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The Amit Bivalkar Interview

1)    Can you please let us know a bit about your early days? How it all started?

After working for three and a half years with “Wealth Managers” I decided to go and join an AMC.  This took me to DSP Merrill Lynch. We opened the branch in Pune which was the first branch outside of metros back then.
I worked with them for about two and a half years. I also worked in Bangalore looking after Karnataka and Goa. Then I came back to Mumbai and worked with Kotak Wealth for a very brief period. This was followed by a stint with Fidelity Asset Management as Mumbai head. When AIG started operations in India, I was selected to manage East and West for their India investments.
During the debt crisis of 2008 a lot of clients actually felt orphaned as there were no advisers to help them. That made me think of starting an advisory company and I met Janak and Rahul in Pune. That’s how we decided to start Sapient in June of 2009.
We started with the humble beginnings of 500 square foot office.

2) What were the factors that contributed to your success in this phase.

First and foremost we made some sacrifices. We did not take salaries for the first six months despite having loans etc. We all made such sacrifices because we believed we were on the right path and once we would get through this initial phase of settlement the opportunity was large enough to handsomely reward us.
As a strategy we believed we should focus on the pain points of the clients who indiscriminately were sold infrastructure funds during the boom period and who were now suffering bereft of any guidance.
So we went out, met people, spoke with them,understood their needs and presented solutions to them. We realised everybody advises clients to invest a very large proportion of their corpus in equity. This set us thinking and we offered a counterintuitive strategy.  We recommended debt as the preferred asset class.
We also suggested that the profit earned from debt investments be switched to equity as a long term strategy. So we went ahead and acquired assets in debt from people who were largely parking their money in fixed deposits. We also concentrated on people in the 30 percent tax bracket because this strategy was tailor-made for them. So clearly by going against the grain, we found our bearing.
Debt funds delivered handsome returns of nearly 9.5% back then and the client experience was extremely good. The steady returns clients made in their early years of investing made them “happy” customers. Most of our clients have been with us for more than 10 years. They have all graduated from Debt products to Equity products. Even today we continue with the same strategy and the average duration of liquid funds in our client’s portfolio is over 3 years. What has been designated as “emergency funds” is treated exactly as what is was meant to be.Another significant strategy was to believe in the business and ourselves despite regulatory changes. Back then entry load had been abolished and many advisors were wondering what to do but we just went about doing our work of meeting potential clients, talking to them and making them our clients. The changes in regulation never stood in our way of growing number of customers.

3)    How has business changed now as against 2009 when you stepped into this business. If you were to step in today would you follow a similar strategy as you did in 2009.

The larger strategy would remain the same. We believe the foremost need is to manage the expectations of the client and that shall continue to be true not only today but also in the future. Those who succeed in doing so and hand holding the client by providing a service oriented experience will always be relevant. However now our thinking on product has undergone a little change as in we are looking at manufacturing products based on client needs and process based which would be different from traditional distribution. We would look to structure products using strategies that we are convinced about. Secondly these days there are many platforms available that provide specialised products like PMS, AIF, Structured Products etc which can be white labelled. These services are available to even smaller IFAs who have the option of collaborating with some of these platforms and offer such products to their clients. However building one’s brand is remains important because that engenders trust which makes customers to draw comfort from being associated with the brand.

4) What you think about the regulatory changes that we are experiencing over the past couple of years?

Whenever there are excesses the regulator will step in. Like it or not excesses have been committed in the past by some and this would happen in every system. The regulator will always be client protecting.  So the focus should be more on client, growing one’s business and providing a great experience to the client. If we are in the market we cannot keep ourselves isolated from the regulator and despite the regulation the opportunity is abundant. The strategy is that of delivering massive value. As long as you can identify and structure the right product, offer the best service, show the right value, the client will pay the right price. The problem is in the inability to offer and articulate this value. We also feel that regulation can ultimately help us in our business. We are happy to keep recordings of our conversations and referring to it if need be. It helps both the client as well as us. So regulation if seen in the right perspective may appear unfair but in the long run it is good for everyone

5) What are the challenges before an IFA other than revenue? Is he caught between the interests of the manufacturer and the client? Do you think clients will ever pay for the advisor’s services?

Most of the IFAs are client centric. However there are day to day challenges that one needs guidance on. The investors do read a lot on google and can ask questions that can take one by surprise. It is important for an IFA to remain prepared to handle all kinds of questions. It is also important to understand what kind of products clients should not sell at different points of time. It is very easy to know what to sell because of the advertisements but nobody advises what not to sell. I think such information is the need of the hour. In my view what is most important is to make the client’s life simple by providing him products that are simple to explain and simple to understand. If one is able to do that then the client will not only remain loyal but would also be happy to pay the advisor ; the quantum of this payment of course would depend from client to client  and one how much value the advisor can bring on the table

6) Talk us through your collaboration with Pallav Bagaria, Shyam Singhania, Divya Khemka and Paresh Karia which is the talk of the town?

The way forward for business in my view is by way of collaboration and synergies. It brings fresh thoughts, new energy, a different point of view and adds to the business strategy. Since we were not working in a corporate structure, we were out own bosses and felth that we needed someone who has similar success as we have had but someone who brings new thoughts and can also question our thoughts. Otherwise we would run the risk of making mistakes. We were fortunate to find such an associate who not only understood the business but also helped us in refining our thoughts, providing a different and sometimes a contrasting perspective. This certainly helps in the business growth strategy. Besides a collaboration brings a huge amount of cost saving in terms of sharing of operational and technology resources. This helps to invest in the appropriate technology and processes without pinching us a lot.

7) What do you think of future business models especially in the context of robot advisory, direct etc? How will these affect the different segments like the youth, the HNI?

The model that will do well in the future is always going to be the one where you service the client and provide massive value to them. The ‘do-it-yourself’ kind of customer more often than not has high expenses to deal with and a lot of debt in the form of EMIs. These people may try out with direct investing but that won’t be serious money lost. And those with serious money will be very uncomfortable placing large amounts of money directly through some App or the other. They would certainly need the services of Financial Advisors. Hence I do not feel that one is going to lose quality customers as long as one is providing massive value and quality service

8) Who would service the bottom of the pyramid?

As far as this segment is concerned, I wonder whether mutual fund itself is the most appropriate product for them. Their needs are more immediate in nature such as food, shelter, education for children etc. They are not so much worried about returns and since most of them do not fall under any tax bracket even a product like ‘fixed deposits’ would continue to be suitable for them.

9) What kind of products should be offered to HNIs?

Mutual Funds is a product for everybody including the rich people.  Unfortunately it is being positioned as a product for the masses.  Frankly mutual funds provide appropriate solutions for the HNI customers as well. I feel one need not get carried away by Alternative Investments and PMS as the only products for the HNI.

10) What in your view is the place of ‘technology’ in this business?

Technology is going to play a very big role future because technology is the easiest, fastest and cheapest way to scale up the business. Unfortunately people are afraid of Technology and become critics of it.  But that won’t work because if somebody wishes to grow the business there is no other way but to learn, adopt and adapt to the technology around.

11) What is your vision for yourself?

I have been managing money for a long time and I enjoy doing this because it gives me a lot of pleasure when I see that my customers have achieved their goals; It is extremely fulfilling to see somebody buying a car on time without taking a loan, somebody who is able to afford foreign education for his child from his own funds, somebody who buys his dream home from his invested money.

This gives me a great deal of pleasure and I see myself as a relationship manager helping people 5 years from now and eve 20 years from now because I feel this is a business that brings happiness to the lives of the people and making people happy is my Ultimate Desire

About Amit

Amit is an MBA Finance from Department of Management Sciences Pune University. National merit holder in Economics , keen interest in Music and Passion for money management. Twenty years into financial services and one of the Directors of Sapient Wealth

 

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YoungTurks

Young Turk Nitin Ghadge

Nitin Ghadge

Dombivli near Mumbai is a small inconspicuous town. The speciality about Dombivli is the enterprise of the people living there. And that includes Financial Advisors. When it comes to following best practices this small township can beat the metros too. Nitin Ghadge is one such IFA from Dombivli who takes his profession very seriously and follows all those processes that are needed to be successful. He follows best financial planning practices while most of us focus on ‘returns’. In times like these his philosophy stands vindicated. His clients are happy because they are chasing goals and not returns. He educates his clients before taking them on board. And of course there is no “free lunch”. His clients pay him for this time, education and coaching. And this is not for a few clients. He has 170 clients who pay him fees and he has a target of taking that number to 500 clients. Nitin is a health freak and works out with the same intent that he shows while serving his clients. Perhaps the values of focus and determination come from his work outs. Nitin is a sponge when it comes to learning and training. Despite his busy schedule he never lets the change of learning / training slip away. He believes he is the best asset and investing in the best asset is the obvious thing.

Nitin Ghadge with age on his side has a long way to go and clearly qualifies as our “Young Turk”.

In a free wheeling discussion Nitin describes his background. What made him join this profession and what gave him the conviction to charge fees and how he succeeded. I am sure simply by reading this interview you will be able to pick up valuable points to enhance the quality of your practice.

1) What is your background?
I am a commerce graduate. I played for my college cricket team. I worked with icici bank, Cosmos bank, Sanghvi reality, ICIC Prudential Life Insurance. Total work experience is more than 8+ years.

2) Why you chose this profession?

Earlier when I was working with ICICI Bank , I realised that people need professional advise because bank employees were selling high revenue products to most of their clients.Even tough I achieved my sales target during those days but still I was not satisfied with my job. One day i read about CFP Certification in the newspaper and that caught my fancy and I enrolled into the course and decided that I will start my own practice.

3) What made you to charge fee when others do not charge?

I do not charge fees for advisory. As a practice I first educate my clients and have regular education and coaching programs for them. I charge them for such programs. I feel without education investing is not fair both for the advisor as well as the client.

4) What were your learnings along the way?

Financial Advisory is a very noble profession. Every day I have to learn new things that helps me to enhance my client’s life. I keep studying what senior and successful Advisors do in their practice. Learning from successful practitioners has been the cornerstone of my success.
Earlier I faced lots up challenges while doing my practice. Those days nobody was ready to pay professional fees. So I decided that I will create value for my clients and will never give free value added service.
I met many people and educated them about how financial planning will change their lives.

Gradually things began to change and people got convinced to pay fees for the value added service.

In July 2010, I started my practice and it took me 12 months to get my first paid client. He gave me 10k for financial education. After 1 month I gave him my report. He got impressed with my work. That client is still with me and he is paying 50k fees to me.

5) Why do some believe it is not possible to charge and what practices do you follow that you think has made you successful.

First thing IFAs need to have a strong conviction that they are giving their clients the best possible service. Many IFAs don’t want to lose clients and they do whatever clients tell them but that is not the best service. The client comes to us because we are experts and if we agree to what they want then we are not doing our job well. We need to tell them what is right for them. Following the Financial Planning process with the clients is the bedrock that can help people live a good life. I show them this path and prescribe the best possible way for them to follow.

I invite my clients to my office. I never go to meet them at their office. When they come to my office I get to spend time with them, understand their needs and educate them program for them. This would not be possible in their office in the manner in which I have designed my education program. When I call them to my office they respect me when they realise that I have designed an education module for them. If you set your right practices then things will change automatically.

People are searching for professional advisors and many IFA are not able to provide them the professional service that they are looking for.

You need to decide your target audience, have the best intent for their well being and do all that is required to satisfy their needs. Ironically revenue flows the moment you serve people in a genuine manner.

6) What are the 3 key factors to your success

The 3 key factors to my success are

a) Intention : The intention to provide massive value to my clients and to keep their interest foremost is the foundation

b) Conviction : Conviction in markets, conviction in compounding, conviction in asset allocation and conviction in Financial Planning has played a vital role in my journey

c) Last but not the least nothing happens in isolation. One requires a mentors, employees, vendors etc to make a system work. But the most important single factor if I have to name one is that of my business partner Dhanashree Sagare who has been absolutely amazing in this journey and it is only together that we have been able to come so far.

7) What is your long term vision?

Currently we have 170 paid clients and we want to achieve 500 clients in next 5 years. Also we want to collect 70-80 lakhs fees revenue from our clients. We never focus on AUM. We want to educate millions of people and help them to achieve financial freedom in 15-20 years. I also believe in training myself regularly and work with professional mentors

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Interview of the Week – Saurabh Mittal

About Saurabh Mittal

An avid biker, Saurabh loves riding his bullet anywhere he has to travel.

Cash flow management being his forte, he advises  business clients’ on prudently managing their cash flows, books of accounts and business life cycle management. He oversees compliance, investment management and research activities at Circle Wealth Advisors.

Saurabh practices asset allocation with a greater degree of professionalism than most others. As a result his clients reach their goals more smoothly. The idea of goal planning and paving a relatively smoother journey is the essence of investment planning and Saurabh has mastered this concoction of science and art.

A commerce graduate from K.C. College, he is a CFP (Certified Financial Planner) & an Associate of Insurance Institue of India.

Saurabh lives with his wife, 2 sons and loving mother. He can be reached on saurabh@cwa.co.in.

In a free wheeling discussion with Saurabh let us unearth some invaluable insights.

1) Kindly tell us about yourself?

17 years ago, founders of Circle Wealth Advisors Pvt. Ltd. began their careers with focus on selling insurance policies. With the rise in acceptance for different financial products, we strategically started charging fees to our clients. The transition was a big milestone and we had to move from a client base of 700 clients to only 17 clients. Due to this move, we graduated from a financial products distribution company to a Wealth Management company in our client’s view.

We are now Personal – Chief Financial Officers in our client’s lives. It’s not just a transactional relationship anymore, it’s deeply personal where the client’s open up about their tiniest details about their life. Our discussions often range from financial plans, returns on investments to which is a better school for children.

2) What is your secret to success?

The secret to our success has always been happy clients. We are obsessive about being client centric. We constantly look for innovative ways to improve our client experience.

Internally the resolve to stick to our belief system and not deviating from our investment process or getting into products, which do not fit client profile, has made a huge difference.

3) How should the IFA handle challenges that he is facing today?

Ideally, an IFA should be very positive for about India’s growth story for many decades to come. This will help him/her to wake up each day with renewed passion and handle whatever obstacles that might come in the way.

It’s always better to look into future and lay brick at a time.

4) What is your investment philosophy?

Our investment philosophy is actually very simple. It’s to Buy Low and Sell High. Although it’s easier said than done. To execute this, we have created a completely quant based Dynamic P/E Asset Allocation Strategy which looks at the equity market and tells us whether the market is expensive or not. The trick is not in creating a strategy but believing in it completely, setting the right client expectations and then ruthlessly sticking to the system.

5) What are the qualities an advisor should have to delight his clients?

An advisor must have a combination of 4 qualities such as Knowledge, Integrity, Execution and Attitude. We believe this is true for any service industry. If you look at how would you choose any service provider for yourself, these qualities matter a lot. Take for example of a car mechanic, you would want that he has the right knowledge to detect the problem, deals with integrity without creating unnecessary requirements. Is great in execution and delivers the car on time, and lastly has the right attitude to empathise with your situation and communicates accordingly. If you find these qualities, probably you would not worry too much about price.

6) What is your view about goal based planning?

Goals are dreams and aspirations of investors that an advisor brings to reality by planning and executing. Goals are the only guiding post for choosing correct investment. In fact by definition investment is delay of consumption, if we are not aware how this money will be consumed, it becomes impossible to decide an investment strategy. The only reason most investors are unable to reach their goals is due to their own inability to stick to their savings – investment discipline. An advisor must manage his / her client’s goals and make the journey very peaceful.

7) How does one manage market volatility?

Volatility can be managed by sticking to the investment strategy. It’s the need to outperform a bull market that creates a deviation from a strong back tested strategy. An advisor must objectively look at the equity market rather than trying to time it.

In our case, Dynamic P/E Asset Allocation strategy has worked good for us. We have been able to cancel out noise of the equity market.

8) What is your view on debt mutual funds?

Debt Mutual Funds is a unique offering for Asset Allocation purposes. However, an advisor should not view it as an alternate to a Bank Fixed Deposit or Recurring Deposit. These are vastly different financial products.

Debt Mutual Funds are interest rate sensitive, so they are volatile too. However, there is tax benefit to it which makes it more lucrative but it shouldn’t be the only reason to keep it in a client’s portfolio.

9) How should one select clients?

Our business of financial advisory is an absolutely relationship based business. We look to build our relationship for decades together. Our target segment is well defined we work with families having an annual income between 50 lakhs and 3 crores.

Hence, an advisor must select clients with whom he/she can work together for a long period of time. There is no rule of thumb for client selection.

10) What should be the mix of HNI and retail client

There is no ideal mix between HNI and Retail client. It depends on an advisor where he/she can offer his service in the best way possible. It’s actually counter productive to deal with all segments of clients. It really pays to have a focused client segment.

11)You are a keen practitioner of asset allocation. Can you share some key insights about asset allocation? 

First step is to distinguish between strategic asset allocation and tactical asset allocation. Strategic allocation is derived from the profile of the investor and is completely based on client situation. Strategic allocation may be different for different client and has nothing to do with current market conditions.

Tactical allocation on the other hand is the tool to generate alpha, and has nothing to do with client situation and is completely based on market condition.

It’s very important to follow strategic allocation, where we add the first level of value to our clients. Client already has allocation to different assets; it’s just that the allocation is derived not from a strategy but on an adhoc basis. Challenges of strategic allocation are to derive at the right mix based on the client situation.

Once the allocation is derived it requires hard-core process to stick to the allocation and rebalance as per the need. For tactical allocation first challenge is to create a strategy with proper back testing and second is the execution capabilities.

Having said that the biggest challenge is to have a strong belief system and huge commitment to stick to the strategy.