College dropout Shailesh strikes gold in MF advisory

Pune based advisers Shailesh Agarwal and S.A. Khetani build 120 crore MF AUA after winding up their equity sub-broking business post the 2008 financial crisis.
By Ravi Samalad |  25-05-17 | 
 
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About the Author
Ravi Samalad is Assistant Manager - Editoral for Morningstar.in.

The entrepreneurial bug

Grown up in Pune, Shailesh Agarwal dropped out from college to become an entrepreneur.

Inspired by the late brother-in-law who ran a famous retail store called Tulsi in Pune, Shailesh knew that he is not made for a regular job. He opened a cyber café after finishing his secondary schooling which is now run by his cousin. His parents were supportive of his plans, says Shailesh, without which he could not have reached where he is today. “I used to tell my sister who worked for Amazon that I will hire ten employees like her,” recalls Shailesh.

Shailesh, 33, along with his business partner S.A. Khetani, 51, today manage Rs 120 crore in mutual funds. Interestingly, they have built their MF book in just eight years.

Foray in financial services

One day Shailesh’s and his neighbor S.A. Khetani, now his business partner, were discussing about stocks. Khetani has been an avid stock investor for over two decades. Their casual conversation about markets led to the start of their journey as sub-brokers in 2004 by floating their venture Kmint Financial Services. The rally that followed after setting up their venture helped them become the top five brokers of Kotak Securities.

Then tragedy struck. The 2008 global financial meltdown came as a jolt. They had never seen a bear market. The steep losses suffered by investors made them revisit their business model. From a short-term trading approach, they began to think long term.

The turning point

While assessing the damage to their client portfolios, they came across a few clients who had invested in mutual funds through them. Their MF book was around two crore then, which was built through the national distributor NJ India, under whom they operated as MF sub-brokers. They discovered that while all their stock portfolios were in deep red, their MF clients had suffered comparatively less losses. Intrigued, they started researching on mutual funds and found them to be comparatively safer than direct equity. One of the wonders of mutual funds they discovered was that their revenue is linked to client wealth.

After undergoing extensive training through NJ, they set out on their journey in building their MF practice. The initial set of clients were captive direct equity investors. Shailesh and Khetani educated their clients about creating wealth through SIP. “We apprised our equity broking clients about how mutual funds have generated wealth over the long term. We showed them a few examples of schemes with stellar track record,” recalls Shailesh.

As clients witnessed their MF portfolios swell, referrals poured in and the business took off. From one lakh in 2009, their SIP book grew to Rs 10 lakh in 2011, providing an impetus to their assets. Valuation gains coupled with new client acquisitions helped their AUA touch Rs 120 crore in 2017. Of 120 crore, about 105 crore of total AUA is in equity funds.

1,000 crore AUA target

From here, they aim to reach 1,000 crore AUA by 2025. They have an action plan to achieve this ambitious goal. Of the total 250 clients, they have identified 100 HNI clients holding current MF portfolio worth one crore and have the potential of reaching Rs 10 crore in the next 10 years. Their aim is to help these clients achieve this 10-crore target which would help their AUA reach 1,000 crore.

How would they achieve this feat? By being in touch. They travel across the country to meet clients and prospects. “We have 40 HNI clients whom we meet every 10 days. We meet 2-3 clients every day. These meetings help us understand their future cash flows from business/asset sale, suggest measures to meet short-term goals or help them fund their expansion plans. Being in regular touch has helped us gain their confidence and thereby higher wallet share. Many a time, clients introduce us to their business acquaintances whenever we meet them in their offices which helps us get referrals,” says Shailesh.

When asked about the unique goals of his HNI clients, Shailesh says that their wealth is tied in debtors and stock and they want some money to come out of business which should offer liquidity. It is not surprising that they have clients who have committed SIPs of Rs 10 lakh per month. But meeting the expectations of the ultra-rich can be demanding. In a whitepaper published by Morningstar US, David Friedman, ex-president of Wealth-X, said that comprehensive performance reporting and an asset allocation that provides attractive risk-adjusted returns are essential to reach this highly-coveted market. To cater to these unique requirements, they rely on Morningstar Advisor Workstation which is helping them win business with the wealthy.

Focused group meets

Besides gaining wallet share from existing clients, they plan to add new clients to fill the AUA pot which leaks through redemptions. Apart from referrals, they get new clients through focused group awareness meetings. They invite five existing clients and ask them to invite one prospect each in these meets. As opposed to organizing a large-scale awareness program, addressing a small group helps them achieve a higher conversion rate. “It is easier to follow up with a small group of prospects. In a small group, people don’t hesitate to ask questions which helps us to connect with them better,” explains Shailesh.

They have three customized set of presentations to connect with different categories of investors. Youngsters who have just entered the job market are the first category. People with age group of 35-45 years who wish to build a retirement corpus fall in the second category while the third programme is meant for retirees who wish to earn more than fixed deposit returns.

Continuous learning

He may be a college dropout. But Shailesh is aware of the need for personal development through education and networking. Shailesh and Khetani are regular attendees at the annual Morningstar Investment Conference (MIC). They have been attending MIC for six years.

Both take out time from their busy schedules to brush up and hone their advisory skills to take their business to the next level. Currently, Khetani is attending a five-day residential course called Flame Investment Lab 2017 offered by Flame University.

They had recently hired a business consultant for four months who offered them ideas for business development and building a strong team. Sharing one of the learnings from this consultant, he says, “The team’s vision should be in line with the company’s vision. The entire team should work in tandem to achieve it. They should know the future of the company and how they can benefit from the company’s growth. If our AUA reaches 1,000 crore our team knows how they will be benefitted.”

Secret sauce

His partner Khetani who is Chartered Accountant heads research while he takes care of business development. Khetani’s strong product knowledge coupled with Shailesh’s astute business acumen has helped them achieve this rapid growth.

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