Vadodara-based MFD Prakash Lohana started his entrepreneurial journey at a very early age. Prakash started pursuing Chartered Accountancy after his graduation. His father Mr. Hariram Lohana used to distribute insurance and post office schemes. Due to his father’s ill health, Prakash dropped out of CA and took over the reins from his father.
There has been no looking back ever since. Over the years, Prakash changed his business model as per the needs of clients while continuing to carry forward the legacy of keeping client interest first inculcated by his father.
Prakash initially started with insurance advisory. However, he felt that these products were not consumer-friendly and gravitated to mutual funds. He started with mutual fund distribution in 2005. After the 2008 market meltdown, Prakash realised that the need for a holistic approach towards clients’ finances. This led him to pursue CFP in 2010 and he started concentrating on goal-based advisory. “Each product is not suited for every individual. The products and solutions need to be customised according to the goals of investors,” says Prakash.
His business has grown purely through word of mouth. They do not advertise or market themselves to acquire clients. Today, Ascent Financial Solutions, which operates from Vadodara, manages assets worth Rs 470 crore in mutual funds across 180 families. His business is growing 33% compounded annually for the last 13 years. So what is his success mantra? “Our mission is to transform the financial lives of our clients. Money is secondary. I tell my team to deal with clients as if they are your family. You can’t put family members’ money at risk,” says Prakash.
His business was impacted during the peak of the pandemic in 2020 as a majority of his clients comprise doctors. “I have many Orthopaedic, Paediatricians and Surgeon as my clients. Their practice was impacted during pandemic due to lockdown as they were not practicing at full capacity.”
Prakash says that a doctor’s career usually starts a bit later, at the age of 27-28 since many of them pursue post-graduation. Further, he says that those who specialise in certain areas start earning from 30-32 and their actual income starts at 35. He observes that while some doctors retire at 65-70 others continue to practice albeit at a slower pace. “Some doctors want a bigger infrastructure as they set up their own practice. Between 35-45, they invest a big chunk in setting up their hospital/clinic which takes a few years to break even.”
Fund selection
While shortlisting funds for clients, Prakash uses a mix of quantitative and qualitative filters. Among the quantitative filters, he looks at the consistency of return, alpha, Standard Deviation, Sharpe, Treynor and so on. When it comes to qualitative aspects, Prakash takes into account the team size, tenure of work, investment process, stock selection methodology, consistency of approach, and so on. “Some funds move into the first quartile and move to bottom very fast. Past returns won’t benefit us. We are investing for 5-10 years. So qualitative factors become very important because one can neither predict returns nor rely on past performance.”
Besides doing their in-house research, his team also interacts with the fund management team to get their perspective on fund performance. “Sometimes, a few stocks in the fund don’t do well due to which the fund suffers for a few quarters, but the managers believe that these companies will turnaround. So it helps to get the fund manager’s conviction and take a call whether to exit or remain invested in funds.”
Debt funds
Prakash believes that the low interest rate regime is likely to reverse soon, which is evident by rate hikes announced in other economies around the world. Further, he believes that rising inflation will push RBI to hike interest rates. In such a scenario, Prakash has cut duration in his client portfolios. “We are keeping the duration on the shorter side because we believe the interest rates can go up from here. Interest rates will rise over the next one-two years. If inflation remains a concern, RBI will increase rates. In such a scenario, funds with a longer duration will be hit due to interest rate risk. We are preferring Low Duration and Short Term Funds. We try to match the investment horizon with the fund’s duration.”
Passive versus active
In the passive space, Prakash believes that investors can hold a mix of passive and active when it comes to Large Cap and stick with active funds for mid and small cap allocations. “If you see the long history of Large Cap Funds, some funds have outperformed their benchmark over the long term. So active Large Cap Funds still have a role to play. The last five years have been challenging for Large Cap Fund managers due to polarisation in a few stocks, benchmarking against TRI and a tight mandate. In the Mid and Small Cap space, active funds will continue to generate good alpha.”
International diversification
Prakash believes that diversification beyond Indian geographies present a good opportunity for clients to add an international flavour to their portfolio and helps in cutting country-specific risk. “In 2018-19, Indian markets didn’t perform well. During the same period, U.S markets did well. It is a good way to diversify from a country. Ideally, investors should look at countries which have negative co-relation with Indian markets.”
Road ahead
Prakash observes that mutual fund distributors need to graduate towards offering goal-based and financial planning as mutual fund distribution is getting commoditised. “Going forward, clients may wish to go for direct plans and MFDs should have a backup plan in place to cater to this segment.”
Prakash has applied for an RIA license with SEBI and awaiting approval to start advisory services.
To create robust processes, he is in the process of automating most of his day-to-day tasks by building in-house software for financial planning, goal-based advisory, portfolio rebalancing, etc.
While Prakash is singlehandedly handling the business along with his team currently, going ahead, his 14-year son Yash intends to join the company.
