“When people cannot stand you, because they do not understand you, god will stand by you,” the quote written on a board in Sushil Sabarwal’s compact cabin perfectly sums up his journey in advisory.
Early days
Sushil had always been keen on striking out on his own. In fact, he had taken up a job in Kuwait for two years to save money for funding his business. After putting aside a portion of his salary every month for two years he had a decent amount to start his venture in India. Sushil started taking contracts from firms for installing their electrical set up. His business started expanding.
However, a minor accident changed his life. When he had a slip disk at his home, Sushil had been confined to home for close to two years. After numerous treatments with no signs of recovery, a friend recommended him to try acupuncture. Upon reaching the clinic, he discovered that the building did not have an elevator. So he crawled up to the first floor of the acupuncture clinic. The doctor assured him that he will recover in 15 days. As luck would have it, Sushil was back in action in 15 days after taking this treatment! He calls it a miracle.
However, during the time he was recovering, he saw his business slipping out of his hand as he was unable to meet his clients. Eventually, he had to sell his business.
In his second innings, Sushil and his wife opened a shop which sold garments and imitation jewelry. While their shop was doing well, Sushil wanted to explore some other line of business which complemented his educational background.
Inflection point
During his heyday in business, Sushil didn’t focus much on saving as his cashflows were substantial. Thus, he didn’t have enough savings to fall back on after he sold his business in 2004. He just had one investment in Templeton India Growth Fund in which he had invested in 1995. Sushil realized the importance of investing when he ventured into advisory in late 1990s. At the recommendation of a banker friend, he started selling deep discount bonds of a private sector bank.
Encouraged with the head start, he started researching on financial advisory industry. During his research, he came across a book ‘The first ‘In The Wonderland of Investment’ which eventually helped him find his calling. Also, he is deeply influenced by the book ‘Rich Dad Poor Dad’ which has kept his entrepreneurial dream alive.
Besides bonds, he started expanded his product bouquet by offering insurance and post office deposits. In the meantime, Sushil discovered that his investment in Templeton India Growth Fund had grown substantially. Impressed with the gains, he decided to take up MF distribution as well.
He also earned CFP certification to learn the nuances of financial planning.
Interestingly, his firm is one of the biggest mobilisers of post office recurring deposits. “In 1990s Maharashtra government had asked the schools in Mumbai to have their parents invest Rs 100 in KVP for their kids. After the KVP matured in seven years the school did not know how to encash it. The school approached us for help. Of the 600 students, we were able to encash KVPs for 90% of students. The school was impressed and they gave us an opportunity to mobilize investments in post office recurring deposits from parents to help fund for their future education. Today, we channelize more than 10 lakh every month in post office RDs,” says Sushil.
Sushil believes in automation and invests in technology to cut down on back office work. This helps him focus on his research. For his research and providing an in-depth view of portfolios to clients, Sushil has tied up with a number of software providers including Morningstar Advisor Workstation.
Transition to fee based advisory
Since the entry load ban, Sushil has been making a conscious effort to transition to fee based model. When the ban came into force, Sushil communicated this development to his clients through his website. “From 1 August, 2009 when you buy mutual funds, you will be allotted units for the full amount of payment you make. Earlier, with entry load at 2.25%, for every Rs 100 invested, Rs 97.75 was being invested in the fund and Rs 2.25 was the load amount. The load amount was used by the fund companies to remunerate us to provide services to you & other expenses. So, abolition of the entry load brings down your cost of buying mutual funds. This will immediately improve your return by 2.25% of your investments in the first year itself. However, this also affects the compensation that we used to receive from the fund companies. In order to continue the level and quality of the service to you, we would be required to charge you in some form.” This message appears prominently on his website.
Currently, 40% of his clients are paying for his services based on the quantum of assets.
Convincing clients to pay fee has been tough. But it hasn’t deterred him. Some clients went for advice shopping but came back to him after realizing the value they were getting. Some still don’t pay. Nevertheless, he turns down additional investment requests from those who are unwilling to compensate him for his services. But this doesn’t mean he doesn’t offer them advice. Clients still have the choice to execute the plan from any other adviser if they don’t wish to draw a separate cheque for advice.
Setting the expectations right
Client education starts from the very first meeting with prospects. All new prospects are taken through a mandatory 2-hour session on wealth creation. In this meeting, he makes prospects understand the importance of beating inflation through equities, lists down the products available to participate in markets (equity, ULIPs, mutual funds, direct equity) and explains their pros and cons. After they understand the benefits of mutual funds vis-à-vis other products, he takes them through the different categories of mutual funds. Having a clear understanding of product categories helps his prospects allocate money according to their risk appetite and goals. Sushil says that none of his prospects have not agreed to start a relationship with him after this 2-hour drill.
Spreading the word
Sushil actively uses WhatsApp broadcast to educate clients and prospects. “I send messages, infographics and videos to this broadcast group on weekends when clients have time to read them. I have been getting very good response through it,” says Sushil.
His firm Essens Investments currently caters to 350 families which include HNIs and middle-class families spread across Mumbai. He has a team of four which includes his wife who looks after the insurance vertical. Going ahead, his son who is currently pursuing his MBA in business analytics is expected to join his business.
While Sushil has got majority of clients through word of mouth, he now plans to conduct IAPs to build his MF book further. From the current approx. Rs 40 crore, he aims to grow his MF AUA to Rs 50 crore by the end of 2017.