In an interaction with Adlin Pertishya Jebaraj, Correspondent at Finance Outlook, Paddy Raghavan, Co- Founder, Multipl, emphasizes the fact that the transition of India towards being an aspirational and participation-based economy is accelerating the emergence of behaviour-based finance.  

Having extensive experience in software engineering, cloud computing and startup ecosystems, he was also the co-founder of CMPUTE.IO, which is a venture that enables cost optimisation of clouds, later acquired by Cisco. Raghavan integrates technology, behavioural finance and practical investing to make wealth creation more accessible, more intuitive and goal-oriented towards the consumers today. 

Traditional investing has largely been savings-driven. What fundamental behavioural and economic shifts are now pushing the market toward behaviour-led finance models?  

India is young, aspirational, and has been recording increasing disposable incomes. These demographic dividends are transforming the scarcity to abundance and desire. Individuals are no longer pursuing financial security alone; they are seeking lifestyle improvement and wealth inclusion.  

Conventional savings failures by banks are increasingly perceived as no longer sufficient to counter inflation and changing objectives in life. With more exposure to consumption trends, online platforms, and financial products in the world, consumers would like their money to serve them more by working hard and matching their individual aspirations. The change in psychology preservation to participation is accelerating the need to have behaviour-based models that would incorporate investing as part of ordinary everyday life. 

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How can behaviour-led finance improve portfolio diversification and risk-adjusted returns for first-time investors?  

Rules-based and automated behaviour-led financial systems can reduce typical behavioural biases that are found to affect first-time investors, in a disproportionate way. These are the recency bias (following gold or silver after an upswing), the effect of FOMO on asset allocation, and panic selling because of the loss aversion during downswings.  

Such systems minimize the perfunctory decision-making by integrating diversified portfolios into default investment paths and automating investments. Goal-linked systematic investing allows discipline and pre-established risk frameworks help to avoid concentration risks. In the long run, this systematic approach increases the risk-adjusted returns by ensuring that investors stay with the long-term plan and not the short-term emotions. 

The “invest-while-you-spend” approach integrates investing into daily consumption. How does this structurally differ from traditional SIP-based wealth creation models? 

Traditional SIPs are a periodic savings plan that is scheduled and geared towards wealth accumulation in the long run. They work as a binding towards economic viability. The invest-while-you-spend model, on the other hand, puts investing into the consumption layer. It forms an endless circle of investing and spending. Money can be invested into mutual funds and dynamically utilized to spend on planned or even impulsive spending.  

This model would maximise liquidity, behavioural engagement, and aspirational results. It may be purposeful, e.g., a holiday, anniversary present, insurance payment, etc. or occasion-based, e.g., food delivery, something-fast purchase, or lifestyle costs. The architectural distinction is in integration: instead of the distinction between investing and spending, they are combined into a unified behavioural ecosystem. 

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Can behaviour-led systems help bridge the financial literacy gap without overwhelming new investors with complexity? 

Yes, behaviour-led systems would go a long way in sealing the financial literacy gap by creating experiences that make the financial decisions easier, not more complex. Strategies like gradual unveiling, where customers have initially been tutored by performance, and then presented with statistics such as NAV, Sharpe ratio, or TER in the real-world are less cognitively overloading. 

Smart defaults such as recommended mutual fund collections and auto-investing options assist users to make good decisions without necessarily having technical expertise. Learning is relevant and timely when presented at key points of decision as raising questions like- Can I withdraw my money? Where is my money invested?  

In response, we cannot call behaviour-led platforms democratization of investing by watering it down. 

Ultimately, how will behaviour-led finance reshape the competitive landscape of the asset management industry? 

Behaviour-led finance will transform the competition in the asset management industry to an outcome-driven ecosystem as opposed to a product-based and distribution-based competitive. The ability to succeed will no longer be constrained by the amount of manufacturing money or the number of distributors.  

Rather, the successful firms will be the ones that become part of the financial behavior of the customers, owning their targets, dream, spending time, and default choices. The key competitive advantages will be behavioural design, embedded finance partnering, smart automation, and customer engagement models. Essentially, the asset managers will become behavioural architects rather than product providers by designing not only portfolios but also financial behaviours and life results.