16 Oct Abhenav Khettry
One of the most sophisticated Financial Advisors of Kolkatta and an expert in using innovative Marketing techniques for growing the market. Read his interview and get an insight into his innovative ideas
What is your view of our economy in the medium to long term?
The world’s economy has been put on steroids by the central banks and they have printed so much money and created more debt that can ever be repaid. All this to ensure global growth at a time where it is hard to find any. If in this scenario, India has sustained without major economic stimulus, that indicates that there is something special about our economy.The economy is a vast subject with several pull and push factors, however to keep it brief, Indians lacks innovation, but make it up by running efficient and profitable businesses, It’s the entrepreneurial spirit that will drive India into the 21st century and make our economy even stronger. We need to manufacture much more, innovate much more and provide real world solutions. That will keep our economy growing and healthy.Capital availability is still inefficient, development of capital markets even further, will help bring down the cost of money which is very vital in our economy.
Is it a good time for entering the markets now? If yes what approach should investors take?
Generally this question refers to the equity markets. We should never look at equity markets on a standalone basis. An investor should look at the overall climate of the markets before investing. But that works if you are a foreign portfolio investor. For an individual or family, they need to look at their goals, their horizon and risk appetite. Based on these an asset allocation has to be provided which will determine how much exposure to which asset class. Risk appetite will determine tactical exposure within the asset class to sub classes like large and or mid-caps.Investors need to understand, that investing is a not a game to enjoy. It’s the most boring thing and should remain boring and methodical. Investing should be matched to cash flows. If you have the cash today, invest as per the required asset allocation. You cannot outsmart the markets, you cannot time and come out on top all the time. Frankly I think fund managers are much smarter than us. If we invest in a fund, we should just let the money be, let them manage cash levels and sector selections, we can never beat them at this game. Secondly never take out the money till you need it or your goal has been achieved. Your investments should mirror your cash flows.
What is the advantage of investing in a Mutual fund vis a vis investing directly in Stocks?
I am all for investing directly in stocks, if you have the wherewithal to do it, then why not? In fact a direct stock portfolio will always give you higher returns than a mutual fund portfolio. Because the risk is much higher in a direct stock portfolio. You will be hit equally hard in a falling marketHowever if you don’t have the time or the patience or the risk appetite, then mutual funds are for you. Mutual Fund is actually a very broad subject.There are various asset classes within mutual funds like debt, liquid and hybrid apart from equity. Mutual Funds have the following benefits;
Professional money management: you are basically hiring a professional team of investment experts who manage money for you
Research & Risk Management:Your money has access to comprehensive and in depth research carried out and shared by investment professionals, combined with extensive risk management to mitigate frauds and systemic risks
Diversification: Your money is well diversified across different stocks, sectors and capitalization to reduce risk in the portfolio
Tax Efficiency: Mutual Funds are exempt from paying taxes on their gains generated, thus only one level of taxation for the end investor. Also mutual funds have the benefit of being taxed under capital gains, which is much lower than regular income.
What is your approach to advisory?
I do not believe in one size fits all. I have a very personalized approach to advisory. I never generalize advise. Advisory has to be very focused on the investor and his requirements.My initial step is to understand the person better. We delay the investment decision to a point when mutual trust and understanding has been developed. Once the investor has reasonable faith on your approach and the objectives are aligned, then he will allow you to take decisions for his money. Then they work on a high degree of trust.Also it is very important to be consistent with the same investor. You cannot be changing your views or approach often. I am also of the opinion that markets are transitory, the investor has to be passive.
It is also true over a period of time, that you attract investors who are similar to you in certain ways. Thus minds match easily and people are comfortable dealing with you.
How do you market your services?
Marketing is an ongoing process. I spend much more time on marketing & communication than I spend on reading and following the markets. Tracking the markets and managing the portfolios is not my job, that’s the fund managers job and he is qualified and well paid to do the job. My job is to manage investors behaviour and retain ownership on them.A larger part of my time is spent in hand holding investors, teaching them the basics, helping them take informed decisions and most importantly cutting the clutter.We have developed an all-round marketing strategy, which is never ending. We communicate at three levels:
Existing investors: via calls and whatsapp messages (no one reads emails, unless their portfolio is attached).
Prospective Investors: Via social media like Whatsapp & Facebook
Activities: Organize quizzes, participate in cultural programs and investor events with eminent speakers
We have an ongoing campaign on Facebook and Whatsapp, which is ever evolving.
Do you conduct IAPs? Our approach and challenges.
We do not conduct standalone IAPs. Most are bundled with other events like:
Quizzes in corporate offices and Housing Complexes
Screening of educative movies in Schools & Colleges (One Idiot)
Stand Up Comedy Shows
Talks with eminent speakers
Here again our target are to capture the attention of the top 5-10% of the people who can give us business. We do not have a retail model, most of the investors are known to me or my employees. We do not have a sub broker or referral model. So the idea is not go for number of investors, but high quality of investors. Despite a controlled approach we have over 1000 active investors (actual 1900), SIP book of 60 Lakhs per month and AUM of Rs 120 Crores only in Mutual Funds. Non Mutual Fund AUM is over Rs 200 Crores.
Future challenges and how to overcome them
The biggest challenges are not from the markets or investors, but from the regulator. The regulator is imposing first world compliance on a third world economy, where the maturity and knowledge levels are abysmally low. We have hardly penetrated and the regulator is putting a lot of hindrances in our growth. So far the market is expanding due to market forces and flow of funds, but having a deep retail investment culture is very important. Also our country is plagued with several fly-by-night operators who raise money in unregulated schemes. Such schemes pay high fees to the intermediaries. Thus wrong selling will increase.The only way to overcome these challenges are to remain true and honest to your investors. Take care of them and they will take care of you. Maintaining a regular connect is very important and you must be selfless in your approach and attitude. Most bankers fail because their interests are not aligned with the investors. Advisors must leverage technology to reach more investors and reduce cost per investor over a period of time. Encourage investors to use technology to monitor their portfolios and also start using distributor initiated transactions for most transactions.
Key message to potential investors
India is far from its true potential, there is still a lot left to be harnessed. We are a capital deficient country and if invested properly, this country will yield very good results in the years to come. We have a strong leadership and a conducive environment for growth. We can create a lot of wealth by investing “simply” in this country. Indian fund managers have consistently beaten their benchmarks are good money managers.You savings are in safe hands. Just come with a goal oriented approach. Do not try to time the market or trade, you will not make money on most occasions.Lastly only farmers and equity investors can earn tax free money in India. So invest early and stay till your goal is reached. Benefit from the true power of compounding.