Yogin Sabnis, Managing Director of VSK Financial Services, has been in the industry for twenty-five years and closely seen the evolution of mutual fund products. He shares with Ravi Samalad some moments of his journey and his view on the changing business environment after the ban on entry loads. Read the story of a financial services provider who entered the market when the industry was virtually non-existent
Has your business undergone a change after the ban on entry load?
We had started financial planning and charging advisory fees 2 years prior to the entry load ban enforcement so it was not difficult for us to adjust to the new situation.
The change has been positive - we are managing more assets and enrolling more and more fee based clients.
How many retail clients do you have?
We have a registered client base of more than 1000. However, as an advisory firm we cannot cater to such a large number of clients. We are in the process of consolidation and would want to have clients who understand the value of advisory services. Accordingly, we have been reaching out to the clients with a view to explain them the merits of availing the advisory services.
What will happen to small SIPs?
We have always believed in investment through SIP as a tool to build wealth over a long term. We have been recommending this tool to our retail clients, a majority of whom are salaried people. Initially, it was an uphill task as the concept was new and there was no track record to show potential returns. Moreover, there was no ECS and we had to take post dated cheques. But after a few years once we could show the efficacy of the concept, the no. of accounts grew. In fact, this has become a preferred mode of investment for them.
This is a concept which benefitted everybody because the fund house got long term steady funds, the investors channeled their small savings profitably to create long term wealth and the distributors got their revenue from brokerages.
Since the ban on entry load, the servicing of small SIP investors has become unviable. What saddens me is that the distributor would not pay attention to those small investors who would bring in only SIPs of say Rs. 1000 to Rs. 5000. To my mind, the loss here is of the small investor because the distributor will find other avenues for his remuneration; but without anybody to guide him, the small investor might not venture into doing this monthly investment on his own and thus would be deprived of a good investment option.
Even now, although we do not actively solicit small investors, we do service the existing small SIP holders. And we do recommend investment through SIPs to our financial planning and advisory clients.
What’s your experience in charging a fee?
We have been in the business for the last 25 years so our older clients have been used to getting advice and a lot of other services free of cost. Our biggest challenge has been to convert these clients into fee based services.
Most of my advisory clients are new and here is the weird part- referred by existing clients.
Generally, I have seen that clients realize the value proposition if you are seen to be really focusing on achievement of their financial goals and not resorting to merely product pushing.
It’s been over twenty years since you started VSK Financial with V S Kulkarni. How has the investment advisory business transformed over the decades?
As you would know, twenty five years back there was no concept of a financial planner or an advisor. We had simple products like unit trust schemes, company FDs and postal schemes which people understood. Stock market was not that well understood by people in general. It was considered to be a fiefdom of a few business savvy people. The investors wanted only agents who would execute their investment decisions. With the advent of mutual funds and liberalization of the financial services sector, the investment scenario has become more complex and investors have started feeling the need for advice. To keep up with the times and as a value addition I pursued Certified Financial Planning course.
How do you plan to expand your business?
We look at our company as a boutique financial planning firm where we offer customized solutions as per client needs and circumstances. Hence we plan to be very selective in client acquisition.
Our outlook has always been that once a client signs up with us we are committed for a lifelong relationship. We would want them to develop a confidence that the advice would be professional and unbiased.
As the nature of service which we offer is not tangible, there are constraints on growth and expansion. We expect the growth to be steady and gradual as we anticipate client acquisition mainly through referrals.
In our industry skilled manpower is the key factor. If I have to take in more financial planners they must have the same mindset to work with our company. Only then they will be able to gain trust of the clients like me or my colleagues.