11 Oct Sanjay Khatri
Why did you get into retail MF distribution and how did you grow your business over the years?
Since the very beginning, we were very clear that we wanted to build a retail business model. When we began back in 1994, there were hardly any distributors in the retail space & this gave us an additional reason to be in retail.
We had to market ourselves in our locality to build & create visibility. For this, from 1994 to 2000, we used to distribute 10,000 pamphlets in newspapers every Saturday & Sunday to create our brand awareness & visibility.
Our first line to explain investments in Mutual funds was very simple: if you invest for 5 years you will be happy, if you invest for 10 years you will be very happy and if you invest for 15-20 years you will earn so much you wouldn’t have earned even in your normal job. These lines came in very handy during the initial days of our business. We used to approach prospective clients, take some investments from them & then ask them for references.
Any specific products / categories of mutual funds that you particularly focused on?
We would always request our clients to look at ELSS funds for tax savings & most of them would agree to invest Rs. 10,000/- which was the maximum permissible investment limit at that time for tax saving purpose. We used to tell our clients that if they lock in their money in PPF for 15 years, what’s the harm in investing Rs. 10,000/- in ELSS. And then, let’s revisit the portfolio after 3 years. Slowly, but surely, they started seeing gains in ELSS and this increased their confidence to progressively increase their allocation to such funds. They now prefer ELSS over other traditional tax saving investments like PPF & NSC.
ELSS is one product which stands out in terms of lowest lock-in period (i.e 3 years), wealth creation ability and tax efficiency. Moreover, the investment in ELSS funds inculcates a sense of discipline to stay invested for a period of at least 3 years or more. We have time & again emphasized to our clients about these positive attributes of ELSS funds & this seems to have worked very well.
How about SIPs?
Since most of our clients come from a salaried class background, a product offering regular monthly investments was most suitable. Our clients were most receptive to the idea of investing money through the SIP route rather than lump sum amounts.
Over the years, having put in massive efforts to promote SIPs, we have now crossed the threshold of 10,000 SIPs (i.e. monthly running book). In amount terms, the throughput value is over Rs. 3 crore per month.
If you were to assume that one has to meet 10 families to convert one of them for an SIP, then to reach 10,000 SIPs we would have met at least 20,000 families (as each family has an average of about 5 SIPs). A lot of hard work, focus & dedication has gone into achieving this milestone.
How did you go about building a strong database of prospective customers?
When we started in 1994 in Vashi, Navi Mumbai was a rising township. People from mainland Mumbai had just started to migrate to Navi Mumbai & many others moving to Mumbai began settling in Navi Mumbai because of cheaper housing & lower rentals. But most of Navi Mumbai’s population was made of the salaried class families. We decided to toil. From collecting names & addresses of the earliest customers who used to walk in seeing a distributor’s board outside the office, we started building our database.
This database subsequently grew because these very clients gave us lot of references for the free services we had rendered to them. Then, we went distributing our pamphlets on a regular basis to housing societies & commercial complexes in the 3 km periphery & also added the names / addresses of people residing in these buildings to our database. This exercise helped us build a very good database.
What kind of marketing activities do you do for attracting them to your office?
In terms of marketing activities, for the past 18 years, we have been sending 600 postcards every day, with various mantras of investments written on them, in English & in Marathi.
We also send newsletters once a month to potential customers whose database we have carefully built over the years. We also send a separate monthly magazine to all our existing clients.
We are registered with the Registrar of Newspapers for India to be eligible to send the newsletters through the General Post Office; this makes mass mailing cheaper.
It was an early learning that in our profession we must carry out various marketing activities. Investing in our own business through such activities always pays you back.
How do you go about building your sales team?
We generally recruit employees from known references & get them started in the back office operations in the initial years. We encourage them to interact with clients on service related requirements & issues. After they have had a meaningful experience, we encourage them to complete the AMFI certification. Post that, the sales training is done by us & we also take the help of AMCs in this regard.
We prefer to recruit staff from humble backgrounds. In our experience, we have observed that such recruits who train & grow with us are more loyal & trust worthy. So in effect when we nurture our relationships with our staff over a period of time, the same has a rub-on effect on our clients as well. Even our clients are very satisfied & elated dealing with the same set of employees since so many years. As Richard Branson says, “Keep your employees happy and they will keep your customers happy.”
What kind of challenges do you face in retail distribution?
One of the key challenges that we face in retail distribution is that retail clients take time to start investing in mutual funds. Besides, the costs involved in acquiring as well as servicing retail clients are quite high. Further, since 2008, there are have been very frequent changes in the MF industry that have made it very difficult to sustain a pure retail model. However, in long run, this model does payoff as the retail assets, once they start trickling in, are sticky and long lasting.
What is your long term vision for your business/customers?
Our vision has been to be the distributor of choice for all investors especially those in our vicinity/locality. We will continue to focus our energy & efforts in retail as we understand this space. We predominantly would be a retail oriented distributor aiming to increase our customer base in years to come.
Moreover, we are in a profession where we can help investors to create wealth over time. It is thus our dream that we help all our investors create an additional source of income through investing in mutual funds and that they should all become very wealthy. More & more wealthy people will make India a wealthier nation; we strongly believe in this and are doing our best for this cause.