Trust Over Transactions: Pradeep Gupta On Anand Rathi Group’s Next Big Growth Leap

India’s capital markets have changed dramatically since screen-based trading emerged in the 1990s. Pradeep Gupta, Co-Founder & Vice-Chairman of Anand Rathi Group, has witnessed that transformation closely. In conversation with Manoj Yadav, Business Editor (Digital), The Free Press Journal, and Sheryll D’Souza, Consulting Business Editor, he discusses investor maturity, hybrid advisory, trust, asset allocation, expansion beyond metros and the group’s ambitions for its financial services businesses over the coming decade and beyond in India today.

Why did you enter financial services in 1994?

Before 1994, India had around 11 or 12 stock exchanges, most of which were regional. Trading largely happened through the open-outcry system.

The National Stock Exchange then introduced screen-based trading, while the Bombay Stock Exchange was also moving towards computerisation. The entire structure of the business was changing, and the market was becoming more professional.

We saw a major opportunity because very few market participants were offering investors research-backed and professional services. 

We started with three principal businesses: institutional broking and distribution, consulting, and investment banking. That was the beginning of our capital-market journey. 

What guided the group’s diversification? 

We were clear from the beginning that our business model had to be customer-centric. We wanted to understand the requirements of individuals, companies and institutions and provide products or advice that could help them invest properly and create wealth.  

We began with broking and distribution. As our customer base grew, we recognised the need to establish a separate wealth-management business. 

Insurance was another important requirement, particularly for retail customers who needed life and health protection. We therefore entered insurance broking. 

Later, we realised that funding requirements often went together with investments. This prompted us to build an NBFC business offering products such as loans against securities.  

We continued adding businesses that addressed specific customer requirements, whether they involved investing money, protecting wealth or raising funds. Every addition emerged from an identified customer need.  

How has the Indian investor evolved? 

There has been a remarkable change. Earlier, many people invested based on hearsay or recommendations from acquaintances. Only a small section studied companies, conducted detailed research or properly analysed financial products. 

Investors have become more mature. They now understand equities, mutual funds, corporate bonds, alternative investment funds and portfolio management services. More importantly, they ask questions—and often ask the right questions. 

Every category of customer has evolved. Consequently, we have strengthened our research and delivery systems. 

Our objective is to remain associated with customers throughout their investment journey and eventually during the transfer of wealth to the next generation. Long-term relationships are central to our model.  

We have segmented our services across retail investors, affluent customers, non-resident Indians, companies and institutions. Each segment has different requirements, preferences and risk-taking abilities. The products and services offered must reflect those differences.  

Why maintain a large physical network? 

Investments are different from ordinary purchases. People can compare consumer products online, choose one and buy it. If they make a wrong choice, they can replace the product later. 

When people invest their savings, they expect capital protection and returns. They want to ensure that an investment suits their goals and risk-taking capacity. Even investors conducting independent research often seek a second opinion before deciding. 

That reassurance should come from us. It requires branches, business partners and relationship managers who can explain our research and help customers make informed choices.  

We have around 100 branches and more than 1,200 business partners. We also operate digital platforms that distribute research, enable transactions and provide customers with a consolidated view of investments and returns.  

Our model is neither entirely physical nor purely digital. It combines personal guidance with digital convenience. Customers can seek assistance when required and execute transactions independently when comfortable. 

What are the challenges beyond metros? 

The first requirement is standardisation. We examine every asset class and product category, including direct equities, mutual funds, alternative investments and portfolio management services.  

Our teams conduct detailed research before creating recommended product baskets. Each basket is matched with customers according to their needs and risk profiles. This helps relationship managers offer appropriate solutions instead of unsuitable products. 

Investor education is equally important. We began organising investor seminars as early as 1995 and 1996. These programmes allow us to explain our investment philosophy, discuss products and show how disciplined investing can create long-term wealth.  

Another challenge is finding and retaining trained employees in smaller cities. Skilled professionals often move to larger cities after gaining experience. 

Our business-partner network helps address this difficulty. We train partners through virtual and physical programmes and provide them with research, advice and operational support. They build their businesses while extending our services to local customers.  

Are new investors focused on long-term wealth? 

Experience matters greatly in equity investing. Many new investors believe they understand the market well enough to decide independently. They often begin through discount brokers or digital platforms.  

This approach appears successful while markets are rising and they are earning money. The real test begins when the cycle changes. That is when experience, guidance and handholding become important. Investors can otherwise suffer heavy losses because they may not know how to respond to volatility.  

Around 80 percent of our customers are above 30 years of age. Many have experienced different market conditions and understand the importance of professional guidance.  

We charge for our services because research, advice and asset-allocation support require expertise and resources. Good advice cannot always be free. Customers are willing to pay when they understand the value it adds to their investment journey. 

How do you determine asset allocation?  

Asset allocation begins with understanding the customer’s financial position, objectives, category and capacity to take risk.  

Financial capacity and emotional willingness to accept risk are not always identical. A wealthy customer may technically be able to absorb a substantial loss but may not be mentally comfortable with market volatility. Both factors must be considered.  

We classify retail customers into different risk profiles and create suitable product baskets. Wealth management follows a more clearly defined, solution-based approach, with different plans corresponding to different risk levels and return expectations.  

Transparency is essential. Customers should know where their money is being invested, what risks they are taking and how a product fits their financial objectives. An allocation must be suitable for the individual rather than based on a standard formula applied to everybody. 

Why are relationship managers important?  

Customers may not disclose everything during their first interaction. Trust develops gradually. As the relationship grows, they become comfortable discussing income, responsibilities, investment objectives and future funding needs.  

A relationship manager who stays connected with a customer can understand these details and prepare a more thoughtful financial plan.  

The role is not limited to selling investment products. It involves understanding when a customer can invest, when money may be required and how the portfolio should respond to changing circumstances.  

A stable relationship allows us to exchange ideas, explain risks and provide solutions aligned with the customer’s actual needs. Behavioural understanding is important because financial ability alone does not reveal how a person will respond during difficult market conditions.  

How do you prevent mis-selling?  

Our philosophy considers three stakeholders: the customer, the employee serving the customer, and the company. A proposal should create value for all three. It must not benefit the employee or company at the customer’s expense.  

We research products before creating recommended baskets. Targets and revenue expectations are linked to products that have passed this internal process. 

We also monitor whether recommendations match customer requirements. If there is a mismatch, we examine the reasons and may speak directly with the customer. 

In broking, customers sometimes invest outside our recommendations based on personal research or market tips. We caution them when necessary. We also show them returns from our recommended basket and let them compare those results with their independent decisions.  

If we notice significant losses or problems in a portfolio, we alert the customer and offer support. The final decision remains with the investor. 

Handholding and transparency are the foundations of our approach. When both are consistently present, trust develops naturally.  

What is the group’s next growth phase?  

The group has five major businesses operating through separate companies. Our broking and distribution business and wealth-management company are listed.  

We are also developing our insurance and reinsurance broking business and our non-banking financial company. Over time, we would like these businesses to grow, attract investors and potentially reach the public markets.  

Our objective is to grow each business and position it among the leading companies in its segment. However, growth should not be measured only through customer numbers. We want to expand our base of satisfied customers.  

We will continue studying the difficulties faced by different customer groups and create appropriate solutions.  

Capital markets keep changing. New products, strategies and investment avenues emerge every few years. Alternative investments and international diversification, for example, have become far more prominent.  

Finance requires constant learning, upskilling and adaptation. Even after spending 30 or 40 years in this industry, one can still feel like a newcomer. Continuous learning remains one of the most exciting aspects of working in India’s evolving financial-services sector.