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Wealthbeats Focus on fund recommendation to grow business

Focus on fund recommendation to grow business

Discover how Bangalore-based K.S. Mohan Raj has built a large equity AUM by picking multi-bagger funds for his clients.
Rosevina Gonsalves Apr 11, 2017

In the early 90’s, people had very little knowledge of mutual funds. Most of them may not even have heard about the term, ‘mutual fund’ except UTI. That was when Bangalore-based Mohan Raj Kuncham sensed an opportunity and began his advisory business, making people aware of the benefits of investing in mutual funds. He was one of the first few people to start this business in Bangalore.

In a short span, Mohan Raj gained popularity among people for his fund picking ability. Soon, his friends and family members started seeking his advice on mutual funds. As he gained reputation as a mutual fund expert, building his initial client base was not very difficult.

How it all started

Mohan is a chartered accountant by qualification. In 1979, he began his financial career by co-owning a franchise of JM Financials where he was exposed to managing Fixed Deposit Schemes, Merchant Banking activities and Financial Management. As years passed by, fascinated by financial planning and advisory he decided to make it his profession. In 1987, Mohan began his advisory firms, ‘Kuncham Investments and Financial Services’ and ‘Alpha Financial Consultancy Services Private Limited’ to deliver quality service to investors.

Recipe of finding out winners

When asked how he manages to pick future outperformers, Mohan says that he spends a lot of time conducting fund research. Every fund has to pass a test before making its way to his recommendation list. Here are the three key aspects that Mohan looks out for before selecting a fund for his clients

  •   Scheme’s mandate: Mohan believes that the mandate of the scheme plays an important role in fund selection. According to him, a fund manager should remain true to the scheme’s mandate to mitigate risk in portfolio. “A few balanced funds had large exposure to small-cap stocks which are not suitable for conservative investors. We don’t recommend such schemes where fund managers take undue risks to deliver alpha,” says Mohan.
  •   Portfolio: For Mohan, portfolio construction plays a key role in performance. A quality portfolio has a better chance to outperform across market cycles.  
  •   Investor behaviour: Another unique factor that Mohan keeps in mind before recommending a fund is managing the behavioural aspect of investors. According to him, the performance of any scheme largely depends on investor’s behaviour. “Investors who come with the intention of making a quick buck often lose out but those who invest in mutual funds to create wealth stay put for long term. In India, over 50% of equity funds manage to outperform their respective benchmark over long-term. Hence, the investor’s behaviour is significant for wealth creation. I think advisors are the one who are responsible for inculcating good investment discipline among investors.”

Before on-boarding clients, Mohan makes them aware of the various market risks as well. He advises his clients to invest in equity funds with a long-term focus. “In wealth creation, patience plays an important role. I advise my clients not to get anxious during volatility.”

Conviction in equity funds

Mohan has been dealing predominantly with equity funds. He explains, “Equity is a challenge. You need to have practical knowledge and a clear game plan to ensure that your clients get good returns. The risk is high and so are the returns. Hence, I advise equity investors to hold their investment for the long term to achieve potential returns. Also, investing over a longer period could possibly help tide over short-term losses as well.”

He further explains, “Bank FDs are standard instruments and may or may not beat inflation in the long run. Equity funds, on the other hand, are capable of doing so. Another reason investor should invest for long-term is tax advantages. Investments in equity funds sold after 12 months qualify for long-term capital gains tax which is nil.” Dividends are also tax free besides zero tax deduction at source.

Don’t chase clients

Winning the client’s trust plays a key role in the advisory business. That is exactly what Mohan did and won client-referrals continuously. His focus on post-sales services like periodical review of the portfolio, guidance in tax planning and helping clients even for basic, routine issues has helped him earn a good name.

“We do not believe in running after clients to procure business. In fact, I strongly believe that word-of-mouth is important for our business. Creating happy customers is what we do that helps us win more referrals. Ours is a well-reputed firm and clients approach us directly. We are more than happy to help their money grow,” said Mohan.

Client servicing

Mohan plays the dual role of a mentor and a financial planner for his clients. He highlights the importance of guiding his clients in the initial stages of investment. He believes, “Clients should be tutored well in advance about mutual funds and their risks before they put their fortune in it. It is only after studying their financial goals and other parameters involved, I recommend appropriate funds. In addition, I focus on helping clients identify their financial goals. Following a goal-based investment approach helps clients stay put for a long term.”

Mohan believes in staying in touch with clients through review meetings. He says, “The best way to engage with clients is through portfolio review meetings. I prefer reviewing investment products periodically. Also, advisors should ensure that the investment recommendation should be updated from time to time.”

It is imperative for advisors to act in the best interest of their clients. “I ensure that my client’s needs and expectations are met. If you do not understand your client needs, you can never recommend a good scheme,” explained Mohan. 

In closing

Here are the three-success mantras from Mohan that he wants to share with fellow advisors,

  •   Advisors should ensure that they follow a disciplined approach by sticking to ethical principles, indulging in good business practices. And avoid switching the portfolio from scheme to scheme and across mutual funds which may cost an investor a lot in terms of exit load and short-term gain tax.
  •   An advisor should make clients aware of the fundamentals of investment at the beginning. It helps in setting the right expectation and emphasizing the power of compounding. 
  •   Financial investment decision making is a complex process. Investors are often overwhelmed with availability of choices and they require assistance in choosing what is best suited for them.
  •   Hence, advisors should focus on motivating investors, helping them identify their financial goals and recommending suitable products. 
Bhavani · 1 year ago
Very useful article thank u sir and one more question new adviser how to train fund selection.
Bhavani · 1 year ago
Very useful article thank u sir and one more question new adviser how to train fund selection.
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