10 Sep 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
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