A former Policybazaar executive’s startup shows how mutual funds can be sold successfully in rural India

When Manish Kothari, a top executive with Policybazaar, quit the billion-dollar company last year to start his own venture, he had learnt two valuable lessons.

One, people have surplus wealth in rural India, but do not know how to invest it properly. Two, for more than 2 lakh LIC agents, there are only 8,000 mutual fund agents in Uttar Pradesh, the largest Indian state.

Armed with this knowledge, he teamed up with Vidhi Tuteja, Gaurav Seth and Ruchi Kuhar to start ZFunds. The team’s mission was clear – go to the heartland, educate people and sell financial services.

The foot-soldiers were mostly retired bankers, insurance agents, chartered accountants, and existing mutual fund distributors.

Within a few months, ZFunds built an asset base of Rs 500 crore and is selling 1,000 Systematic Investment Plans (SIPs) on a monthly basis across 35 districts in Uttar Pradesh. Now, the target is 2,000 monthly SIPs.

How did he pull it off?

Kothari’s philosophy is simple. He encourages local agents who know the socio-economic demographics to sell less risky investment products. There are already 300 such advisors.

This, he believes, will help expand the overall investor base and encourage consumers not comfortable with a smartphone to invest their wealth properly.

ZFunds intends to digitise their back-end processes and sell products, and service the clients physically.

“By October we will have an investors’ app as well, but the thrust will be on agents,” he said.

ZFunds will not have physical offices but agents will do the rounds and reach out to prospective clients regularly, help them chose the right funds and service their requirements.

Scaling up

From Uttar Pradesh and Gurugram, ZFunds intends to scale up to Bihar and Rajasthan. How?

Choose one small market, establish a strong distribution business there, and then move on to the next. This is his plan for the next two years.

There is enough investment appetite beyond large cities and metro cities in the country, believes Kothari. But these kinds of businesses tend to be less attractive for a typical venture fund.

Though Kothari is in talks with a few venture capitalists, he said his objective is not to build ZFunds for valuations. If the talks do not fructify, Kothari is confident of scaling up this business profitably across the country, albeit at a slow pace.

“I want to create a sustainable business and make money on the core product, cross-selling is not easy,” he said.

The core team

Kothari learnt about the nitty-gritty of this space while heading the mutual funds business at Policybazaar. He has spent around 15 years in the financial services space, having worked at Citibank, Standard Chartered Bank and IIFL Investment Managers in the past.

His co-founders Tuteja, an engineering graduate, leads tech initiatives, Seth, a CFA, leads research and content, and Kuhar leads client servicing.

Building Awareness

To be able to sell mutual funds, ZFunds first needs to create awareness about the product. So, ZFunds is using short videos in Hindi to explain the products in an interesting manner to prospective clients.

“The research team works closely with fund houses to create short explainers. Then, either me or Gaurav explain these products through short videos in a language our target customers can understand. This has been a big hit among our advisors,” said Kothari.

The company also organises regular training workshops for advisors, so that they know how exactly the products need to be explained to consumers and what needs to be sold to who.

ZFunds has a base of curated products that are recommended and preliminary experience shows that 70 percent products sold are from among recommended funds only.

It has already partnered with 38 asset management companies and is trying to expand that base, too. For the customer, every conversation happens via WhatsApp and there is no need for each of them to download the application and manage the assets.