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Seven MFDs in Pune have joined hands to set up a common distribution practice. They feel their collective experience and expertise will unlock some powerful synergies that will help them to level up their business and hence they have formed Finnovators Services.
Sharing this journey of collaboration, Balvir Chawla and Neepa Khatri also took us through the prerequisites for merging individual businesses.
Here is what they shared with us.
Key reasons behind collaborating
Every MFD has different skills and expertise. When two or more MFDs come together, they leverage and learn from each other’s talent and experiences. This, in turn, assists in achieving larger goals and a stronger administration that supports business growth.
Also, a structure like this gives clients the comfort of business perpetuity that continues to look after their interests even in the absence of their MFD.
Effective ways to create synergies
Leveraging on their skills and strengths, every MFD at Finnovators Services spearheads specific functions like marketing, accounting, finance, technology, recruitment, etc.
Also, their client base remains exclusive and every investor that they have onboarded stays mapped to them. Further, each MFD continues to operate from their respective office.
Balvir Chawla said, “We also have a centralized office where a 26-member back-office operations team extends support to each MFD. The staff here is trained to follow standard protocols which showcase professionalism and also free MFDs from administrative work to concentrate more on business. Additionally, keeping in mind the larger goals, we have mutually created broad guidelines for doing business including client engagement and investor education sessions.”
Neepa Khatri added, “We have a defined revenue agreement. For revenue that every MFD brings, a fixed percentage is set aside for meeting company expenses like salaries, rent, bills, etc. In fact, we have created a provision of three to six months of expenses that equip us to effectively manage unforeseeable events. Most importantly, we all meet once every month, quarter and year to review, strategize and re-strategize business practices.”
Important things to keep in mind before collaborating
MFDs should invest sufficient time to know other MFDs with whom they desire to collaborate. Here are a few key points that they should certainly discuss before deciding to join hands.
- Long-term vision - There should be a similar long-term vision. Discuss questions like - Where do you see business in the next 5/10 years?
- Business objectives - Consensually identify common goals and objectives as business strategies differ in light of such objectives. Hence, there should be agreement on business aspects like product offerings (mutual funds, insurance, etc.) and investor categories (retail, HNI, UHNI, etc.) among others.
- Working style - Discuss and understand each other’s working style. Answer questions like - Do you usually prefer making tactical calls or holding on tight? Differences in working style cause differences in opinions while hiring a team and also result in uncertainty in the team’s mind about the right approach to guide investors.
- Revenue sharing - Establish a clear understanding of the treatment of revenue and loss.
- Roles and responsibilities - Bifurcate roles and responsibilities to empower MFDs to do more focused work and filter out confusion and operational clashes.
- Adversity clause - Explicitly address difficult questions and document the remedies that will come into play. For instance - What happens if an MFD passes away? What if a disagreement arises in the future? What if an MFD wants to part ways? What if an MFD suffers from a disability?
About Finnovators Services
Balvir Chawla, Bhupendra Ketkar and K.V. Balaji joined hands and merged their distribution business in 2014. Amarnath Lal and Neepa Khatri collaborated with them in 2019. Thereafter in 2020, Hemant Kale and Veena Malgaokar partnered with them all.
Today, the seven MFDs, collectively manage around Rs 1,100 crore AUM and monthly SIP flows of over Rs 5 crore for 5,000 clients under the name of Finnovators Services.
While Balvir is the CEO, the other six MFDs are the directors.
