Why this rural India-focused RIA wants to build an account aggregator platform

This initiative aims to provide a consumer-focused AA service. Sawant, who began his financial advisory career in rural Maharashtra as the son of a farmer, reflects on how limited data access can impede effective financial planning.

In an interaction with Mint, Sawant shares various factors that prompted him to join the AA framework–a financial data-sharing system that aggregates a customer’s financial information-launched by the RBI in 2021.

Why did you decide to shift from RIA to AA?

As an RIA, I had served 270 families. However, as an AA platform, we aim to serve 5 crore families.

Data is key to a holistic financial plan, but financial planners and advisors often find it difficult to access all client data in place. The AA framework was launched to solve this problem. We want to build an AA platform that not only plays the role of consent manager, but also allows users to see all their data on the AA platform itself.

How will this work at the back end?

We want to build a mobile app, where the user can give consent to our platform to collate and store all their data, but this will only be stored on the user’s device for data security. So, using our app they should be able to see all their data in one place, across asset classes and investment products. Like all AAs, our platform will also play the role of consent manager, where the user can take full control of how the data is shared across third-party platforms.

How much did you invest in this venture?

We have invested ₹5 crore so far. Of this, ₹2 crore has been for the eligibility criteria for AA licence, while the remaining ₹3 crore has been for investing in technology and building the team. We have raised this money from friends and family and partly from personal wealth.

What about RIA business?

For RIA business, I already have a team in place. So, it can continue on its own with the principal officer leading the business. I have a team of 17 people in Vita (my village in Sangli), with five people in Pune. For the AA business, I have a team of five people right now, with me acting as a full-time CEO here. We plan expand AA team over time.

We want to build an AA platform that not only plays the role of consent manager, but also allows users to see all their data on the AA platform itself.

Eventually, the AA business will also help the RIA business. Lot of my team members see a lot of their time getting consumed in meeting various data requests of clients. A good AA platform will be able to solve these data queries in one go. The RIA team can focus on designing financial plans of individuals and giving advice. We want to allow individuals to understand their own personal finances by easily accessing their financial data. It is like giving them access to their own balance sheet. 

Also Read: RIAs can charge fees, commissions for non-Sebi products: Sebi’s Kamlesh Varshney

What challenges do you foresee for a new player like you?

As a new AA, it can take time to onboard new FIPs (financial information providers). For FIPs, every new AA adds to costs, compliance and paperwork. The FIPs need to ensure their systems are ready to cater to the increased volumes of data requests with the new AAs coming in. However, it is a challenge for FIPs to meet such data demands as their systems were not designed to handle such large volumes of data demands. AAs are data blind. So, we don’t know the quality of data that is being sent to end-users. We have received feedback from the market that data quality may not always meet user expectations. For example, some data may not be available with more than four-five months of history.

Also, AAs need a more sustainable pricing model, which the industry is still figuring out. There are now more use cases emerging. Besides banking data, investment data is now available through RTAs (registrar & transfer agents) of mutual funds, but still you can’t see the buying price of stock holdings, for example. There is insurance data available too. EPFO (employer’s provident fund) or PPF (public provident fund) data is not yet available. Data on bonds investments is not integrated yet.

What are the other challenges?

As a new AA entrant, building trust among customers that we are going to ensure their financial data is protected at all times and used only as per their consent, will be challenging initially. It will take some time to build that comfort and trust in the initial days after we launch the product.

Mint take

Different entities can apply for AA licence from RBI. However, not all entities are allowed to fetch data from the AA ecosystem and use it. For example, mutual fund distributors (MFDs) cannot be financial information users, while insurance brokers are allowed as they are directly regulated by Irdai. MFDs are not directly regulated by Sebi, hence they can’t access AA framework as financial information users (FIUs). This can create arbitrage among different players as the AA ecosystem starts to scale. Regulators can work together to avoid this and ensure there is a level playing field among different financial intermediaries.

Also Read: Why this Mumbai-based RIA prefers to go with referrals