‘Advisers need to manage client emotions more than portfolios’

By Ravi Samalad |  06-10-21 | 

Anand Khetriwal grew up in Kolkata. His passion for numbers drew him to pursue MS (Finance) and CFA from ICFAI. After completing his education, Anand worked at a couple of small private firms in Kolkata where he managed mutual fund portfolios.

Subsequently, Anand got a break at one of the oldest private sector AMCs in India having its branch office in Kolkata. He got to handle different functions of the branch which helped him get an overall experience in the back office, operations, sales, and so on. His early experience at this fund house helped him find his calling. He decided to make a career in the mutual fund industry.

Entrepreneurial plunge

Starting an advisory practice when the market was in the doldrums helped him thrive in his venture.

“Post 2008-09 market crash, many fly-by-night mutual fund distributors folded up and investors were left orphaned. These distributors had sold infrastructure, close ended and mid cap fund NFOs and left the market. Panicked investors had a lot of queries,” recalls Anand.

Anand sensed a demand-supply mismatch in terms of the quality of distributors back then. He took the entrepreneurial plunge in 2011 as a mutual fund distributor. “I had to give up company ESOPs but I had to make a difficult call. I thought I will come back to the company if things don’t work out,” recalls Anand. His perseverance and hard work paid off and there was no looking back for Anand.

Client acquisition

For budding MFDs/advisers, often, the first set of clients are low-hanging fruits like friends, immediate family members or colleagues. But Anand got out of his comfort zone and started reaching out to unknown prospects. He tried cold calls for a few months which was not fruitful. He realised that cold calling doesn’t work in finance, especially where the relationship is based on trust. “I didn’t want to force advise them (family members/family members).  I had witnessed this trend and friends/relatives are usually not comfortable discussing their finances with someone known. Now that my business has been established, many of my friends and relatives have started investing through me. But my initial clients were a few corporates who were not getting good service from their existing distributors. The initial two years were very challenging. I got references from friends. I didn’t want to poach any distributor’s business. I have onboarded many clients who were first-time investors in mutual funds. My aim was to focus on those clients who have not done their KYC,” says Anand.

He vividly remembers his first client who gave him a cheque of Rs 25,000. Today, Anand manages this clients’ entire investment portfolio which is worth crores. He has many such clients who initially started with a small investment and have now entrusted Anand with their entire portfolio.

Anand also dabbled in insurance advisory, but he realised that he was not cut out for it. He had taken up an insurance agent license and was given a target of achieving a fixed business within a year. He realised that the modus operandi of the insurance industry was not customer-centric and decided to call it a day and rather focus on MFs.

Anand believes that trust is of utmost importance in building a career in financial advisory. Today, Anand caters to close to 150 clients with assets under advisory of Rs 400 crore across products. Anand says that distributors today are not bound by geography, and they can acquire clients from anywhere.  “I have acquired many clients in Mumbai, Delhi and other metropolitan cities. I was surprised that they didn’t get a good adviser in their respective cities. So the opportunity is huge even in cities where the penetration is good.”

His clientele mostly consists of HNI and UHNI clients. Since most of their goals are easily met, their main focus is on wealth preservation in order to pass it on to the next generation. “Typically, they don’t invest for specific goals. In fact, they themselves are not aware of their goals. So we help them identify them. Going ahead, one area which we want to focus on is estate planning/succession planning.”

Everyone can thrive  

Anand has been a part of the industry for over two decades now. He believes the industry is witnessing some structural changes. For instance, he thinks that the rise of digital fintech players offering mutual funds will only help the industry increase its customer pie size. He does not view these players as a threat to brick-and-mortar advisers. He puts across his point with the analogy of the retail industry. “We have seen the entry of organised players like Dmart, Reliance, and Tata into retail. But Kirana shops have not become extinct. Similarly, there is space for every player be it MFD, RIA, fintech, banks and wealth outfits. It depends on your willingness, capability and goals.”

His only worry is that many young clients who have entered the market in the last two years have not seen a bear market. “Once they see their portfolios in red, there could be a tendency for such investors to redeem. Hence, the industry needs to be prepared to handhold and guide such clients on the benefits of staying invested.”

Are direct plans a threat?

Anand says that some of his clients show an inclination of investing in direct plans. He believes that distributors should be forthright when it comes to explaining the pros and cons of any product. “Today’s clients know everything as the information is available online.  Rather than being defensive, distributors need to be honest. If you continue to give them good advice and service, they will continue with you and won’t take the hassle of handling portfolios themselves to save some money from direct plans.”

Passive vs active 

Anand believes passives will be a big category going ahead. However, he doesn’t see either active or passive replacing each other.

“It takes a lot of time for AMCs to acquire clients in active funds. So passive is a safe play. Passives will help increase customer base and reach for new players as well as existing players.”

Anand believes that the industry should not position passive funds as ‘safe products.’ “You can have a bad experience even in passive funds. Passive funds will deliver at par or less than the index. It is just that you are not taking fund manager risk,” points out Anand.

Anand believes that MFDs manage their client’s emotions more than portfolios. “We don’t manage funds. Our job is to help investors stay the course to achieve their life goals. We need to manage their emotions when markets turn topsy-turvy.”

Handholding new investors

Anand is observing that while the people of East India have traditionally preferred investing in post office and fixed deposits, lately they are showing an inclination for direct equity and mutual funds. “With interest rates at rock bottom, investors are exploring newer investment avenues. They are particularly drawn by historical returns from equities. We apprise them that past returns are not indicators of future returns but can beat traditional investments easily. We are advising them to have an investment horizon of at least seven years if they wish to enter now.”

Anand brings first-time investors in equity in a staggered manner. More importantly, he sets the expectations of such investors right at the start of their investment journey. He prefers to keep equity allocation at 20% initially. He feels that Balanced Advantage Funds are ideal for such clients. Once such clients are comfortable with volatility and understand that equities require a long-term horizon, he brings them into pure equity funds depending on client risk profile and goals.

Building a future-ready practice

When asked about his immediate plans for the business, Anand says that he wants to build a robust back-office support and operations team so that his clients can have a seamless experience. He believes that client service is the backbone of any advisory/distribution practice. "Once your foundation is strong you can build an edifice. The business should be able to support the pre-sales and post-sales service of clients. Then only you can scale up any business,” notes Anand.

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