Bhavesh Khetan grew up in Nagpur. Unfortunately, he lost his father when he was just 11. His father's untimely demise put huge responsibilities on his shoulder. Thus, he strived hard to become financially independent. After graduating in commerce, he took up a job at an Iron and Steel factory run by his uncle.
Foray in financial advisory
In 1999, a public sector life insurer was offering insurance agency in Nagpur. Bhavesh came to know about this and decided to give it a try.
The criteria for enrolment was to get five policies. Bhavesh vividly remembers that day, “It was June 1999. I went to their office at 10 am. I was asked to get 5 polices to get the agency license. I sold seven policies to my colleagues and took the agency. Since then there has been no looking back.”
This is how Bhavesh found his calling. He decided to continue as insurance adviser. His entry into financial advisory coincided with the Ketan Parekh scam which had severely hurt market sentiment.
In 2000, private sector fund houses had started establishing business in India. He was introduced to mutual funds by a fund official. Bhavesh liked the concept of mutual funds and decided to expand his offerings. Due to the high interest rates prevailing in that era, debt funds were a popular choice for most investors. “Investors were wary of equity funds due to the scam. Debt funds offered attractive returns till 2003-04. We used to deal three categories – liquid, income and short-term funds. The returns were in double digit. We used to channelize small amounts like Rs 500 - Rs 1,000. An application worth Rs 5,000 was considered a big amount that time,” recalls Bhavesh.
Due to the attractive returns earned in debt funds, his investors drew comfort from mutual funds. This helped Bhavesh bring them into equity funds. The stock market rally which began from 2003 till 2008 provided an impetus to his equity book.
His clientele grew purely through referrals. The financial crisis in 2008 came as a jolt but Bhavesh didn’t lose hope. He observed that many advisers were shutting shops. Bhavesh knew that one has to remain in the business through bad times to reap dividends in future. His perseverance paid off. In 20 years, his mutual fund AUA grew to Rs 250 crore across 700 clients.
Bhavesh treats all customers at par. His clientele includes vegetable vendors to publicly listed firms. “We cater to retail, HNIs and corporates. The ticket size does not matter. Earning is a by-product,” says Bhavesh.
Keeping in touch with clients
When asked about his success mantra, he says, “You need to put client interest first. Also, you need to be in touch with clients during bad times. That is when your clients need you the most. We actively reached out to clients to assuage their fears during the recent market crash. We also had zoom calls with our clients where we invited fund managers to share their views,” says Bhavesh. Thus, Bhavesh was able to prevent most of his clients from panic selling during the March 2020 crash.
Risk management
Having a conservative approach towards fund selection and risk management has held him in good stead. He had been advising his clients to exit from Franklin Templeton debt schemes since 2017, when he sensed some early signs of trouble. “Those were early days when a few debt papers were downgraded. I actively advised my clients to move out of credit risk funds and stopped fresh allocation. Today, I have a minuscule exposure to FT debt funds,” explains Bhavesh. Today, Bhavesh’s total AUA exposure to FT debt funds stands at 1.25%.
As a prudent risk management norm, he makes sure that no single client of his accounts for more than 10% of the total assets under advisory. Also, he tries to keep his AUM exposure to a single AMC at 15%. This helps him diversify business risk.
Focus on research-based advice
He actively uses Morningstar Adviser Workstation to prepare a whitelist of funds for his clients. “Whenever we meet a prospect, we ask them to share their existing portfolios. Based on this, we import this data on AWS and see where we can add value. We weed out funds that have overlapping stocks and fill gaps where the portfolio has less or zero exposure. Also, our NRI and HNI clients like to see the reports generated by Morningstar Adviser Workstation. This helps them get a 360-degree view of their portfolio. Showing such portfolio reports showcases our differentiation and value, which results in client conversion,” says Bhavesh.
Scheme selection
When it comes to picking equity funds, Bhavesh likes consistent performers. They may not be in the top quartile, but they need to be at least in the middle quartile. As the awareness about direct plans is growing, Bhavesh is conscious of choosing funds where the divergence between the expense ratio of regular and direct is minimal.
In debt funds, he is currently advising ultra short term funds and a few credit risk funds, which have a superior quality paper to clients who can take the risk. “I look at the portfolios very closely. The scheme should lend to well known and trusted names. We had also been advising gilt funds to those who have a minimum investment horizon of five years.”
Set realistic expectations
Bhavesh says that it is important for advisers to present clients with realistic expectations as they may be lured by past returns. I tell my clients to expect a maximum of 7.5% in debt and 11% in equity. Anything more than this is a bonus. Bhavesh steers clear from selling flavour of the season products. “Hybrid funds were offering monthly dividends, and everyone was pushing them. I educated clients that they should not treat dividends as interest. Some clients were not happy that I didn’t sell them balanced funds. But we stuck to our guns and did what is right,” says Bhavesh.
Road ahead
His daily routine is reaching the office at 8.45 am. He reserves the first 1.15 mins for catching up on reading and keeping a tab on the economy and markets. After 10 am, he gets busy with client calls and other office work. Bhavesh operates with a staff of seven.
Going forward, Bhavesh aims to focus on institutionalising his practice so that his business has continuity.
When he is not advising clients, he likes to hit the road on his bicycle with his teenage sons Lakshya (18) and Yash (16).