Home / Money / Personal Finance /  The anatomy of Scripbox’s success

Scripbox, a digital wealth management platform, has been on an acquisition spree over the past few years. Set up in 2012, the platform has seen a surge in its assets under management (AUM) recently—from 1,700 crore in August 2020 to the current 12,000 crore—driven to a large extent by inorganic growth. Scripbox has been acquiring several mutual fund distribution (MFD) businesses to expand its customer base and geographical footprint. It has now entered into a partnership with Wealth Managers (India), a Pune-based wealth management firm.

Scripbox holds a MFD licence and is also a Sebi-registered investment advisor (RIA). The platform derives 90% of its revenue from commissions. Mint reached out to Atul Shinghal, founder and CEO, Scripbox, to understand the firm’s business model and acquisition strategy, among others.Edited excerpts from an interview.

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Can you explain your business model? How does Scripbox make money?

We are a wealth manager and help people manage their money for the long term. We understand a customer’s needs, create a portfolio using asset allocation and fund selection, execute that portfolio and manage it on an ongoing basis. All of this is driven by science and math. As we gather more data about customers, we’re able to customize our asset allocation models.

A lot of people confuse digital with online. Online is a channel on top of a physical business. Digital is science, math, data and algorithms analysis. We are a digital wealth manager. So, we have algorithms running, which you can never do in the manual world and then reviewing this every quarter because circumstances might change. We do this at the family wealth level. We target customers who are 40 plus and already have some money.

Is MFD or RIA the larger part of your business?

I think MFD and RIA are different revenue mechanisms. We are wealth managers. The customer can either allow us to collect distribution fees or commissions from the manufacturer or instead become an advisory client and pay us a fee on a regular basis. We make money very transparently on one of the two sides.

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So, what’s the revenue contribution?

It used to be 80:20 till recently. After the strategic partnership (Wealth Managers), the revenue split has become 90:10 between commissions and fees.

For a customer, what’s the difference in services between the two?

Nothing at all, there is no differentiation. Services are exactly the same. So, if you come to me as a distribution client, I will still spend time trying to understand who you are, I will use tools like the financial health check-up or portfolio audit; I will talk to you to figure out your requirements, create a portfolio, execute for you and review it regularly. That said, regulation, however, limits services like stock advisory which we can only provide to RIA clients.

For mutual funds (MFs), you have detailed analysis and recommendations. But, in case of fixed deposits, National Pension System schemes and life insurance, you have tied up with only a few partners. So, there’s limited choice?

At this point in time. We are much more mature in our capabilities on the MF side. As we build our research capabilities, we will add a wider basket. So, when we started with MFs, we offered only four funds originally. As our customers have grown, their wealth has grown and we are offering more choices.

Would it be okay to say that you are a holistic wealth platform only on the MF side?

So, it is holistic for our customers. It’s not holistic for traders, right? So, obviously, we don’t allow trading. Today, our customers are in the 40-45 age group. Our target is customers in the 35-55 age range, and managing between 15 lakh and 2 crore. We believe MFs are sufficient to manage their portfolios.

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Scripbox started out in 2012. Many other MF platforms have come up since. So, was there a stagnation phase in between?

We are the oldest wealth management platform. I don’t think we’ve ever had stagnation. Businesses compound over time.

We are the only true wealth manager, most others are transaction platforms which allow you to buy and sell MFs. So, even when we launched say 10-11 years ago, though we had 4 funds, they were very heavily curated. So, we were targeting 28–30-year-olds and we said, you should be investing in equity for your long-term wealth.

At that time, there were 800 equity schemes. The Sebi categorization did not exist. As our customers grew, we added other funds. Over the last two years, we’ve accelerated our growth by consolidating some of the offline players into an online solution. We have customer retention rates of close to 95%, the industry average is 65%.

How much of the 12,000 crore AUM has come through acquisitions?

When we acquire a business, we are able to grow it very fast. For all our acquisitions, we have been able to double them in a 12-month period. You are used to a certain experience and now, it’s fully digital, there is a bigger brand and better experience so clients are ready to commit more money. Including the latest transaction, it would be 8,000 crore through acquisitions.

You’ve just announced a strategic partnership with Wealth Managers (India). How will this help Scripbox?

I think it’ll help customers more than anybody else. We believe we will learn a lot and we are privileged to have Bharat Phatak and Ajit Khasnis (founders and directors, Wealth Managers) on our team. They have decided to join hands as they believe digitization is the future.

You have also acquired other RIAs and MFDs. What are you looking for in these acquisitions?

Eight of them have been MFDs. Only one was an RIA—Mitraz Financial. Wealth Managers (India) is our tenth transaction. One, we are able to serve a larger set of customers. Second is a wider geographical presence. We are a phydigital company with a digital first business but there are higher ticket size customers who require some kind of physical presence. So, today we are in 10 cities thanks to our various acquisitions. Last but most importantly, we learn. We are continuously refining our portfolio management models plus we are also able to acquire some great talent.

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ABOUT THE AUTHOR

Maulik Madhu

Maulik Madhu is a special correspondent at Mint. She started her career at the Competition Commission of India (CCI) and forayed into business journalism in 2012. Choosing to specialize in personal finance, she worked at FundsIndia and The Hindu Business Line, before joining Mint in March 2022.
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