Madhav Kumar L. R., Founder, InvestCart.in, talks about the benefits of opting for Morningstar Managed Portfolios solution for his clients and more.
Please take us through the evolution of your advisory practice. When did you start and what inspired you to become a financial planner?
With 25 years of experience in telecom, consumer durables, realty sector, and predominantly in the insurance industry for more than a decade, my journey started during Q4 of 2019 when I felt an acute gap in the advisory space. What’s missing? A holistic approach on the fitment of right products to end investors depending on life goals and situation. It was quite evident that the investor’s behavioural aspects too needed strong support mostly on the biases that confirm a specific decision, emotional attachment of certain assets, recent performances that hide the underlying risks beyond the tolerance levels & life situations. Needless to say, the market most of the time is flooded with products being pushed across channels of great repute but focusing on revenues diluting the actual solution required for end clients. Investors look forward to intermediaries offering genuine solutions that suit their risk appetite and ushering them in the nuances of investments for the long term thereby helping them achieve their goals, be it retirement, estate planning, or any other. The requirement to bridge the above gap was a strong catalyst for setting up my practice.
How many clients you are catering to currently and what services do you offer?
Currently, I work with 50+ clients managing their investments taking a goal-based approach besides following an asset allocation model, depending on their risk appetite and tolerance. In addition to this, being part of an insurance broking setup, I cater to 200+ clients for their life, health, and general insurance needs.
We cater to retail and HNIs clients for mutual funds and PMS who are based in Chennai, Coimbatore, Kerala, U.K and UAE. For insurance, we cater to retail, HNI & SMEs spread across Tamil Nadu.
What benefits have you observed by investing your client’s money in Morningstar Managed Portfolios?
There are 44 AMCs in India offering 1,600 schemes. It is not pragmatic for investors themselves to achieve the right bundle of schemes that suits their needs. Even if so, would the portfolio consist of right mix of equities, debt, gold & cash? This is where clients benefit by deploying investments through Morningstar Managed Portfolios (MMP). MMP’s expertise lies in leveraging on the framework that rebalances the perfect proportion of asset classes at all times on a forward-looking perspective which is backed by a team of research analysts and portfolio specialists. As the saying goes “the mileage depends on the driver who drives it”. With MMP, investors are exposed to portfolios with multi-layer checks and controls on risk management through careful selection and a blend of schemes achieving the perfect asset allocation. Assets picked at fair value and quality make a huge difference in the long run thereby appreciating the returns. While returns can be rewarding, it is also imperative that investors are exposed to the right amount of bearable risk to mitigate losses during a downward rally. Besides the top-notches, funds that pick stocks that are fundamentally strong(though offbeat and sometimes unconventional) are made part of the portfolio. Apart from that, de-risking by way of diversification strategies has helped my clients weather through different markets. Custom benchmarks for an active range of portfolios have helped a wide range of clients witness active fund management in the multi-asset class portfolio. It is important that my client’s investments are part of schemes that follow a high level of governance & qualitative attributes and at the same time shun short-term tactical calls that are too risky. “Clarity is Power” – Transparency, Unbiased, Strong and fundamental principles and powerful processes make MMP the winning choice and proposition and all this at extremely low cost for investors. MMP leads the pack in the Multi-Asset category with the highest risk-adjusted returns.
Typically, how much time were you spending in research and portfolio review/rebalancing before you started outsourcing investment management?
HNIs are focused on wealth conservation and creation as well. However, they expect a periodical review of their portfolio in comparison with benchmark performance. Typically, research on the selection of schemes and rebalancing is an endless task as the market what we see today is not the same tomorrow with economic market indicators being dynamic.
After outsourcing investment management, how much time are you able to devote to client-facing and business development activities?
With MMP, upgradation happens from bespoke research and findings. My journey has been fairly smooth as substantial duration on analysing raw data & parameters has reduced, paving way for more quality time with new client prospects and retail sales business development.
How has been the feedback from clients about Morningstar Managed Portfolios?
Though the concept of valuation-driven investing can be understood theoretically, it requires a substantial duration of time in analysing the data and pointers, and continuously researching in identification of the right investments. MMP provides access to the above strategy and operationally offers the single window to portfolio reports, valuation, expenses, holdings, and capital gains. Besides, periodical reviews make MMP a preferred choice and a customer delight.
What trends do you foresee in the wealth management/MF distribution/advisory space in the days to come and how are you planning to grow your business?
The low penetration (1.57%) of mutual funds in India provides ample opportunity in the distribution space not just in rural & semi-urban locations but Tier 1 cities as well. The young population advantage of India grants a huge potential for the next few decades. However, MFDs putting investors first with a focus on quality advisory and transparency are expected to have the maximum leverage. It is a misconception that only HNIs require wealth management. Even disciplined retail clients have the potential to scale up their wallet share. This is a segment that is in need of expert advice.
New product launches of low expense ratio and direct index funds can accentuate the overall growth of assets under management. Nevertheless, the returns would trail the indices due to tracking error. The alpha generated by actively managed funds is substantially high as per back-tested data.
The industry is poised to undergo a gradual and paradigm shift towards robo advisory, which the millennials and Gen ‘Z’ (people born from 1995 to 2010) are embracing with many associated pros & cons. However, investor biases can be managed only with human intervention and quality advice, especially during unusual circumstances of investor’s life stage and Macros. With robo advisory, the vulnerability of clients to fall prey to the ideas of the herd is very high, and a high churn rate hikes the costs. The underlying phenomenon of staying the course, in the long run, is the key to tap exceptional ideas and opportunities.
Ultimately, proper asset allocation is key and spending time in the market rather than timing the market is prudent. This happens with the right selection of products at the right time, right at the first time.
