Hemant Rustagi, CEO Wiseinvest Advisors, is among the new breed of financial advisors who have moved from being on the manufacturing side of mutual funds to setting up an advisory firm. He tells Anju Yadav that the ever growing number of satisfied clients has provided his company the word-of-mouth publicity that helped in building assets under advisory of over Rs 450 core from about 8,000 clients in five years.
What made you shift to selling financial services?
I spent 17-18 years in the mutual fund industry. I began my career with Unit Trust of India and played a key role in setting up the mutual fund businesses of a few multinational private players. I was an integral part of the industry and was actively associated with AMFI (Association of Mutual Fund in India). After spending so many years in the industry, I realised that in a country like India, having one of the highest savings rate in the world, there was a lot of scope for a knowledgeable and a serious advisor to grow. Besides, investors were not getting the quality advice that they deserved to get on their hard earned money. Keeping this in mind, I started Wiseinvest Advisors in 2004-05.
What kind of challenges did you face in your initial days?
We began in an era wherein incentive driven selling was still on. Not many distributors were offering professional advice and there was a lot of focus on selling NFOs (New Fund Offers). The challenge was to move away from that and instead develop a team which also believed in the process of building wealth for clients by following a process of understanding their needs and offering need based products. Today, we have a team that has a fine blend of experience and youth. While on one hand, we have quite a few people who have spent 15-20 years in the mutual fund industry, on the other there are fresh graduates willing to go that extra mile to imbibe the philosophy of the company.
What’s that one quality most essential to succeed?
To become a significant player in the market, one has to place client ahead of everything else. The entire model has to be client centric. Initially, it may be a struggle to get new clients because ultimately one is selling an expertise where results are evident only after a while. Therefore, one must have a lot of patience. In investment advisory profession, there are no short cuts.
How do you cope with increasing number of clients?
To handle the increasing number of clients, it is vital to develop a sound infrastructure, have a well trained team and make extensive use of technology. This is exactly what we have been doing. Needless to say, the key is to maintain efficiency level even as the investor base increases over time. The entire business model has to scalable.
How did you build your client base?
Firstly, referrals have been a great source for acquiring new clients. We believe that if you are honest with your clients and are able to deliver results on a consistent basis, then the word of mouth publicity helps in acquiring new clients. Secondly, we have a monthly newsletter, which is published in two languages i.e. English and Marathi. We distribute around 25,000 copies to prospects and to ensure familiarity with the brand, we continue to send the newsletter to the same set of people for a period of 6-12 months. We have been able to increase our client base substantially through our communication with investors and prospects.
Do you charge a fee to your clients?
As of now, we are not charging any fee to our clients. We strongly feel that by building a loyal client base and long-term assets, one can benefit a lot from higher trail fee. However, if there is any change in future in the present trail fee structure, we would surely start charging. Our clients do not have any issue with paying fees. In any case, the earnings from the large portfolios compensate the lower level of earnings from the retail clients. I would like to add here that charging a fee is a tricky issue especially for new clients. It is very difficult to convince a new investor to try out a new investment option and at the same time pay for it without experiencing its utility and results.
Has the entry load ban affected you?
I don’t think it has impacted the business of serious players like us. It has impacted those who were not following any particular strategy or who were just relying on selling mutual fund products rather than providing solutions to long-term needs of investors.
……..but there is a loss of revenue?
Surely, there has been an impact on the earnings as the upfront fee has been reduced from 2.25 per cent to 0.50 per cent. However, the impact is limited only on the new business. Since trail fee forms a major part of our earnings, the impact is not of the level that cannot be managed.
Was SEBI right in doing away with upfront commission?
I think, SEBI should have allowed the in-built cost mechanism to continue for some more time. The right way to move forward would have been to reduce the load from 2.25 per cent to say 1 per cent or 1.50 per cent. After all, expanding the market is a tough task and those involved in the process need to be adequately compensated. Too much emphasis on the cost can at times result in investors losing out on wealth building opportunities.
What kind of advisory scenario you think will evolve?
India is growing at 8-8.50 per cent. In tandem, investible surplus in the hands of investors will grow and that will increase the role of mutual funds. Therefore, there will be a greater degree of scope for serious and experienced advisors to expand their reach and client base. However, it would require imagination, resourcefulness and hard work to achieve this.
What is your marketing approach?
We don’t consider advisory as a marketing function. We believe in enhancing the package by adding professional advice to reflect the ever changing needs of particular clients and client groups.
Any regulatory changes you would want to suggest?
I think irrespective of who governs the distributors, players need to know what they are allowed to do and what they are not allowed to do in clear terms.