to 1 million of Twitter stock by just putting in hundred thousand dollars, then that my return on that hundred thousand dollars will be much higher because if Twitter moves by 1%, that 1% will become 10x because I am just putting 1/10th of that 1 million. So which is why this is important for a hedge fund.
[00:04:55] Ujjwal Jain: Correct. And hedge fund, when they build their strategies, leverage is one important factor because for [00:05:00] limited investment amount mitigating their risk across all portfolios. They amplify their returns by using leverage and prime brokers provide that services by bringing complex margin agreements, which you can use to fund these portfolios and that is managed by treasury. So it sits at the middle of front office, middle office, back office. And post crisis became important cause prime brokers were going through their liquidity crisis, right? So they wanted to increase margins and all that. But if your agreements are well sought out, what margin they should expect, you can reconcile well and you can still continue to protect your capital, so it becomes important. So interestingly, they independently opened this treasury platform for other experts. So imagine how technologically advanced these funds are, that they ended up creating a new business as a technology business platform business for providing treasury platform to others. So I was part of that culture.
[00:05:49] Akshay Datt: This would have been spun of like a SaaS business?
[00:05:52] Ujjwal Jain: Yes. Yes. If you go and look, it's a platform service to other experts. Now, within D. E. Shaw, there was an opportunity to actually move [00:06:00] to Bombay for where they, D. E. Shaw was going into JB with the Reliance industries where the idea was to deploy Reliance treasury money with DE Shaw's fund management expertise into Indian markets. That's when I came to Bombay first we used to do prop trading, then we ended up doing institutional brokerage business and that's when I got. Proprietary heading in the sense using the treasury capital to deploy markets across different strategies. And that is the time when actually I got exposed to Indian capital markets as a professional like knowing Indian markets so closely from a business standpoint. And that's when my sense was that there's a massive market opportunity in India to build as a computer science guy, to create great businesses whether it is proprietary trading, whether it is brokerage business, whether it is wealth management, whatever it is, it is a very good play. And not just B2C, even B2B also, you can do great things.
[00:06:46] So that's what the confidence I got when I looked at Indian markets policy. And then I was asked to move back to the treasury platform business but I decided to stay back in Bombay and like, again, a fortunate moment for is, immediately I got an opportunity with the MSCI, they're the [00:07:00] leading index provider in the world. So they actually
[00:07:02] Akshay Datt: Morgan Stanley?
[00:07:03] Ujjwal Jain: Yeah, Morgan Stanley Capital International now it called MSCI only. So they are the leading index providers. And index business is very different from hedge fund business. So hedge funds are very actively managed portfolios. But if you are building an index, you are passively creating a rule based strategy, tracking an index, which can be used by any fund to create ETS. I saw that there's a good opportunity to look at passive side, but again, passive businesses, especially Indian style businesses, are again very heavily on tech because you are building everything on a technology platform, the rules, engines, everything runs on technology. So I joined that business and I could got exposed to passive business. Fortunately, I was part of launching some of the most modern sophisticated indices around factor investing, Smart vita, carbon credits.
[00:07:45] Akshay Datt: Does MSCI offer indices on Indian market or are these for global market product? Like in India it's NSC 500 BSC.
[00:07:53] Ujjwal Jain: Correct. So actually MSCI has a global index in which India index is also part of that. So that's called Jimmy Index.[00:08:00] It is, if you look at all the passive money globally that gets put deployed into Indian market, most of them comes to MSCI index only, which is tracking India at a global level. So that's the global part of it. The Indian part of it, I think custom Indian indices has been known by MSCI, but not that big because NSC, BSC predominantly drive that market, especially AMCs tend to open launch for exchange indices right now because they're well known and good domestic view around Indian market. So when I was in MSA, that's when I actually started making Indian brokers and tried to understand the Indian landscape, like what could be done with a very long term view because there's a massive market opportunity, not just the short term, but the long term. You can build great businesses out of India, completely technology led and interestingly, at that point, I saw some green shoes. One is that Zerodha was driving the entire working play led by technology, which was a completely different perspective of how a broker in a Bombay look like versus how Zerodha was doing it. I could send that from a computerized mindset. The second was, SEBI came up with the [00:09:00] first regulation around investment advisory in 2013 which was around driving product distribution in India under advisory model versus distribution model. Now, just to give you some sense, what it means is that if you buy a mutual fund or invest in a stock, you most likely you will not, don't pay anything for that because there's some commission that the distributor is getting in the packet. So there's a, this called distribution model versus if I tell you that I will recommend you this product or I will provide value in your account, you pay me a fee, but I won't make any money on the tail side, on the commission side.
[00:09:31] So that transition or that phase started with the RIA regulation where SEBI was clear that eventually in the client interest advisory should scale up faster their distribution and India largely even today there's a large market under distribution model versus advisory. So I realize that mutual funds will continue to penetrate under distribution model because penetration itself is a problem.
[00:09:52] Akshay Datt: One quick recap. The distribution model, funnily these people who are distributors are called financial advisors, right? So I just wanted to clarify [00:10:00] that for the listeners. So when you buy mutual funds through a financial advisor, which means like it could be a bank employer, someone you know, then he's earning some commission, which is not transparent, you are not aware of it whereas in the advisory model, there is a money manager, say it could also be a app. I'm sure there could be some apps which charge you a fixed amount. Say I think ET money has this now they've lost the product here. So they charge an amount of fees for giving you the right advice on what to invest in and giving you updated advice on regular basis. And do you also provide execution support or they just are an advisor?
[00:10:37] Ujjwal Jain: No. So you, as part of your advisor, you can provide execution support, but there has to be a very non-conflict way of making money from the customers on one side.
[00:10:45] Akshay Datt: The transparency should be there.
[00:10:47] Ujjwal Jain: It's complete disclosure. Yeah. So I realized that while mutual fund penetration is a problem, so distribution is key, so it'll continue to expand. While if I look at a 5, 10 year view, there's a massive opportunity to build a [00:11:00] technology stack wherein on one side you bring in advisors who can create portfolios for different demographics, investment strategies and all and market segments. And on the distribution side, if you could Take Extend, how a Open Broken would look like, where you can integrate with a brokers trading app. If you connect and interconnect this entire value chain. So from product creation to the execution in the client account, we are talking about panel to mutual fund, a different investment instrument available to retail investor and advisory.
[00:11:27] So that technology we started building back. So when I quit my job in 2016 March, I started building it from 2016 onwards and in 2018 we first launch the platform. So what we are essentially as a platform, we are a B2B2C platform. On the B2B, we gave our portfolio managers, semi licensed entities who can manage portfolio, who can do advisory and research. They come, they create platform portfolios on our Wealthdesk business platform, it's a Saas platform. And on the distribution side, what we do, we open this consumer challenge inside the broker's app or even outside also, where you can log in with the broker[00:12:00] where customer can discover these portfolios under advisory and or research model and they can pay a fee and invest in these portfolios. And this model portfolio category, something which we have enabled in the B2B2C segment. So parallel to mutual funds and PMAs and their advisory. For the first time retail investors can get into managed portfolios on broking. So the shift at the broking level is like this when you open a broking account or when you an existing broking customer, most likely you do transaction you invest in stocks at different times and exit typically most of the people are not well versed when to exit, when to exit specific stalks and time the market right? What happens is after a point, they end up exiting the winners very quickly or having losers for a long time. And that's why most of the broking account especially investor side, they get dormant after a right because they burn their fingers because they don't know how to make systematically money. But the same customer would've done reasonably well in mutual funds space because he invested in the right fund, managed by smart fund manager, so on broking for the first time. If you open this managed portfolio to a retail investor, what is happening is that the [00:13:00] same customer instead of IT stocks investing in managed portfolio, which are managed by people who know how to do it and replicate the underlying portfolio still in their own broking account. So they know more the underlying stocks which they want to, but and gradually in that portfolio, whenever there's a change manager makes it, you get the update on a one touch approval by itself you do it and systematically you are getting into a portfolio based investing strategy in broking. That is very important in India because it is very important to create a category of investing in the broking so that the people eventually make wealth systematically like they will do in mutual funds because these are portfolio based strategies, which is only available 50 lakhs to 1 crore+ customers. Retail investor console have that product because they can't have that much of capital to deploy. Imagine democratizing that capability, with that kind offering at a retail investor level, through a wellness platform, that is what we are powering. And because of platform play, you can scale this at a very effective way and make sure superlative well solutions are available to retail investor in broking. So [00:14:00] that's the vision we're working and building this platform.
[00:14:03] Akshay Datt: Okay, so let me again break it down a bit. So what you're saying is that most investors who open a Zerodha account end up becoming inactive after a couple of months because they're not professional investors and so they will face some loss and because of which they will get demotivated and they go inactive after some duration. So really like that retail level investment is not a mass market product. It's for people who have the time and the patience to learn, study and continuously follow news about stocks, so on and so forth. And for people who make money, they are people who are HNIs, who use a portfolio manager who is able to do all this work of tracking stocks and deciding what to buy, when to buy, what to sell, when to sell and so on and so forth. So you have made it possible for a regular retail investor who's not an HNI to get access to that kind of sophisticated portfolio manager who is constantly researching and taking decisions about what to buy, what to sell, when to buy, when to sell, and so forth. And [00:15:00] the way you're doing this is the advisor, the portfolio manager can create a model portfolio on Wealthdesk and he can continuously update that model portfolio and that gets connected. And as a retail investor, I can subscribe to any of the model portfolios available there. Maybe these model portfolios could be based around some theme, like it could be, for example, tech or digital or so on and so forth. So based on the theme, based on the reputation of the portfolio manager, I could subscribe to a particular portfolio and therefore then it becomes passive investing for me.
[00:15:36] It is almost
[00:15:38] like investing in a mutual fund, because in a mutual fund also, it's the same. You put in money and a mutual fund manager is doing that. But here, there is more flexibility and or like what is the difference between investing in a mutual fund and investing in a, or subscribing to a portfolio from a Wealthdesk portfolio manager?
[00:15:55] Ujjwal Jain: Yeah, if you invest in a model portfolio or a wealth basket, the fact is the underlying stocks stays with [00:16:00] you in your booking account. So you have complete transparency of the underlying stocks, while in case of mutual fund, you invest in the fund while the underlying constituent, you get to see the discloses every month, but you are investing in that fund, while you know, broking your objective is to get directly exposure to these companies. So model portfolio, wealth basket ensures that you continue to follow fund structure or a portfolio structure, but underying stocks are with you in your Demat account. So that's one thing.
[00:16:23] Akshay Datt: That's just a technical difference. As an investor, the color of money is green always.
[00:16:28] Ujjwal Jain: Yeah. So the other thing is that, so for the kind of portfolio accessibility through a model portfolio versus a mutual fund actually are very different. So for example, today when we look at, and people say, should I do wealth baskets or mutual funds or should I do both? The ideas very simple. You continue to do your mutual fund, but you open an account with some investment objectives, right? You want to get exposure to some specific sectors or stocks or segments for which you might not be an individual mutual fund also. So for these nuanced exposures, what people are doing is they're investing in these managed portfolios of smart managers around and there is one [00:17:00] interesting trend we are seeing is ETF investing. So if you look at individual ETF like a NIFTY50 ETF or a NIFTY Next 50 or a midcap, individual ETFs, you can go and invest and track money and deploy that and that you do so on booking. But with the same ETS gets into different wealth baskets around, let's say you want to create a portfolio around India and US or coal debt equity, those weighing scheme that might be smart managers when you get into portfolios the underlying ETFs are scientifically weighted and defending different market conditions, the weight keeps changing, tilting in the right way, keeping the macro economy and micro economy, that's what manager decides. You tend to outperform the individual ETFs performance and that is a very change that we're seeing that ETFs and baskets are creating a new portfolio construction strategy available at retail investor level using the simple ETFs, which can create systematic wealth for you at a very nominal cost. So those kind of stuff you can do parallel to mutual fund. So in the overall asset allocation as a retail investors, you open a broker account to get exposure to [00:18:00] stocks, ETFs instead of doing directly, you are not smart enough to follow till the end, getting this managed the right way. When you continue to invest in a mutual fund from a long term strategy, like the funds which you know are gonna do better. It's a coexisting market and the other thing is the liquidity wise you can withdraw money from these wealth baskets anytime. So real time redemption is there, so always there for you. So that flexibility is always there.
[00:18:22] Akshay Datt: Okay. So there is this concept called portfolio theory, which basically says that investing in multiple non-correlated set of assets will earn you more in the long term than just doubling down on one single asset. You invest in a company which makes umbrellas and you also invest in a company which makes caps. On sunny days, caps will sell. On rainy days, umbrellas will sell. So you are diversifying. So the same thing now you're saying is the reason why somebody would choose a wealth basket for more diversity whereas a traditional mutual fund will say, offer you only exposure to India or more generically say midcaps or smallcap and so on. But in a [00:19:00] wealth basket, you could get something which is exposing you to say India and US as you said, or India equity plus commodity like gold, you gave an example. So that is something which can give you more benefits than in the long term. So that is one reason and the second reason is, mutual funds. You cannot have say, thousands of mutual funds around different teams, but you can have thousands of wealth baskets around different teams. Somebody was to just say that, okay, I believe insurance is the next big thing. So you can have a wealth basket, which is around insurance only, but you can't have a mutual fund, which is focused on insurance. So that long tale, more options that is the other thing which basket use.
[00:19:39] Ujjwal Jain: Correct, because the mutual funds are created with a very larger objective to create mass retail product. So if, when it comes to concentrated exposure, nuanced exposure on very innovative portfolios, that can come through wealth baskets. And one other trend that we are seeing on our platform, the PMS firms who are only stick at serving the ultra HNI, HNI segment, they're realizing[00:20:00] there's a mass affluent retail building up and they can't access 50 lakh - 1 crore, but still they can manage a smaller ticket size portfolio. So these premium managers are not coming to retail because through platform they can open these smart portfolios to retail investors and that is a democratation in true sense where you are bringing significantly better portfolios to the retail investor so that retail investors wants it, but he cannot access it. Now he can access it.
[00:20:24] Akshay Datt: For a talented portfolio manager. The previous option was to focus on big ticket or like the big fish because you earn more there. You would rather want somebody who can give you one crore than somebody who will give you one lakh because you earn more there. But with this product by creating portfolio and wealth basket, he can actually get 1000 investors who are each putting in one like each because he doesn't need to personally do the servicing.
[00:20:50] Ujjwal Jain: Heavy lifting is done by the platform to facilitate this entire value chain. So all they are interconnected and actually, if you look at our current vision, what we are calling ourselves is the unified [00:21:00] wealth interface on top of broking/transaction platforms we're bringing all these stakeholders into an interlockable tech layer. One party is doing portfolio construction or the value creator the other partying the value into our account and this entire pipe is what we're building as a platform enabler.
[00:21:15] Akshay Datt: What are the assets covered under wealth basket? You said exposure to gold how would that happen?
[00:21:20] Ujjwal Jain: Yeah. Right on the instruments underlying assets on which you, where manager can create portfolios is stocks and ETFs. We are in the process to even bringing, by the way, mutual funds also in next year, where you can package mutual funds, wealth baskets, because there's a reason for that. If you look at the ultra HNI segment, a guy with a huge amount of purpose when they invest, right? Even the mutual funds are not looked in isolation. You look at a bunch of mutual funds with defined ways in the overall asset allocation, retail investors still look at individual mutual funds. He might end up doing a tax lever, might be doing a large cap. He might end up doing a midcap or without any scientific reason or with a scientific reason also in some [00:22:00] places. So what ideas that even this advisors can package these mutual funds also in a very scientific way for different investment objectives and open it to retail investor. So that also becomes a wealth basket. So packaging layer at a wealth basket is about what you rightly said is to bring that multi asset value to the retail investor with efficient execution, which is a very heavy problem to solve, larger, complex problem. But that's the journey we are going through as a platform.
[00:22:25] Akshay Datt: I would've thought mutual fund would be easy to do. There are so many apps offering you to sale, purchase of mutual fund and all. Why is mutual fund coming in so late?
[00:22:33] Ujjwal Jain: Actually, good point Akshay that at some point if I would've started packaging, platform technology to package mutual funds, bunch of mutual funds into portfolio. But we took the difficult problem because advisory led portfolio construction and retail investor using direct stocks in ETF was a challenging and it was a very critical need of the market. When it comes a broking account, you are talking about direct stock and ETF exposure. So important to bring that and then mutual fund, so mutual fund is not a challenge, it's a journey [00:23:00] which will bring him down.
[00:23:00] Akshay Datt: Got it. Mutual fund is very me too. If you would've started with that, you would've been facing like companies like say Deserve and all these, which are like, have raised a fair amount of funding and all of that.
[00:23:12] Ujjwal Jain: Such companies are actually not our competition, they're actually our partner because they are the platform enabler, we work with every staple in the country, like on the manager side, on the execution side. So technically all our partners.
[00:23:24] Akshay Datt: How is Deserve your partner?
[00:23:25] Ujjwal Jain: So technically Deserve can actually, for example, any other mutual fund platform can come now on a plug and play, can package portfolios and open it to their investor and they focus on their core competency, which is portfolio conceptual asset allocation and all that. So as a platform enabler, we are trying to become a heavy lifters of this entire value chain and each party can their own mutual exclusive strengths and join them, which means that everybody's your partner.
[00:23:50] Akshay Datt: No, but Deserve is doing both, right? They're acquiring customers on the one hand, so they're building that capability plus they're saying, We will manage your wealth for you. What part are you saying? Like you're [00:24:00] saying that they will offer wealth management to more people or they will allow their customers to,
[00:24:05] Ujjwal Jain: This would mean that, let's say they hold an RIA license assuming they can continue to acquire channel independently through their own network. For example, a company like this
[00:24:13] Akshay Datt: But they can acquire more customers through
[00:24:16] Ujjwal Jain: There's a never expending distribution channel being created because we're integrating every demat account through broker partnerships. So platform network effect is something which is cool to our business world.
[00:24:25] Akshay Datt: Got it. What about exposure to global markets, say exposure to US market and all?
[00:24:30] Ujjwal Jain: So right now we have realized that there's a lot of good stuff happening to open global markets to retail investor in a very frictionless and at a cost effective way. That's a very important part when it comes to retailising global markets to Indian investors. So as that happens, which is a matter of time, it's happening, even the good parties give cities with open deposital receipts where you can easily invest through existing broking channels. But we are eventually, right now focusing that most of the critical global exposure can be very well done [00:25:00] even today with ETFs. But eventually, let's say a good, efficient, low cost, frictionless way of exposing directly to stocks and ETFs in global markets, we'll open that channel as in when the market is right.
[00:25:12] Akshay Datt: Okay, Got it. So you're saying essentially, right now what you can offer is only something which a customer can buy on a Zerodha or any of the broking apps and right now these apps don't offer people to, for example, directly buy Twitter stock. Therefore you cannot really offer that as an asset class. But that is in process.
[00:25:29] Ujjwal Jain: That is what even we can directly indicate with somebody who opens global markets, but we are not taking that part because even with that journey there's a cost, there's a friction. There's no point doing something just for the sake of doing, right? We need to do it.
[00:25:42] Akshay Datt: It's not mainstream yet
[00:25:43] Ujjwal Jain: Leave the adrenaline rush of that, okay, I need to hold a tester's talk or tutors talk versus I need to have exposures with TEDx talk. There's a way to do that with the current universe. So that's how we're looking at it. So they believe in that model.
[00:25:55] Akshay Datt: Now you said fundamental advisory model is you pay [00:26:00] a fixed fees. How does that money transfer happen from a user to a portfolio manager who's created a model portfolio on wealth desk?
[00:26:08] Ujjwal Jain: So there are two touch points. So one is the manager collects fee on the portfolio when you invest. So that collects collection happen directly from the customer to the manager.
[00:26:18] Akshay Datt: Okay, which means he's telling his existing customers that I have created this way for you to subscribe to my services. Just pay me and you can subscribe through zero then probably there'll be some coupon code or something which he will give to his customer or how will it happen?
[00:26:31] Ujjwal Jain: Like you want to promote more at a very cost effective, so that's a campaign part of it, but yeah, the fee collection happens from the customer to the manager and then you invest regularly. Like how would you do it with the broker in that like portfolio by putting the broking account and executing the stock in your broking account?
[00:26:47] Akshay Datt: So that is one way direct collection. What is the other way if a zerodha user discovers this concept and wants to subscribe to a portfolio?
[00:26:56] Ujjwal Jain: Yeah so our platform strategy is very simple. So as a manager, [00:27:00] when you come and create your portfolio, there are three channels. One is on a broken app. Your customers can discover these portfolios, broking doesnot discover these portfolios but inside the brokers app and they can invest, pay a fee and invest in these portfolios.
[00:27:14] Akshay Datt: They will pay the fees to wealthdesk. How will that fees
[00:27:17] Ujjwal Jain: Fee directly to the manager
[00:27:18] Akshay Datt: Okay, so you are not coming in between there. But if Zerodha is integrated.
[00:27:22] Ujjwal Jain: Yeah. We are a technology service provider in that value chain, so we enable those gateways and all. The whole journey is like customer pays to the manager. So just to clarify, first way is that inside the brokers app, your portfolio gets discovered and customer get invested. The second is, like a Shopify, we open a direct consumer sites as an enabler for the manager for their portfolio to get discovered. So through these direct to consumer channels, the manager's portfolio gets discovered and customer can invest again from that same channel. And by logging in with broker, like a payment gateway and executing their stocks. So that is directly to the manager like a Shopify. And third, obviously these portfolios are discoverable in different distribution channels [00:28:00] where customers are coming to find right products and stuff. For example, we just going live with a full service bank who are very big on wealth in India, they are going into retail, so we are opening they are opening multi asset products, including mutual funds, bonds and TEDx talks based portfolio. So we are powering that journey. Their your open architecture manager side, these distributors where they open these different managers and open architecture on the booking side where you can log into any broker and invest in these portfolios. So that kind of services are being created on our platform.
[00:28:31] Akshay Datt: Okay. Interesting. So in the Shopify product, basically the wealth managers gets a custom domain, which he can circulate. Say if I'm an influencer on YouTube, then I can share a link with my followers that follow my strategies and that link can be powered by wealth desk, basically.
[00:28:48] Ujjwal Jain: Yeah. The only disclaimer that whoever is that financial influencer, you should be SEBI licensed, yes.
[00:28:52] Akshay Datt: Obviously. Yeah. So that would be part of your onboarding process, right? You would make sure that.
[00:28:57] Ujjwal Jain: Yeah. As a platform enabler, we only onboard[00:29:00] SEBI registered intermediaries, so that is a very difficult process to get.
[00:29:04] Akshay Datt: You do that KYC to make sure that they have the license?
[00:29:08] Ujjwal Jain: So KYC is a very regulated word. We do the onboarding checks screenings and then the onboard. And anyways, the distributing party is regulated, the manager is regulated, so they, it naturally fits the platform journeys ensure that they're only separate entities.
[00:29:23] Akshay Datt: Got it. Okay. So I understood what the managers are getting out of this deal. What are the distribution apps getting out of this deal? You give two separate examples. One is zerodha, the one is this bank which is getting into retail. Tell me what is in it for them?
[00:29:37] Ujjwal Jain: Yeah, so from a broking stand part which is very simple, right? So today your core business models are built around transactions, right? And as industry moves where you want to provide right value to your client account to make money versus trying to increase transaction volume to increase your business. From your business standpoint you've continued to make transactional businesses but the core is still advisory. [00:30:00] So versus just focusing on your transactions. So that shift ensures you continue to make good business, but the value proposition is more towards right, which is getting the right advice.
[00:30:08] Akshay Datt: Yeah, your customers are stickier
[00:30:10] Ujjwal Jain: So that's, if you go back to the original thing that I told about the 2013 RIA admission. So that's one thing. The second thing is, as I told you, inactive account go fast. So now immortality rates stickiness is coming because systematically are making it a very managed portfolio and that's the right approach to actually investing in markets. So brokers are trying to get the right client who's actually ready to pay you for the right advice and from a broking standpoint your customers are getting serious about their wealth management at the broking level.
[00:30:38] Akshay Datt: So what does a broker need to do to get wealth baskets on their platform? Does the trading happen in an automated way? If I subscribe to a basket through Zerodha, then every time the basket is updated the key reason why I would subscribe is because I want somebody to actively manage. So actively manage means that there would be some update by they sell this. So does that happen through an [00:31:00] automated way?
[00:31:00] Ujjwal Jain: No. So as per advisory regulations when you invest in a portfolio, you need to give an approval for the underlying execution and you decide which broker you want to execute with. So that's one. The second is, for following rebalancing upgrades, you get notifications from the managers through the platform, you go to your broker login and do a one touch approval. So that is not automated because that's not allowed.
[00:31:21] Akshay Datt: Okay. And this is a regulatory reason that you can't automate this.
[00:31:25] Ujjwal Jain: Yes. See, otherwise, see there's a clear panel debate going in the industry around algo trading SEBI is very clear that algo trading to retail investors should be under the right framework protection. And one of the reasons is that these automated strategies are there, which does not fit to the regulatory guidelines in the right way. So that's always a debatable point from a model portfolio baskets point of view, when it comes to retail investor, every trade they have to one touch consign based approval and through their own choice of broker.
[00:31:54] Akshay Datt: I give you the example of ET money, which also offers this advisory service. They charge 2,3 hundred rupees a month and[00:32:00] for portfolio management, is it automated there or there also, you have to manually balance.
[00:32:05] Ujjwal Jain: It'll be always one touch.
[00:32:07] Akshay Datt: Okay. And the difference between what ET money is doing is essentially they are building both paths together. Like they're saying that we will do portfolio management through research and all, but we will also acquire customers directly. And what you're doing is you're bringing in stakeholders for each of these parts separately like you are disintermediating this in a way, not disintermediate is not the right word.
[00:32:27] Ujjwal Jain: Yes. So yeah. So for us any such use case can take the same portfolio open to network.
[00:32:32] Akshay Datt: So how does wealth desk run?
[00:32:35] Ujjwal Jain: So we, for the, because as a platform enabler, because we enable this entire value gen, we take a platform fee for this from the manager and a platform fee from the broker.
[00:32:45] Akshay Datt: Okay. Is it a fixed fee or is it per transaction or how is it priced?
[00:32:49] Ujjwal Jain: There's a transaction being processed through our platform, typically our payment get charged. There's a processing fee.
[00:32:53] Akshay Datt: Give me an example like,
[00:32:55] Ujjwal Jain: If a manager is collecting a fee or ensuring [00:33:00] a subscription of a wealth basket to our platform, let's say they makes hundred rupees, we take, let's say 30 rupees processing fee.
[00:33:06] Akshay Datt: And what about when they're updating?
[00:33:08] No, when they're updating, there's no charge. It's only when there's a fresh money or a fresh fee being collected from the customer.
[00:33:14] So you are only taking from subscription that advisory fees, that is, you're taking a cut from that. That's it. You're not taking a cut on trading, on updates. All of those are like, those are not things that you're taking a cut from?
[00:33:28] Ujjwal Jain: No, not yet. So on the broking, we take a transaction fee that get processed through the broker on, which is again, linked as a platform fee.
[00:33:35] Akshay Datt: Give me an example of that. What you take from the broker?
[00:33:38] Ujjwal Jain: So broker, when we opened the technology, so on a broker we put a very it's a very deep integration because we need to integrate with your broking engines, right? To place orders, to get confirmation. And manage the entire platform dedicatedly for that broker as a consumer channel. So for that entire thing we say that for every well that we process to you, we give us a flat fee [00:34:00] or something. So that's the platform thing that we take from.
[00:34:02] Akshay Datt: Now, what is the wealth basket transaction here? Are you talking of subscription transaction or even balancing?
[00:34:08] Ujjwal Jain: Just subscription transaction. If there's any fresh money that gets invested through wealth basket. On rebalancing, we for like regular updates on, because on a broking challenge, there's a transaction being processed. We used to charge transaction fee, but now what we are doing is that we are keeping it simple for broking standpoint that when you pay for, when you, somebody infuse cap fresh capital into the portfolio, adds money to the broking, then only we charge a transaction fee from the broker.
[00:34:34] Akshay Datt: Okay. But although most of these broking apps have zero brokerage, say Zerodha will not charge, will not earn anything from you when you invest. They'll earn only when you sell. They don't earn anything when you buy. But in this case, you're saying that whenever a customer buys, then I will charge.
[00:34:50] Ujjwal Jain: That's a evolving question that we are having with brokers. They understand that we provide, we are the platform heavy lifters who drive this value chain. So what's the right [00:35:00] business economics for the broker. So it's a work in progress.
[00:35:03] Akshay Datt: Basically for a broker even though when someone is investing one lakhs they're not paying anything to Zerodha today, but that one lakh will eventually get rebalanced. It'll get sold, and that is where the Zerodha will start earning. There is a long term earning for it. So therefore they are happy to pay you every time you increase their assets and their management.
[00:35:22] Ujjwal Jain: Correct. So yeah, that's what I'm saying, that's an evolving landscape, like all the, everybody had received what they want. The good part of this whole problem statement is that the end customers are being looked very holistically to add value to their accounts, whether from a managers standpoint or a brokers standpoint and if that customer report and rate increases for working standpoint. So as rightly said, it's long tail plan of action so both the points are understanding. See as a platform we incur a heavy cost to deploy such massive platform technology at such massive volume. So we need to run a sustainable business.
[00:35:57] Akshay Datt: Okay. How do you ensure that a broking [00:36:00] partnership is leading to convergence? Say you integrate with Zerodha, how do you ensure that integration is leading to conversions? People are actually discovering and assigning up, that real revenue is happening. How do you ensure that? Because Zerodha could put it in some corner, say, the PTM app, there are like literally probably a thousand products that you can explore over there and you would only see maybe top 10 products.
[00:36:22] Ujjwal Jain: Actually, that's a problem like a lot of brokers come with this thing called marketplace of apps or different products. We already have talking about 7,000 stock universe, which are so crowded for a retail investor now there's another hundred apps you need to discover, some might overlap. So generally what we have seen and this is purely based on the platform statistics, the brokers who've understood that portfolio investing is a core value proposition to my investor community. I looked like this as a category and they have integrated platform in their journeys and they open to their customers to understand what a portfolio which industry could do to your lives. [00:37:00] There we're seeing a very good growth.
[00:37:02] Akshay Datt: And which are these?
[00:37:03] Ujjwal Jain: Mostly I not namedspecific broker which I have worked with so many brokers, but full service brokers, regional brokers, discount brokers who have done that right across all segments, High ticket size, low ticket size, who have actually made this as a core value proposition to their investor community. They are seeing the benefits, investors are seeing the benefits, brokers are seeing the benefits and managers are getting the assets.
[00:37:24] Akshay Datt: What are the top three brokers from where you get traffic from where you get subscribers?
[00:37:28] Ujjwal Jain: Our biggest traffic drivers have been full service brokers where the customers are actually well informed.
[00:37:33] Akshay Datt: Give me an example. What is a full service?
[00:37:35] Ujjwal Jain: Full service broker like for example I've just not named specifics, but maybe let's say an Anand Rathi or a Motilal of the world or the higher securities, the IFLs and the access securities. They know they want invest in right products.
[00:37:49] Akshay Datt: Okay. Okay. Got it. These traditional firms, these are full service brokers?
[00:37:53] Ujjwal Jain: Even we worked in discover brokers also where we are part of the poor offering actually case is more difficult for [00:38:00] customers of first time into work and they eventually tend to go wrong quickly at the government and many of the new accounts, you know, the growth has been higher on the discount booking, online only brokers site. So there, this portfolio is not packaged like another app offering or a marketplace offering versus core value proposition in the journeys where, what is the best get into direct stocks and ETFs and then get these right portfolios of stocks or ETF. There, we are seeing that incremental money that the customer is putting into these portfolios is increasing and is more confident about investing. So that is a free hit, even on discount.
[00:38:35] Akshay Datt: Right now you have got product market fit, right? What are the indicators which tell you have got product market fit? What numbers do you track?
[00:38:42] Ujjwal Jain: Pool factor, say the top managers want to be on the platform to serve the retail committee and brokers are coming to us directly.
[00:38:49] Akshay Datt: Give me some numbers also like how many managers are there? What is the monthly sign up?
[00:38:55] Ujjwal Jain: So number of managers, actually we tend to actually keep it low in [00:39:00] terms of, because of our screening criteria, what has happened, we just focus on corporate entities, managers history and all that. So that means that number does not go like a Saas business. So we have a low number doesn't mean you are not doing right. Low number would mean that the basic checks ensures that you have finite market. Anyways if you look at some of the numbers that I think only 1300 registered entities who can advise and all. So that number is anyways small. The broking side, what is happening is that smaller brokers, big brokers, bank based brokers, full service brokers, discount brokers, all are coming to us that we want to integrate the platform into our core offering. And that's a natural thing that we're seeing as a business which means that we are doing something right for the entities. Investor level awareness, picking up as a category to look at how you could look at mutual funds. How would you look know rest of the investing, how you should invest in modern proof, that awareness is picking up. It's slightly better with highly aware customers across broking segments where they have opened a demat account before and they know how [00:40:00] they would not turn wrong things which they try to avoid by getting into modern portfolio. So there, there's an organic growth happening. The numbers to track from a manager point is how much assets you are aggregating across all part.
[00:40:10] Akshay Datt: Assets under management.
[00:40:11] Ujjwal Jain: Assets under advisory. Broking standpoint, you might just look at what's the kind of Demat account assets that are coming into your broking through these portfolios.
[00:40:20] Akshay Datt: But you've not shared any numbers with me so far like what are your assets under advisory?
[00:40:24] Ujjwal Jain: I think the last month, I think this is September, we must have somewhere around 1200 and 1300 crores of AUA at the platform level.
[00:40:33] Akshay Datt: And how many paying subscribers and customer or investor?
[00:40:37] Ujjwal Jain: We only have fee based customers only at the platform level which by some manager, which are free, but that's sort of number for us. I don't know the exact number.
[00:40:44] Akshay Datt: But how many customers, like how many investors?
[00:40:48] Ujjwal Jain: So we might have a lakh plus customers across our platform.
[00:40:52] Akshay Datt: Amazing. Amazing. Okay. Okay. Got it. Cool. That gives me a good idea. And by the end of this year, how many brokerage apps would you be on? Like you said, you [00:41:00] getting a lot of inbound interest, so what do you think by the end of this year?
[00:41:02] Ujjwal Jain: Yeah, so I think 50+ already active works like, good part is as a platform, we have been very clear about one thing, we are not just looking at the top 10-15 or digital first brokers. We want to expand the market to bring even small brokers into the foray because they serve a community because there's a customer who sees that broking branch that wants to open an account and they also need to be stopped, right? So that way instead of side, we are very clear that we want capture a larger market in terms of market segments. So, we seeing the benefits of transaction very rightly and we also bringing in lot of capabilities on our wealthdesk business platform where on an assisted model to make somebody understand a portfolio investing in provide them an assisted journey to get into this portfolio. More like an offline to online play that also we are investing heavily because there's a large investor committee who doesn't want to come on the app on their own and [00:42:00] invest.
[00:42:00] Akshay Datt: Is there such a thing as an offline broker? How does that work?
[00:42:03] Ujjwal Jain: You call your broker and they have a dealer, you say that by this, by that on recorded line. And even if you do online, some people call their some designated guys say that, I want to invest in this. How does it look like?
[00:42:14] Akshay Datt: And this works on trust, like you tell your broker like he'll already have money in a wallet of yours or you will send him the money.
[00:42:22] Ujjwal Jain: The money still in the locking ledger.
[00:42:24] Akshay Datt: So there'll be a demat account which the broker is managing and that demat account will have money in it and the broker will run it.
[00:42:30] Ujjwal Jain: Yeah.
[00:42:31] Akshay Datt: Okay. Okay.
[00:42:32] Ujjwal Jain: So that's compared to our offline to online business platform technology.
[00:42:36] Akshay Datt: So what are you building there like to get these people.
[00:42:40] Ujjwal Jain: So to make that more efficient on this assisted journeys led by managers or brokers where customers can understand and then get into these portfolios in the right rate.
[00:42:49] Akshay Datt: So for these offline brokers, like they would like probably recommend to a customer in person?
[00:42:54] Ujjwal Jain: Customers will discover on their platform and then they will call and they will understand and then they will get [00:43:00] into this.
[00:43:00] Akshay Datt: And then they will just call and tell the broker ki ye update kar do or the broker will call them and say, okay, portfolio aapka is due for updation and they will say yes.
[00:43:10] Ujjwal Jain: So they get this update and both ways they can assist and help them execute that.
[00:43:14] Akshay Datt: Yeah. Got it. Tell me the journey part of it now. So we've talked a lot on the product and the stakeholders in the product. How did you start? Did you start with your savings and bootstrapped it because this is like a heavy investment in tech kind of a product, right? To build these pipes would not have been easy, I'm sure. So tell me about the journey.
[00:43:33] Ujjwal Jain: Yeah, actually the interesting part in downside is currently going through a lot of market, like the bootstrap businesses are actually coming out stronger. So we started bootstraps. So when I started in 2016, when I actually realized that it's not a one year, two year growth trajectory that I can show to an investor, it's a long event. It's a wizard of 10 years, for example. I bootstrapped it.
[00:43:54] Akshay Datt: You were very clear on this vision from day one or did the vision evolve?
[00:43:58] Ujjwal Jain: The vision was very clear [00:44:00] in terms of the only changing moving model was the regulatory landscape keep changing. For example, between 2016 and 2020 a change came that brokers can't pay advisors or if they're advisors, they can make money on one side. So that separate segregation came in. So they're independent advisors, they're independent broker. The good part is that the platform who are already stitching the story. So very from day one that we wanted to build this with a very long term view. And interestingly if I look at the time when I started, there was a lot of VC money push around mutual fund businesses to build consumer brands and all that. Most would say that why are we not doing the mutual fund, it's an easier problem to solve, right? There's an infrastructure out there and all that, but it was very clear as a vision that as India expands the broking market, this is inevitable. The regulator would want a business like this to flourish because it has a good intent to make money at the retail account level in a managed model, so we were very clear. So bootstrapped it from 2016 to 2020. Not easy for me because I come from a lower middle class [00:45:00] background. So that transition to think that okay, you can actually build a business because you know what you're building and hardcore computerized guy, I can build architect this businesses with the right team, so was very clear. Money, obviously building an IP though it is very expensive, but it is not crazy. For example, with 5, 10 crore rupees, you can build a great technology over a period, then you can pound on it take market feedback. So 2016 to 18 bootstrapped it for the first customer paying customer, so that fly will affect started building up. Cost was always low with the right team, not like crazy hiring and stuff. So very small team, very focused objectives till 2020 when Covid came in like we have seen the fly will affect both on the managers side, on the broker side and we realized that some growth. So 2020, somewhere we took a first round of funding around 25 or cumulative fundings of cumulative funding we took and that was working really well. All good. Then at some point, as you might have heard that Phone pe has [00:46:00] backed us recently. So again, Phone pe came up with the same mindset saying as a business, you are one of the first technology, first businesses in India who's trying to build such a heavy, deep tech in wealth tech segment. We really value this businesses. We want to back you to build this interoperable tech pipe that you're building for the industry. So it took a while and then we joined hands. So it's very fortunate that businesses like ours started bootstrap, got the product market fit with honest intent and then got a backing now with such institutional internet tech player, like Phone pe. So yeah, things are going good if you want to build business with a 10 year view also now in India.
[00:46:35] Akshay Datt: Was the decision to not take funding a choice or was it just that you found it very hard to raise capital and so you decided not to like
[00:46:44] Ujjwal Jain: Raising capital in 16, 17, was not difficult because space was picking a payment all that was getting very, lending especially, so else was anyways you know today they are hardly any meaningful company doing meaningful stuff, right? Even today, it's not easy space, right? So especially with the kind of [00:47:00] background we had money would not have been the challenge. But the challenge I'll tell you was that if I take very high momentum, high velocity capital, right? You need to grow at that scale and you might end up making mistakes and building a technology first business is the first principle thinking is that you need to protect your vision, So that means that you have to make some hard choices. It is not easy. It is not easy when money is out there, right? We took that, for example, some of the most like poster companies poster when you talked about zerodha for example, I mean they would've also been able to risk, but they did not, it was the kind of approach they're taking to buildings and business is very tech first, very long term, very market dealing. Whatever be the situation we will survive, will grow. That is something which is cultural to me, as a founder, like that outgrow me, outpace me my life that was the passion, it was like raise capital, get that funding dues out and then grow, call of duty at my level.
[00:47:53] Akshay Datt: Congratulations on the Phone pe acquisition. I believe they valued you at about 50 million dollars, which is pretty [00:48:00] amazing considering that you have raised only, I think 4, 5 million till date before the acquisition. So like for the investors, it must have been a pretty good exit.
[00:48:08] Ujjwal Jain: Yeah. So actually valuation numbers, I don't know where you have got it but I'm gonna comment on that number, this side or that side. But we have not raised more than 25 crores out of which I can tell you honestly I have not warned to them like 60, 70% of that when we were talking. So we had good burn to actually good money in the background to continue to burn the way we were burning. So the phone backing is largely built on the principles of building tech first businesses and wealth. So culturally, we all are aligned, like Phone pe, like Sameer, Rahul and when we sat down and they told me to hold the back to and its a natural evolution for building an interoperable tech pipe, culturally we understand tech first business. So patient capital and continuous long term vision is fundamental so that connected where with Phone pe and so that's where we are today.
[00:48:57] Akshay Datt: I would've thought that a broking [00:49:00] company would find you more appealing as an acquisition. Phone pe doesn't offer broking, right? How would Phone pe leverage this for their customer base?
[00:49:08] Ujjwal Jain: Phone pe today, if you look at it, a Phone pe have a wealth business in the form of mutual fund distribution and they will have its own plans around wealth space eventually. And as a platform, what Phone pe values is the fact that building interoperable tech or something like a unified wealth interface vision of the booking layer, it's a very strong, very institutional very india focus play that which is largely technology led and they value that vision very well. So that's and wealth desk can grow very well on its own. So that's something which Phone pe as an investor obviously they will use platform for their different cap cities like a regular partner. The fact is by the way, wealth management is now being taught, like can there be an internet scale wealth management play in India.
[00:49:53] Akshay Datt: What does that mean?
[00:49:54] Ujjwal Jain: In the sense that can you bring wealth management kind of offering to retail investors in millions of accounts, that was not there. [00:50:00] Transactionally we are there like broking is now there, right? A platform like ours, the core strength and the vision is built on those principles.
[00:50:06] Akshay Datt: Okay, got it. They're not looking at like an immediate monetization through their customer base but they're looking at this as a long term play that this is the kind of business that they would like to be in basically.
[00:50:18] Ujjwal Jain: Yeah, don't want to comment on the evolution of how that business of Phone pe will work out, but as purely from a backing point of view, nothing to do with the Phone pe side of thing, but more to do with wide lens vision is pretty solid from a long term point of view.
[00:50:33] Akshay Datt: So what do you think you'll be doing 10 years from now, post acquisition a lot of founders then after a year or two or three would look at a second inning and what's in the pipeline for you?
[00:50:45] Ujjwal Jain: Actually, if you look at it, the second innings within this business has just started like the tired of opportunity that I could see for next five minutes, actually, I couldn't see five minutes before.
[00:50:55] Akshay Datt: What do you see, like the five year opportunity, what are some of those things which are making you excited?
[00:50:59] Ujjwal Jain: [00:51:00] One of the things is obviously as there will be many retail investors who, for a better wealth management solution, they'll pay. And if you are a platform in that segment, there's a massive market to build up. The second is, in the entire value chain, like, there's a massive innovation happening to make transactions more efficient, onboarding, more efficient. I just heard like there's a change in IT act to even allow digital POA power of which means onboarding gets more seamless at the level. See, government is also doing very exciting things, I cannot imagine if you're an interoperable tech by connecting stakeholders in the ecosystem, regulators doing so many great things that are onboarding account aggregator and bunch of things. The opportunity is massive out in India. So as a Computer Science tech first founders, I cannot sleep actually thinking about next five years.
[00:51:50] Akshay Datt: So this is a follow on conversation based on something you just told me offline that most newspaper articles top of Phone pe acquisition for Wealth desk and [00:52:00] Open Queue. You just told me that Open Queue, you're also the founder of Open Queue. So tell me about that.
[00:52:05] Ujjwal Jain: If you look at our business evolution, when we started in 2016 and 2018, we started looking at managers who were creating these portfolios. Most of the managers were active style researchers in the sense they used to actively understand which top to put in the portfolio and build the portfolio. Coming from my MSCI background where I've seen passive factor based or smart beta based portfolio tracking enormous about.
[00:52:26] Akshay Datt: What is this smart beta based, cohort based, what do these words mean?
[00:52:30] Ujjwal Jain: So technically these are all active research title in the sense, when you say that this stock is a good quality stock. So quality, definitely is some mathematical understanding at the company level, right? How do you identify a stock as a good quality stock, but you know this is so called value investing, this stock has a lot of value. Yeah, there's this factor called momentum. There are a lot of baskets on momentum. So momentum is a factor. So momentum size, large cap market is a factor. Quality is a factor, value is a factor. These factors are nothing but [00:53:00] active research styles, which many managers do on their own discretion can be modeled through academic research very well research in developed markets where you can identify how good quality factor can be created to identify the quality of a stock. Thousands of speeding variables goes into these factors you backed us to build models, which are for factor models or smart beta models. So when these factors or models are created, you run that on a stock universe, these each stock has some score on an online distribution basis and using those scores you can create portfolio with a tail to quality, with a tail to monitor, with a tail to value. The best part is the models are far more nuanced, far more comprehensive because they are fully built on massive amount of data which has no look at bias, no survivors in bias, no fund manager bias, nothing. And it can track very actively because these are modeled into a rule based engines. So they are like on a real time basis they're tracking that numbers very quickly. If you have the right data feed, when these research gets into these portfolios, [00:54:00] so that we call it the smart beta wealth baskets, like a momentum quality.
[00:54:03] Akshay Datt: So this is like using machine learning principles, right?
[00:54:06] Ujjwal Jain: So first principle is quantitative machine learning could be one of the other factors, but it is all quantitative statistical models.
[00:54:13] Akshay Datt: So like for example, you would see that in the last 10 years, let's say page industries stock has done very well. And then there could be like say maybe hundred such stocks, which have done well and then you would have some data about these stocks. What kind of data? You said there are 30 data points. What kind of data?
[00:54:30] Ujjwal Jain: No. There are many data points around price, core protections, then fundamentals, earnings, estimates.
[00:54:37] Akshay Datt: Core protection, like whether this stock came in the news or whether there was some stock split.
[00:54:43] Ujjwal Jain: For example, if you want to understand on a factor how a stock has done well from let's say, to 2000 to 2022, you need to ensure these biases or core protections are also adjusted, right? Because then you'll not be able to have a right time series, that is a very challenging problem to solve.
[00:54:59] Akshay Datt: You [00:55:00] can do Apple to Apple comparison if there's a stock split.
[00:55:02] Ujjwal Jain: So these are very challenging problem to solve in order to build a very systematic research-based portfolios, right? Some of the heavy lifting in should be done at the data level to ensure, no such bias. You can do a time series analysis.
[00:55:14] Akshay Datt: How do you get fundamentals? You said that data around fundamentals like that would be on the balance sheet.
[00:55:20] Ujjwal Jain: They charge amount of fee around these raw data feeds. You feed this into your research clouds, ensure your, all these spices are sorted out and then you are in a situation where you can actually do real research from back testing point of view and all.
[00:55:33] Akshay Datt: So this basically will give you correlation that these factors correlate with stock price going up and therefore you can continue to look at the universe of stocks. And the model can then predict that the factors which in the past have been correlated to high price are present for these stocks. So it is highly probable that this universe of stocks price will go up because those factors are moving in that way. Something like that.
[00:55:58] Ujjwal Jain: Correct. So these are factor [00:56:00] models. That's what we call as factor models and the other interesting part is that you can merge different factors. Say for example, you want to write on momentum, but you want to stick to let's say quality stocks. So you weigh on quality factor and momentum factor in some mechanism. So you can create very good portfolios and all systematic rule based and passively invest in
[00:56:20] Akshay Datt: Momentum is like basically saying that if a stock is going up, then it'll continue to go up purely because of momentum because people see it going up. So it is like mob psychology that everyone sees it going up, something like that. That would be a momentum.
[00:56:33] Ujjwal Jain: Correct. But in that, in India, specifically if you add the low volatliity factor, low volatility factor is like that, that the market goes up but when market goes to steep fall, it's not like your will not go fall. It'll fall, but you taper down that fall with volatility. You ensure that the volatility factor is minimized in your portfolio. So you can have that factor when you mix both, you create a very good portfolio. So those things you can do very well intelligently, completely.
[00:56:59] Akshay Datt: Like saying that [00:57:00] a momentum stock is a stock which will continue to go up, but high quality momentum stock is a stock which when the market turns, it'll not crash, say game stock was not a high quality stock, obviously.
[00:57:10] Ujjwal Jain: It'll crash lesser, when it crash lesser recovery becomes faster, so you eventually in the longer run side to tend to outperform the market very well. So 2018 we incubated Open Queue as one of the managers on our platform where the focus was very simple, that as a manager you bring these research styles into Indian stock portfolio universe for the broking committee. Most of the 99% managers are focusing on active stock picking bottom up analysis, bringing what we've smart beta factor and these research mechanism into Indian retail company. So that was the thesis Open Queue came out and 2018-2020, they first went live with the first portfolio, two, three years, went into the heavy lifting of data clean, building the right research cloud to cover with this kind of portfolio. So I founded that with the sales presented as a platform can we bring in these in emerging research style segment into Indian market. So [00:58:00] that was the thesis and what happened in 2022 when Phone pe backed wealth desk. So eventually that opened, you also get acquired by phone as the advisory business model.
[00:58:09] Akshay Datt: And like you incubated as in you found a few people whom you got on as co-founders and you had the biggest stick. Collectively you would have the majority stake in both these businesses like maybe 60, 70% is yours or something like that.
[00:58:24] Ujjwal Jain: Yeah.
[00:58:24] Akshay Datt: Okay, cool. So are you like now planning to become an angel investor? Because you have obviously got a lot of cash from this deal.
[00:58:32] Ujjwal Jain: Yeah. I am actually actively investing, not actively investing in very selective companies. I have started in the sectors, which I like.
[00:58:40] Akshay Datt: What kind of companies and sectors are you investing in?
[00:58:43] Ujjwal Jain: I like road tech. I like SaaS businesses and I like heavy lifting infrastructured tech companies and all.
[00:58:49] Akshay Datt: Heavy lifting infrastructured tech, what does that mean?
[00:58:52] Ujjwal Jain: Which means that we are trying to solve tech led long term problems. Like for example, wealth desk is a long term problem, like, which we solve for over years. So, which is not like [00:59:00] you'll see an outcome immediately but because I went through that journey. So any founders solving those challenging long term problems, sometimes boring also in the short term runs
[00:59:10] Akshay Datt: Like a web two to web three or those kind of,
[00:59:13]Ujjwal Jain: Like you could go it right? Yeah. So those kinda.
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