A CA and cost & work accountant by qualification, Mumbai-based Dhruv Mehta started his career as a corporate finance executive and rose to become CFO. During his last assignment, where he was responsible for the financial affairs and investment portfolio, Dhruv began overseeing the large investments made in various financial instruments including mutual funds by his company. Mutual funds being a relatively new instrument in the 90’s Dhruv set off on an in-depth study of mutual funds to understand them better. He found merits of mutual funds such as diversification and low management fees for professional fund management very attractive.
Convinced that mutual funds could beat inflation and provide attractive returns over the long term, Dhruv started encouraging his friends, acquaintances and family members to invest in mutual funds. Soon, other people sought out his views on the category as well. Dhruv then realized that many people have an investible surplus but they are not able to find proper guidance to deploy such sums gainfully. Sensing an opportunity, he quit his job and took up mutual funds advisory as a career in 2004.
The initial days were quite challenging for Dhruv. He was not able to acquire a single client for a few months. He began his practice on-boarding ex-colleagues who were mostly HNIs. Subsequently, Dhruv approached corporates and HNIs through referrals from existing clients and friends to get access to them. “I asked my friends to fix an appointment with their bosses,” he reminisces.
Recalling an interesting episode of his struggle, Dhruv says, “I once followed up with an HNI prospect for over a year. Even after several rounds of meetings and spending hours discussing markets and macro-economic conditions, this client did not invest with me. He used to seek my views on markets to invest in direct stocks. Everyone advised me not to waste time meeting him for business but I did not give up. Surprisingly, this person recommended his friend to invest with me and today that friend is one of my largest clients.”
“HNIs are astute, and observant by nature. They can assess an advisor’s knowledge and ability in a couple of meetings. You may build trust by regular interactions with them, but this does not mean that they will give you business. Trust without competence is of no value,” believes Dhruv.
Speaking from experience on what HNI clients expect, Dhruv says, “HNIs don’t want to invest money for retirement and child education. In fact, they do not have specific financial goals in mind; they just expect the advisor to help them preserve and grow their wealth. They also want you to help them spot opportunities in the markets arising out of events such as Brexit and Trump Presidency. Hence, you should keep an eye out for key trends and developments impacting the Indian markets.”
Dhruv ensures that he keeps himself updated on global affairs, economics and taxation. He ensures that he spends a few hours daily to enhance knowledge despite his hectic schedule. To cater to the diverse need of HNIs, Mehta has increased his offerings by adding structured products like PMS, hedge funds, private equity and venture capital funds. “HNIs are more evolved when it comes to investments. Advisors should also develop expertise on alternative investments and structured products to meet their expectations.”
Another approach that Dhruv follows is to encourage his clients to stick to asset allocation. According to him, advisors should give 90% weightage to asset allocation, 9% to product selection and 1% to market timing. “HNIs will often come to you with investment ideas. They seek your views to validate their point. However, advisors should encourage them to avoid noise and focus on asset allocation. You should convince them to maintain a right mix of equity and debt in their portfolio. The best way to do is to document all the communication. This would help you remind them about their commitments.”
Dhruv believes in setting reasonable return expectation from the beginning. He urges advisors not to set unrealistic returns expectation; instead, they should under promise and over deliver. “Even if your recommended portfolio has delivered 8%, clients would be happy with if you had set 6-8% return expectation,” Dhruv suggests.
All these strategies have worked out well for him and today Dhruv manages a niche practice catering to the HNIs segment. Currently, he has a client base of 125 for whom he manages over Rs.700 crore.
Given his over 13 years of experience in financial advisory, we asked Dhruv how investors have evolved over the past few years. He says that most clients now prefer to increase exposure to equity whenever equity markets decline due to an external event like Brexit. “In my view, clients who have witnessed a bear market become mature. These clients do not panic on downturns; instead, they increase their exposure to equity.”
On fund selection, Dhruv first looks at his experience with the fund house. Citing an example of a friend, he said, “Whom would you call if you are in a need? Of course, your best friends as you trust them. Similarly, I select fund houses on the basis of trust and past experience.”
He also considers fund manager’s approach and consistency. “I look at the track record of the fund manager across market cycles. I have seen fund managers betting on high beta stocks to outperform the markets but such funds suffer badly in volatile markets,” says Dhruv.
Apart from his personal business growth, Dhruv wants to strengthen the advisor community through Federation of Independent Financial Advisor (FIFA). Currently, he is the Chairman of FIFA. The federation aims to empower advisors through knowledge and skill sets. Dhruv says that advisors can help mutual fund industry increase penetration. “Only foot soldiers of the mutual fund industry can help the industry grow manifold,” he says.
Dhruv’s story shows that advisory is about understanding client psychology and developing competency, which in turn help in acquiring and retaining clients.