In the year 2010, Gajendra Kothari ventured into mutual fund advisory after quitting his job at an asset management firm.
He was convinced with the prospects of this industry and thought of approaching his business with a professional lens. This meant he had to put in working capital from his own pocket. Gajendra, along with his brother Virendra put their savings in renting a 250 sq. ft. office in Andheri’s Lokhandwala area from the very first day of business.
In five years, Etica Wealth Management’s MF book grew to Rs 100 crore. Cut to today, Gajendra’s AUM has grown to Rs 650 crore, which is a CAGR of 45% from 2015 to 2020. What helped Gajendra build his business at such a breakneck speed? What did he do different from other IFAs?
The first thing one needs to have is conviction in the business and take pride that we are helping people achieving their dreams, says Gajendra. For IFAs to be perceived with the same respect as doctors, Gajendra says that advisers need to showcase their professionalism by investing in their business. Gajendra’s secret sauce is investor awareness programmes, or IAPs. He conducted his first IAP in Johrat, Assam for a gathering of 500 people for five hours, all funded by himself. He received more than 200 new investors from this initiative. This shows that one needs to spend on business to achieve results.
Gajendra’s second winning mantra is technology. Right from the inception, he has been carrying an iPad with him for meetings. It is loaded with infographics and charts on the benefits of investing in mutual funds. This comes in handy while explaining the merits of investing. Also, he invests in subscription to paid versions of Microsoft Office and other software which help in protecting his data and conduct online IAPs.
Expanding Network
Gajendra’s client base kept increasing by conducting IAPs. Further, referrals from existing clients also helped. Gajendra realised that he needs to invest in having a bigger office at a prominent location for the next leg of his growth. He moved to a 500 sq. ft. office in Mumbai’s Churchgate area. As his clientele and team strength grew, he shifted again, this time with an office space of 1,600 sq. ft. in the same area.
He also expanded geographically by opening offices in Assam, Delhi, Kolkata and Gujarat. To service his clients, he expanded his team. Today, he has a team of 33.
Keep a cash buffer
He also keeps a cash buffer for his business which helps him tide over uncertain times. This has helped him to retain his staff during this lockdown period.
Don't fear regulations
“Many IFAs fear of regulations and other headwinds. They should take it in their stride. In fact, one should remain persistent. Those who survive will win,” says Gajendra. He feels that IFAs should create a brand pull. If your brand is big, the business comes automatically.
“I think many IFAs are not able to grow because they are satisfied with their current growth. They don’t upgrade. They don’t invest in the business. They rely on subscriptions to services offered by fund companies. They blame the regulator for the slowdown in business,” observes Gajendra.
Advisory business has leverage
Gajendra says that we advise our clients to invest in other businesses (through equity funds) for their better future and it would be unwise not to practice the same mantra ourselves. “Our business anyways has less capital requirements and if we shy away from basic investments also, then we are not playing for long term. Also, this business has great operating leverage. Beyond a point, the fixed cost doesn’t pinch. It only helps us scale up in a much more profitable way.”
Like Gajendra, Mumbai-based adviser Tarun Birani struck out on his own at a young age of 26 by floating TBNG Capital Advisors after a few stints with financial services firm. From his corporate stints, he learned how businesses invest to build scale. He looks up to the founders of Motilal Oswal who have built their business empire by starting early.
Tarun has observed that not many advisers operate like businessmen. To reap dividends, he strongly believes that advisers need to invest in their businesses. “If you want to be an adviser behave like an adviser. Build infrastructure by investing in the business. You see that almost all doctors behave similarly which gives people confidence,” believes Tarun.
TBNG Capital Advisors manages assets worth Rs 210 crore across mutual funds, PMS and alternative strategies, with a team of nine.
Adapt to change
Tarun says that market dynamics are changing rapidly. This requires advisers to stay ahead of time to adapt. The need for re-investments be it for technology upgrades, staffing, or training it is an on-going and ever-changing process for him.
Investing in business pays off
Growth is the only constant in any business and the financial advisory business is no different. Precisely calculated capital allocation can ensure every penny invested generates a return on equity, or ROI, for the business.
Tarun focuses on building scalable teams to benefit from operating leverage in business and in turn building capabilities.
He also invests in technology which is vital for any business. He has invested in financial research software, back-office operations to bring both scalability and a higher ROI. Tarun believes that advisory business is all about building meaningful conversations and any initiative advisers take should help achieve the same like technology should help us get meaningful analysis which in turn could be shared with clients and help him plan better.
“The current circumstances call for a different view on reinvesting. At one point we would consider growing our team to the next level as apt, which would mean bigger office space and better facilities. Today, these current lockdown times have made us rethink the need for our physical presence. It has presented the opportunity to save costs on leases, amenities, and more to further invest in an enhanced virtual presence along with an upgrade in technology that increases our efficiency in service offerings,” says Tarun.
Institutionalise your practice
Tarun says that every IFA begins as an individual freelancer who at a point reaches his 100% potential. After this, he/she needs assistance to transform the practice into a company. “The growth will not be consistent unless there are periodical investments made in manpower, technology, and training to build scalability. Additionally, in India’s financial service domain, the human touch is one crucial factor that technology is finding difficult to replace. It is to the advantage of IFAs to know how to make the most of it. We cannot turn a blind eye to the fact that investors today are technologically savvy and so our services rendered need to be at par. Traditional methods of functioning that form our backbone need an upgrade to smarter backend functionalities. Investing in technology reduces time spent on mundane tasks, enables us to better serve our investors, and frees us to focus on our core competencies and activities,” says Tarun.
To sum up, you can’t rely on external forces to grow your business. They need to have business goals and have a strategy to achieve them. Advisers can invest in areas where they expect to get ROI. Try to implement an idea. If it doesn’t work, try it differently. Keep experimenting. Learn from your peers on how they grew their business by investing in their business.
