LIC agent turned fee-only RIA

By Morningstar |  26-02-19 | 
 

An introvert, Swapnil Kendhe detested approaching people for business. When he realized traditional policies were not investor friendly, he took up mutual fund distribution and eventually migrated to fee-only advisory. Today, he has 110 clients who pay him fee. Swapnil chats with Ravi Samalad about how he made this transition.

 

What drew you towards financial advisory?

I accidentally landed in this profession. I am a Chemical Technologist by education. I worked with Marico Ltd. and Hindustan Unilever Ltd. as a production executive for 3 years. In 2011, I left the job to do something of my own and started a business. Business did not work as expected and I had to close it within a year. This left me in debt and with no cash flow.

In mid-2012, when I had nothing else to do, I applied for the Life Insurance Corporation (LIC) agency on a friend’s suggestion. I wanted a temporary source of income until I find something worthwhile to do. But I found it interesting. I began reading, studying and exploring personal finance and investing aggressively. It became the principal activity of my life. In mid-2013, I became a mutual fund distributor and stopped selling LIC policies. This led to the termination of my LIC agency. I also sold health insurance for some time but then transferred my health insurance business to a senior health insurance agent and became a full-time mutual fund distributor.

In early 2014, I decided to move to fee-only model because it is more upright and dignified way of earning money as an adviser, and I felt that it suits me better than the commission model. Since I did not have a relevant postgraduate degree, I needed to fulfil five-year minimum experience criteria to apply for RIA registration, which was still three and half years away. I used this time to build my competence as an adviser. I applied for RIA registration immediately after fulfilling 5-year minimum experience criteria and got the registration in late Oct 2017. I have been working on the fixed fee-only financial planning model since then.

How many fee-only Registered Investment Advisers (RIAs) operate from Nagpur? Was it a tough decision to move to a new model like RIA? What kind of challenges did you face and how did you overcome them?

As far as I know, I am the only RIA working on the fee-only financial planning model in Nagpur. It was not a tough decision for me to move to the fee-only financial planning model. I always felt I am better suited for this model. After registration, I began bringing my mutual fund clients to fee-only model. Online business did not work for me for first 5 months, though I was part of the list of fee-only advisers maintained on freefincal.com. I got online business after my first two guest articles in freefincal.com in March and June 2018, but it dried up quickly. By July 2018, I had brought most of my bigger MF clients to fee only model and I did not have much of an online business either. In late July 2018 I worked on my website and made it SEO friendly. I also began posting regularly on social media. I do not know what exactly worked, but I began getting a steady flow of online business from Aug 2018 onwards. Today most of my new business comes online. Referrals have also started working for me now.

How many clients do you have currently and what is your fee model?

I have over 110 financial planning clients today. I work on fixed fee-only model which is transparently provided on my website.

Assets under management (AUM) tends to be the yardstick of success in MFD model. What is the yardstick of success for an RIA?

The conventional yardstick for measuring success in advisory business is AUM and fee revenue. High AUM and revenue certainly earns an adviser recognition within adviser community, but primary responsibility of an adviser is towards his clients. Individual client has nothing to do with adviser’s revenue or how well respected he is within adviser community. He is only concerned about the quality of attention/advice he receives and a reasonable fee. Once an RIA reaches the level of revenue where he can comfortably achieve his own financial goals, the percentage of satisfied clients who trust and respect him should be the measure of his success.

Do you see it as a challenge to collect fee when the markets are not doing well?

The scope of financial planning is far bigger than investment advice. It is job of the financial planner to educate his clients about the importance of following process instead of worrying about what market is doing. He should also recommend portfolio allocation which can withstand and survive bad market conditions. If the financial planner does his job well, I see no reason why collecting fee should be a challenge when markets are not doing well.

Some say that financial advisers need to be outgoing/extrovert to be able to build connections and grow their business. What would be your advice to advisers who are introverts like you?

It is difficult for introvert advisers like me who dislike mixing with people and asking for business to become top independent financial adviser (IFA). But dynamics of fee-only business, especially online business is different. It requires you to have online visibility, higher degree of competence and display of that competence online. That doesn’t require you to be outgoing/extrovert. You can sit all day in your office and still attract online business. Referrals also don’t require you to be extrovert/outgoing. All it requires is to be good at what you do.

If you are introvert, stop taking conventional advice of making 10 calls and 3 appointments a day seriously. It is a game you can never win because others have aptitude in it, and you don’t. Focus instead on building competence. Read and learn as much as you can and as fast as you can. Seek association with quality advisers who have ethics of an adviser and not that of a salesman. Try to do the work in hand as well as you can, because it increases the probability of getting unasked referrals. If you do this, business will come to you and snowball effect will start working for you, though it would take longer than it does for other advisers. But your business will be robust unlike those of salesmen who do not work on their competence.

Not all investors may be able to afford the services of RIAs. What can be done to make sure more investors are able to access the services of RIAs?

If you can pay Rs 2,500 monthly insurance premium of a traditional insurance policy, you can hire a fee-only financial planner in less than the commission you indirectly pay to the agent in the first year of the policy. If assets and savings potential of the investor is low and financial planning is relatively simple, planners also agree to charge a lower fee. Renewal fee of most fee-only financial planners is less than 60% of the first-year fee. What we need is higher number of advisers who work on affordable fee-only model. With increase in the number of advisers, visibility and acceptance of this model will also increase and more and more investors will have access to the services of fee-only advisers.

You are a voracious reader. Which books have influenced you a lot?

Literature of Swami Vivekananda has had the greatest influence in my life. It made me the person I am. The books that added the most value to me as a financial planner are ‘The Intelligent Investor’, Jim Otar’s ‘Unveiling the retirement myth’ and all Nassim Taleb’s books. Otar made me aware about the importance of the sequence of return in financial planning. I also began thinking in terms of lucky and unlucky outcomes because of Otar. Taleb trained me in inference and made me a better thinker.

You struggled with English language. How did you overcome the language barrier?

My English was poor in early 2014 when I decided to become an RIA. Poor English can be a serious handicap if you want to target online business. I sincerely worked on my English as a part of the preparation to become an RIA.

What are your future plans?

I will continue to work on affordable fee-only model and charge fee in proportion to the work and not in proportion of client’s assets. Apart from that, I do not have any future plans. I believe that if I concentrate on becoming a better financial planner and have online visibility, business will follow. I need not worry about it.

I have no interest in becoming one of the biggest financial planners in India. I find joy in doing things well. I will stop taking new clients if I feel that volume of business is impacting the quality of my work. I am increasingly becoming fluent at the work I do and therefore my ability to handle a higher volume of business is also increasing.

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