How Ramesh Hegde built over Rs 100 crore MF assets

Davanagere based adviser Ramesh Hegde started from scratch after his automobile service station wound up. Today, he manages Rs 132 crore assets in MFs. Read his inspiring journey.
By Ravi Samalad |  14-08-17 | 
 
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About the Author
Ravi Samalad is Assistant Manager - Editoral for Morningstar.in.

Early days

Ramesh Hegde always dreamt of having his own business. His passion lay in automobiles. After earning his degree in automobile engineering, he started a Maruti Authorized Service Station in 1992 with a capital of Rs 50,000 in Davanagere in Karnataka which is situated 260 kilometers from Bengaluru.

His passion and dedication helped his business flourish and his company’s net worth swelled to Rs 1.50 crore by 1998. It is during this time he thought of diversifying into ancillaries. He took dealerships of batteries, lubricants and tractors. However, luck did not favor him. The automobile industry went into a lull after he ventured into these verticals. While his service station was doing well, his new ventures suffered. Funding them took a toll on his finances. By 2002, his company’s net worth reached negative Rs 80 lakh.

Saddened with losses, he thought of starting afresh by exploring other business ideas. After much contemplation, Ramesh realized that while he was good at making money he lacked the skill to manage wealth.

A new opportunity

While exploring new business ideas, he came across an advertisement by Bajaj Capital which invited agents to enroll with it. The branch manager of Bajaj Capital and an AMC official apprised him about the opportunities in this space. Ramesh started developing a keen interest in wealth management, a skill he was looking to acquire.

Before donning the hat of adviser, he earned the CFP certification and chartered wealth manager (CWM). Armed with the technical skills, he was all set to start a new chapter in his life. But Ramesh did not wish to project himself as an agent/distributor. What is truly inspiring about him is that he has been charging fee to his clients since inception of his venture. Interestingly, his MF book reached Rs 80 lakh in the very first year of business.

Making the first right impression  

When he meets prospects for the first time, he tells them that that his conversation will not include any product pitch. The first meeting is all about educating the prospect about setting goals and the importance of managing money in a disciplined manner. He takes them through concepts like importance of beating inflation, saving for emergency, having adequate life/health cover, advantages of equity vis-à-vis other asset classes, implications of taxes, and so on. Prospects are also given a handout which lists down common investing mistakes which they should avoid. Observing people’s behavior, he says that prospects often look at generating highest returns without having a goal for their money. He makes them understand why they should not focus on returns and instead on goals like retirement.

Ramesh says that financial planning is more about managing emotions and instilling discipline in clients than asset allocation. He advocates his clients to focus on five mantras to create wealth – have a goal, maintain discipline, remove emotions from investing, manage risk and generate tax-free returns.

Ramesh says that clients sometimes themselves ask him what fee he would charge for his services during the very first meeting.  He says that how advisers demonstrate their value add and their unique proposition in the first meeting conveys a lot about them.

Spreading the word

Davanagere is an education hub which boasts of many engineering and dental colleges. It was also once known as the ‘Manchester of Karnataka’ due to its numerous cotton mills. However, Ramesh says that the district still lags when it comes to financial awareness, as is the case with many smaller towns in India. To help people make smart financial choices, he works tirelessly to spread financial awareness in this district. So far, Ramesh has reached out to 6000 people in Davanagere of which 438 families are his clients.

He has set out on a mission to make 100 mid and low-tier prospects crorepati in 30 years who are below 30 years of age. They include rickshaw drivers, cobblers, sweepers, maids, office boys, which is a largely ignored segment. Many of them are already his clients. He strikes up a conversation about investing with auto drivers when he is travelling in autos. Many autorickshaw drivers in Davanagere are his clients which helps him drive referrals from this segment. He does not charge fee to them though.

Bank treasury

Besides individuals, he has five co-operative banks as his clients. This is an important segment for Ramesh which has helped him get large ticket advisory deals. Ramesh says that many co-operative banks in his district have surplus cash and they end up parking this money in call money, treasury bills and current account which hardly earns them 5% post-tax returns. Hoping to tap this opportunity, Ramesh reached out to the administrative heads of these banks and educated them about the virtues of G-sec bonds, state development loans and debt funds. By channelizing banks surplus cash in debt funds, he is able to help banks save substantially on taxes due to indexation benefit. Citing one such example, he says that a bank client had invested Rs 1 crore for three years which earned 34 lakh capital gains. On this investment, the bank paid Rs 2.60 lakh as long- term capital gains tax after indexation. Had the money been invested in other products, the bank would have had to pay Rs 11 lakh in taxes.

He manages assets worth Rs 300 crore (in G-Secs and State Development Loans) for five co-operative banks while his MF retail assets are worth Rs 132 crore.

Team

Given the low financial awareness, Ramesh says that it is difficult to find talent which aspires to pursue a career in this field. He hires fresh graduates from local colleges and trains each candidate in a specialized area like back office operations, plan execution, marketing and accounting. Today, he has a team of seven.

A known face

Ramesh has become an authority in advisory. He is regularly seen on Kannada channels offering advice to people on managing their money. His efforts have been recognized by various industry forums. He was bestowed with Outlook Money Award for excellence in financial advisory this year.

What is truly inspiring about Ramesh’s journey is his spirit of entrepreneurship. He did not think of playing it safe by taking up a job after his first business sunk. Instead, he ventured into a space which was completely alien to him and emerged as a winner.

Further, building a Rs 400 crore asset base (across all products) in tier two city like Davanagere is commendable. This goes on to prove that there are immense opportunities for advisers in smaller towns. We already have enough success stories of advisers from B15 towns.

Road ahead

He is in the process of changing the legal status of his practice from individual to private limited. When asked about his succession plans, he says that his son is currently pursuing Mechanical Engineering in Bengaluru and aspires to take up aeronautical engineering. He would like his son to pursue what is close to his heart. In the meantime, he aims to increase his MF asset base to Rs 1,000 crore.

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