Resource id #4Resource id #4 Advisor Interview
20 May, 2024 09:38 IST

`Our main aim is to increase fees paying clients base`

Source: IRIS Exclusive (18 July 2011)

`Our main aim is to increase fees paying clients base`
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In an interview with Yogita Khatri of, Satish Mistry, proprietor, Money Care Financial Planning Services says, ``There is a need of advisory service to clients and not transaction based courier services. It`s fact and will take time. Road is tough but not impossible.``

What led you to enter into financial planning and corporate training profession? What services do you offer?

Basically, I am a commerce graduate and at that time there was no choice to enter into various fields or you can say, there was scarcity of information sources. So, I decided to enter into accounting job. After graduation, I worked as a freelance accountant. Then, I got a job in small scale pharma company as an accountant. During the job course, I became insurance advisor with HDFC Standard Life and my interest diverted to this area. In process, I became mutual fund advisor and got to know about financial planning. Then, I joined International College of Financial Planning (ICoFP) for CFP certification. After clearing in IP module, I left my job and started full fledge work of financial planning & investment advisory from January 2008.

Regarding services that we offer, we are mainly engaged in offering mutual fund advisory with personal financial planning concept. Our focus is financial planning services. Company fixed deposits, health insurance and term plans of life insurance companies are amongst other products to cater with our advisory services.

Tell us about your current business model, the kind of clients, AUM etc. How has been your journey so far? What are some of the challenges that you faced?

Frankly speaking, we are on a very foundation stage as of now, as we entered this profession at the time when market collapsed. So, the period after January 2008 was very painful for advisors. After entry load abolition, we have started fee based services, but it is growing very slowly. Right now, we have 80 to 100 retail clients. It`s a very tough journey to convert client into an investor. Most of the investors think short term profits. Every now and then they keep asking portfolio status just like stock investments.

Active investors mainly invest in stocks, IPOs. While on the other hand, others who don`t want to take risk, take LIC route. They understand that mutual fund is stock market. We have to differentiate various MF schemes, category in debt & equity, etc. So, there is a need to educate them and we are ready to provide it. The main hurdle is the cost to provide education in rural areas. There is a vast opportunity for mutual funds products through SIP route. Most of the money flow towards LIC & post office schemes. Rural areas people are just saving their money, but do not get growth on their money. We are ready to put efforts, but it will take time, at the same time, we have to see our cost involved. Also, there is a need of education in their local language. To start with small amount, confidence will build up, and then we can start expecting some money flow from this area.

How does a small retail investor protect himself against the volatility in the equity market?

It`s a human tendency to get short term profit. People lose their money in trading, those who don`t know the risk involved in equities within particular time-frame. We only suggest SIP / STP route through MF schemes as there is no better alternative to small investors to get better growth on their money. We say if you want growth, you must invest your money with SIP / STP route of better schemes of MFs. We do not advice them on stocks. Another point requires much attention is the asset allocation. It`s much needed tool after considering client`s goals, risk capacity and risk behavior. If the client has knowledge, time, risk capacity, we provide him our opinion, but we do not provide specific advisory services regarding direct equity investment. We have interest only in the long term growth through MF route.

With so many investment options, how does a small retail investor select where to invest his hard earned money?

It`s all depend on investor`s needs, specific goals in future, cash flow, risk capacity, risk behavior, time frame of goal and other liabilities. It`s a case to case matter. Traditionally, people choose postal schemes, bank FD & life insurance scheme. Only the small portion of investors invests their money through MF route for long term. Whoever has invested money through ULIP, most of them don`t even know that their money is invested in stock markets. Thus, keeping eye onto one`s goal, he or she must take proper life insurance though term plan and invest their money through MF schemes with proper advisory. If their cash flow is very healthy and if they are comfortable with 4% to 6% rate of growth on life insurance policy, they may continue investing in ULIPs. But for small conservative investors, there is a better option and i.e. term plan + PPF. If you have taken ULIP, you must review it, analyze it and then decide whether to continue it or not. Other better options are postal schemes, subject to criteria mentioned above.

What is the ideal asset allocation that every small retail investor with very low risk profile must have?

In our view, there is no specific ideal asset allocation suitable to every small retail investor. As I said earlier, it`s a case to case matter. But if you are a conservative investor and have long term time frame, you must invest through SIP route with minimum 25% to 30% allocation, whether it`s a balance fund or equity fund. Also, you can consider better MIP schemes or FMPs.

How can small retail investors protect their interests and money while investing in MFs?

It`s all depend much on advisory services, which he is following on. In market, there are good as well as poor performing schemes. So, keeping in client`s interest, an advisor must look at the fund house, fund manager, scheme`s long term performance, various ratios, sector allocation of scheme, benchmark outperformance, relative strength of schemes with market. These are the criteria to look at before investing in schemes that have been advised to you. It`s a duty of the advisor to protect the interest of client. Retail investor generally should not have concern with it or has no knowledge about it. Thus, an advisor should take into account investors` requirement, time frame before advising.

How many life insurance companies do you deal with? How much is the whole insurance business in your total?

We started dealing in life insurance with HDFC Standard Life. It`s been six years we are working with them, but we are not actively involved in this area. We advise only term plans. So, there is no much need to involve with them actively. We are providing services to our old customers only. We have not sold any ULIPS. So, there is no interest to sale side. Right now, we are advising online term plans to clients, we work on behalf of them, subject to fees. It`s all recommendation by us after analyzing their current life insurance portfolio, cash flow etc.

How many fund houses do you deal with? In which fund house do you have the maximum AUM (in terms of percentage)? Tell us your favorite all-time MF schemes and fund managers.

Presently we are dealing with top 12 to 15 fund houses. We have maximum AUM with Reliance Mutual Fund (25%). There is similar pattern with HDFC, DSP, Birla fund houses too. Our all time favorite MF schemes are HDFC Equity, HDFC Top 200, Reliance Growth, DSPBR Equity etc. Favorite fund managers are Prashant Jain and Sunil Singhania.

What are your business plans for over next few years? Where do you see yourself 3 years from now?

We want to see our business to run on purely advisory services. Transaction services are secondary. We also want that investors, who have already invested with other advisors code, can also take our advisory services, subject to advisory fees. So, the main aim is not to build up AUM, but to increase fees paying clients base. We also have solutions like comprehensive financial plan, mutual fund portfolio analysis, life insurance portfolio analysis in our basket. Thus, investors have choice to pick from. In next three years, we want to establish a business that can give us minimum fixed annual fees as per our target. There might be regular fees paying clients or consulting fees. Our first priority is to increase regular fees paying clients.

Is there anything else you would like to share with our readers?

Definitely, most of advisors are now going through painful period like us. But there is a need of passion, self confidence, eagerness to provide creativity and new learning. These will take us at higher level in near future. So, keep the faith in yourself. Financial planning is the concept for future. Whether an advisor is CFP or not, doesn`t matter, but his approach to help client matters, as it will help the client much more. So, there is a need of advisory service to clients and not transaction based courier services. It`s fact and will take time. Road is tough but not impossible.

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