Before striking out on his own, Anil Rego worked for Wipro in its Business Planning and Merger & Acquisition division.
A Chartered Financial Analyst (ICFAI) and MBA, Anil always dreamt of retiring early from his corporate job to pursue his entrepreneurial dream. He set himself a goal of quitting his job at 35 and started working towards it. Giving up the security of a monthly pay cheque meant he had to save up enough to meet any exigencies for his family. Interestingly, he realised his dream at the age of 30!
Focus on financial planning and fee-only advisory
Anil floated his firm Right Horizons in 2003 in Bengaluru and was later joined by his wife, Rachna Rego. Rachna currently looks after the backend functions, apart from managing clients herself. Drawing from his experience in Information Technology, Anil adopted a process based and planning oriented approach right from the start. To break the clutter and establish a professional advisory practice, he was keen to start a fee-only advisory practice two decades back. “Fee based financial planning was unheard of. We used to do business planning for corporates, but nothing much happened at the individual level. When I did it for myself successfully, I felt the need for others to benefit from this approach,” recalls Anil.
Before starting his venture, Anil conducted a survey among a group of 150 investors to ascertain the awareness and acceptability of a fee-based advisory model. A majority of respondents said that they would not pay a fee to take investment advice. Another small percentage of respondents said they would pay a fee if they find value in the advice and if it made a difference in their lives.
Nevertheless, Anil wanted to offer financial planning services right since inception for his clients. Anil started charging a flat fee for preparing a financial plan. He didn’t charge an ongoing fee because distribution was the only option back then. Distributors were compensated through entry loads plus a small trail fee. “If I had to operate a fee-only model at that time, it meant that I would have restricted myself to catering to high net worth clients alone, not the ones who needed it the most. I wanted to help others achieve their dreams, just as I was able to achieve mine. A wider coverage was important in my scheme of things, and hence I chose a hybrid model at the start,” says Anil.
Cut to today, the Right Horizon group manages/advises assets worth Rs 1,500 crore across 18,000 clients while 1,200 are fee-based clients. It has three verticals: distribution, RIA and PMS. The distribution business caters to individuals who are merely looking to manage their investments while RIA vertical offers fee-only holistic financial planning.
Foray into PMS
From its humble beginning, the company went on expanding its product offerings over the years. In 2012, the company received Portfolio Management Services (PMS) license from SEBI. It offers ten schemes under PMS. Talking about the rationale for launching his in-house funds, Anil says, “We wanted to offer a differentiated product. We aim to deliver superior risk-adjusted returns to clients with a contrarian style. We lay more emphasis on avoiding bad companies and cutting down risk rather than chasing outsized returns. Some PMS funds in the industry deliver great returns during a bull market, but they see a huge drawdown when the market crashes. Some of them fall more than the market. We aim to protect the downside,” says Anil.
Anil along with two fund managers Piyush Sharma, Gaurav Aggarwal and two Assistant Fund Managers, manage these ten funds. They adopt a four-stage process for their fund management. They scout for companies that have consistently grown revenues and profits, with high return on capital employed, among other factors. “If the company is consistently growing ROE by leverage then it is a red flag. We see what differentiates the firm from peers which is about identifying MOAT.”
Apart from the structured ranking model that they follow for stocks, they keep up to 15% for cyclical exposure. “We have made a number of contrarian calls including buying Gold ETFs and metals, which has done well for us. We study a lot of macroeconomic and other indicators which help us identify the turning point in key sectors. We take such calls sparingly within the 15% limit. We have a risk management process, through which we keep a hawk’s eye on how much risk each fund is taking,” explains Anil.
Apart from providing distribution and advisory through segregated entities, it currently offers Portfolio Management Services, insurance broking and real estate advisory. It caters to a wide range of clients from mass affluent clients to family offices through various verticals of the group.
Road Ahead
When asked how he sees the competition from fintech players impacting traditional financial planners, he says, “Most people are comfortable with having a discussion with a person while managing their finances. They look for reassurance. They need guidance. The market has gone up but how many people have made money in markets? Behavioural coaching plays an important role in helping clients achieve their goals. Even fintech players are evolving; and many now have a team in place, to talk to their larger customers. There will always be investors who would prefer that their money be managed by professional advisers. However, there is no question of technology playing an important role for non-fintech players as well.”
Over the years, Right Horizons has expanded its geographical footprint by adding branch offices across different states. It currently has a presence in Bengaluru, Hyderabad, Gurgaon, Chennai and Mumbai.
Anil aspires to grow his firm’s assets under advisory to Rs 5,000 crore by 2025.
