What inspired you to start your own practice?
Having worked with banks, I handled retail clients all along. Typically, a retail investor buys mutual funds, direct equity, insurance and other banking products. I had exposure to all these products. I have changed a few jobs in the course of my 11-year career. Some clients wanted to continue to seek my advice whenever I changed jobs as they liked my service. This prompted me to venture on my own.
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When did you realize that you have to do goal-based planning and how does it benefit the client as well as the IFA?
Investors often take knee-jerk decisions if markets are volatile which impacts the portfolio. What stops someone from taking a day-to-day decision and watching markets every day is focusing attention on long-term goals. And what that long-term ultimate goal could be? If you are saving for retirement which is 20 years away, if you are saving for something to do with your child's education, which is 10, 15 years away. I realized that the portfolios of investors who try to time the market did not do so well.
Clients' goals can change over time. How do you incorporate such changes in the portfolio?
Financial planning is only the first step. It's a rock-solid step. It is as good as the foundation, but your entire building is yet to be constructed. That 20-storey building is nothing but 20 goals. You review it once a year to track the progress. Most of the review meetings are conducted when clients get an increment/bonus which helps us rebalance the portfolio.
How should investors go about prioritizing their goals?
Most investors find it difficult to prioritize their goals. But I would say, this is one of the easier questions to answer. The most difficult part is behavioral. So, we'll revisit that. First and foremost, financial planning will always help you. It will help you achieve bigger financial milestones. Most people typically have three or four major goals - child's education and wedding. Nowadays, there's a lot of awareness about retirement planning because cost of living is going up consistently. After this comes buying a home. Though people take 20, 25 years home loan they like to close the loan in 7-10 years. Then comes car, foreign travel which cost a lot of money. These are four to five major goals most people have.
Once you have identified the goal, the next step is identifying the amount required to fund it. Suppose a post-graduation today costs Rs 30 lakh, you have to inflation adjust it over a period of time, say, 8 - 10 years depending on your child's age. Then you put your existing resources to work and then do the recalculation, back-calculation whether my goal will be comfortably achieved and whether I will be able to meet my goal. So, this entire exercise needs detailed information about investor's risk profile, investor's asset allocation and existing portfolio, how can it be best aligned with what goals that investor has in mind.
You have been practicing goal-based financial advisory and you are writing financial plans for your clients. So, have you considered becoming RIA? If not, what stops you?
There were two consultation papers released by Securities and Exchange Board of India (SEBI) that have proposed that distributors will not be able to offer advice. After seeking public comments, SEBI has not come out with any further proposals or regulation. There is no clarity. Many RIAs are facing challenges in collecting fees, the kind of mechanism that is required to collect fees, whether it should be monthly, quarterly or annually. Also, markets have been volatile. When the portfolio is in red, many RIAs are finding it difficult to collect fees. Investors simply cannot accept the fact that their Rs 100 has become Rs 94.
I will give it (RIA) a thought once there is regulatory clarity and a proper mechanism to charge fee.
You started your practice six years back and built Rs 100 crore of assets. With the recent changes in the industry like ban on upfront commission, cap on expenses, what would be your advice to new distributions wanting to join the industry?
I would answer this question in two ways. One is how has it impacted us. We have always been on all-trail model. Since the beginning, we wanted to service clients throughout their journey of financial planning. New distributors should be mindful of the fact that it will take two to three years to earn a decent living. Of course, it will change from person to person and what kind of AUM they are able to build. But two to three years of gestation period is what you should consider. Only then you will be able to take your business to the next level and earn a decent living.
After the ban on entry loads, many distributors have started migrating to servicing towards the HNI segment. So, what would be your advice to new distributors, which clients should they focus on? Should it be retail or HNI or the mix?
Focus on your strengths. While everybody would like to have an HNI client base may be five or ten clients with AUM of Rs 10-20 crores each. But that's not easy to achieve. If your catchment area, references, expertise, the market that you have previously worked into, happens to be retail, that's where you should concentrate. Retail ticket sizes are lower but assets are sticky and goal oriented. If anybody is investing Rs 1 crore or upwards, a lot of your time would go into servicing those clients. So, there are challenges and opportunities in each client segment.
Once you build a certain minimum client base, lot of references would start coming through. That makes your job 50% easier because once somebody gives you a reference, then the first screening whether this adviser is good, whether his advice is good, whether he will stick with me for short-term, medium-term, long-term, those questions are answered already.
You are quite active on Twitter and have more than 3,000 followers. How do you engage with your clients on Twitter and does it help you to get new clients?
Investors today get a lot of information and news through WhatsApp. You need to be able to distill it to 140 characters by sharing your thoughts.
You need to spot trends in markets, advisory, financial planning and products. Your followers highly value that. One should not be on social media just with the sole intention of acquiring clients. Some sales element will jump out of your tweets and people may not like that. You need to share your views, comment and spot trends impartially.
Apart from Twitter are there any other social media channels that you find useful?
I’m not very active on LinkedIn and Facebook. I have a broadcast lists on WhatsApp. I share articles of my own coverage or other articles that are important from an investor's standpoint.
What's your Twitter handle if somebody wants to follow you?
You can reach me on @AmolPlanRupee.
