Wealthbeats From direct equity to mutual funds

From direct equity to mutual funds

Find out how Asset Alliance has acquired 2500 clients by highlighting mutual funds’ advantages over direct equity.
Nishant Patnaik Feb 6, 2017

PJ Rao’s career in finance began with Canara Bank after his post-graduation in 1969. He moved to the mutual fund part of the business within the Group in 1991, playing a key role in the organisation. He was responsible for managing functions such as fund management,Accounts, sales and auditing at different points of time during his tenure.

After spending 14 years in the mutual fund industry, PJ Rao realised that there was tremendous scope for a knowledgeable, serious advisor to grow considering the fact that India has one of the highest savings rate in the world. Besides, he felt that investors were not getting the quality advice that they deserved. Driven by this conviction, he joined Latin Manharlal Securities as a consultant in 2005 where he headed third party sales, which included mutual funds.

In 2007 when Latin Manharlal Securities Pvt Ltd under its group company called Asset Alliance Private Limited began its focus on third party products, PJ Rao was appointed as head of the division and was instrumental in setting up this new business.

Client acquisition: The first step for Asset Alliance was on-boarding the parent company’s clients. However, it was not as simple as it might appear. As majority of their clients had an exposure to direct equity, they were hesitant to invest in mutual funds.

To overcome this challenge, Rao began creating awareness about mutual funds through group meetings, inviting prospective clients with the help of its parent arm.

“Most of the investors who primarily invest in direct equity don’t find mutual funds attractive. However, when we explain to them the merits of mutual funds such as transparency, low cost fund management and diversification, they start considering it. We have created charts that compare the performance of their equity portfolio vis-a-vis the performance of Mutual Funds schemes having common stock holdings to highlight long-term return potential of Mutual Funds schemes. We also make them understand the concept of debt funds and how they offer better returns and attractive taxation compared to other fixed income products,” Rao explains.

His Company also conducts IAPs and seminar marketing to reach out to new prospects. In fact, Bhavin Shah, Director of the Company manages IAPs and seminar marketing exclusively for the firm, besides his other activities. His company conducts IAPs through their sub-broking network. In addition, the advisory company approaches corporate houses, SMEs and business professionals through their existing clients.

“While we use basic educational content such as ‘ABC of mutual funds’ in IAPs, we encourage people to identify their financial goals by highlighting benefits of long term investments in equity funds in our seminar marketing programs. We prefer customized content in seminar marketing as against generic content in IAPs. Since we know the audience profile, we create relevant and appealing content such as how can you save taxes (salaried individual) and how to grow wealth if you don’t have fixed cash flow (SMEs)”, elaborates Rao.

How he converts prospects into clients Rao says that his company follows the golden rule 80:20 during client meetings i.e. giving 80% time to listening to clients and 20% time to answer client questions and queries. This helps them understand client and engage with them better.

Interestingly, Rao prefers to meet with the entire family of his clients. He believes that this helps advisors strengthen relationship and inculcate good investments habits in the next generation. It also ensures that an adviser and a family are on the same page, he added.

Further, Rao focuses on helping his clients identify financial goals. “Instead of discussing the best funds to invest, we try to make them understand the fundamentals of investment and benefits of goal based investment approach. This helps them dig deeper into their lives and set priorities. Also, clients who understand their financial goals stay put for long term,” he added.

A key aspect for Rao is asset allocation. However, unlike most advisors who rely exclusively on risk profiling for asset allocation, his company factors in financial goals to finalize asset allocation. He said, “Though risk profiling is a vital part of financial planning, financial advisors should follow risk profiling of their clients only to a certain extent for asset allocation. Advisors should keep in mind the goals of their clients. Some clients have a conservative risk profiling but their goals are very aggressive. As an advisor, our job is to make them understand that aggressive goals can be fulfilled only with aggressive allocation strategy. Also, an advisor should keep in mind other factors like goals and market scenario before allocating his/her client’s assets.”

Finally, his company offers one stop solution to its clients including tax planning, estate planning and comprehensive financial planning. “We want to be a one-stop solution for all the financial needs of our clients. This helps us increase wallet share and ensures that client will work with us for the long term.”

Client retention : Asset Alliance caters to over 2500 clients and manages close to ₹ 150 crore of assets. When asked how he manages his huge clientele, he says that he has segmented his client base. His company has segregated clients into two broad categories – HNIs and retail investors. While Rao actively looks after managing investment portfolio of HNIs, a team of 13 manages the retail segment based on their relationship with clients and area of expertise. All his employees meet clients personally, at least once a quarter, to strengthen relationship. In these meetings, they review portfolio and discusses the macro-economic outlook.

Rao sends a newsletter to all his clients to stay connected with them. In these newsletters, Rao shares articles on personal finance and gives his views on equity and debt markets. In addition, his company interacts with clients whenever market witnesses a downfall due to specific events such as Brexit and demonetisation. Rao believes such hand holding during turbulent times helps in building trust.

Moreover, his company has made it possible for clients to execute transactions and monitor their portfolios online.

Future plans
His company wants to introduce a chat helpline on their website to resolve queries related to personal finance. “Many people are not comfortable talking to customer service executives as it takes time and effort. Online chat facility works well for such clients. Also, this facility would help us reach the young generation as they are more at ease using such services,” he says.His company is also planning to launch a mobile application for their clients to help them access their portfolio and execute transactions easily.

Asset Alliance also aims to reach out to people across Maharashtra and Gujarat through their sub-brokers. Currently, the company is encouraging sub-brokers to take up mutual fund distribution to grow business.

PJ Rao’s story shows how an approach based on understanding client needs and educating them can help advisors grow their client base.



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