progressive advisors from Kolkata have come together to form a company. Their
aim is to help those IFAs who want to write financial plans for their clients but
are hesitating to register with SEBI as RIAs. In an email interview with
Cafemutual, Subhabrata Ghosh, Director, Step Ahead Investment Advisors shares
their plans and the thought process behind starting this venture.
(From L to R ) Uttam Kumar sen, Sachiv Nijhawan, Subhabrata and Nandji Rai
How did the idea of four advisors coming under one platform come about?
We have all studied CFP course through NJ Gurukul and that was the common point of contact. Our partner Uttam Kumar Sen is very passionate about financial planning and as soon as he cleared two modules in 2010, he registered himself as AFP with FPSB India and started to write financial plans for interested clients and had been charging fees since then. I followed in his footsteps in 2011 after completing my CFP certification. But people in eastern India are traditional and we had to face lot of difficulties convincing clients to pay fee.
We wanted to become RIA individually but we were not sure whether we would be able to handle the compliance part properly. Uttam and I were the worst affected financially after October 2013 as we had moved completely to fee based financial planning business model and we could not now write plans without registering as IA.
The turning point came at an iFAST event where one of our other partners Rai was a panellist for a discussion on collaboration. We could suddenly see light at the end of the tunnel. We started discussing regularly about how we could make 2 plus 2 equal 5 through collaboration. It was perfect manifestation of Chinese Yin-Yang theory which can be thought of as complementary (rather than opposing) forces that interact to form a dynamic system in which the whole is greater than the assembled parts. We got wholehearted support from Santanu Biswas BDM, iFAST Kolkata who would chip in with his valuable suggestions. Finally, Step Ahead Investment Advisors was born on 23 January 2014 on the basic principle of Nick Murray “To do good, to do well by doing good, to be happy doing well by doing good.”
It has been a long journey from conceptualisation to confirmation from SEBI for license under RIA. We had faced financial hardship in the intervening period. So we thought it as our duty to help our advisor friends who wish to help their clients through financial planning but cannot do so due to infrastructure/regulatory constraints. Accordingly, we have devised a fee sharing model for them and would like to empower them with our support and services.
Could you give us a brief background about the four partners and their respective strengths?
Uttam Kumar Sen – He has been part of the life insurance industry since 1986 but his Diploma in Life Insurance Marketing in 1988 from IFSERT, Pune changed his approach to financial advisory. After passing CFP in 2011, he started to write fee based financial plans in a full-fledged manner. Strengths - perfectionist, disciplinarian, follower of rule book to the letter.
Nandji Rai – He was in insurance business since 1994 and his love for meeting people and exploring different angles of human nature helped him establish a successful agency career. He joined mutual fund industry in 2006 in pursuit of better investment products for his clients. He enrolled for the very first batch of CFP course at NJ Gurukul in November 2009. But he had to leave it midway due to unavoidable circumstances. However, the relevance of proper financial planning and its impact on human life had dawned upon him. He was very much impressed by the way Uttam Sen & myself started our fee based financial planning business against all odds as none of the earlier certificants known to him had dared to even think of asking fees from the clients, and he knew his destination when he came in close contact with us. Strengths – Wise, good PR, analytical.
Sachiv Nijhawan – He is a Mechanical Engineer from DCE and managed the family business of stainless steel trading and fabricating stainless steel equipment for various industries like steel, sugar & chemical manufacturing plants. In 2003 he joined Max New York life as an insurance advisor, adding MF advisory in 2006 and then completing CFP in 2011. He’s happy doing with what he is doing – making people happy – helping them make prudent financial choices, building their wealth and making their world a great place to live! Strengths – relaxed, keen observer, mild natured, good learner & follower, resourceful.
Subhabrata Ghosh – I have been an outsider to the financial services industry till 2006 and became interested in MF industry after the entry load ban when I attended a 2 day financial planning workshop by Anil Talaiya. After that there was no looking back and I passed my CFP in 2011 and then Network FP 2011 happened for all of us. It was the launch pad for all of us to have the faith and belief to pursue the financial planning profession wholeheartedly. Strengths - calm, methodical, tech savvy smart worker, always open to learning.
What kind of services will you provide to IFAs in your B2B model? Will you be just providing advice or you'll execute them as well?
Under the B2B model, we plan to tie up with fellow financial services people who may be having clients who need financial plans prepared for them but are unable to provide the services due to regulations or other complications. We can provide them customized solutions and will have a written associate agreement with them so that we have our predefined roles and responsibilities clarified.
We believe that sooner or later regulations will become very stringent and individual practices will go through a tough challenge if they try to do everything by themselves. We feel that it is time the IFAs started thinking about the future and planning for it instead of waiting for things to happen.
What kind of services will this new company provide under B2C model?
Under the B2C model, we shall be having both the services of advice (which will encompass financial planning, tax consultation and estate planning) and execution. Clients are free to execute through any person of their choice.
Are you (all four partners) winding up your individual businesses and forming a new company?
The SEBI RIA regulations do not require winding up of existing agencies. So we have not taken any such steps. We are doing very little or no business in life insurance as we are mostly suggesting online term insurance for insurance advice and in general and health we are continuing our agency but not charging any fees to the client.
To keep a clean slate as we set out our RIA journey, we moved some parts of our existing business in mutual funds to some of our family members. Any individual practice would have to go through this shift when they transform. The new company has a very clear vision – we will plan, and we will not force execution of the plan either within the company or through our family members. We have already formed the new company and it is already registered with SEBI as an Investment Advisor.
We also believe that over a period of time, it is easier to transition a corporate business than an individual practice.
Indian investors are hesitant to pay a fee. How do you plan to convince people to pay you a fee?
That’s not true. The correct statement would be “Majority of Indian investors are not paying fees”. We ask many of our friends in the industry as to whether they have even proposed this topic with their customers /prospects? It will be wrong to arrive at any conclusion if in the first place if there was no effort to seek clarity on the matter. In fact, we encourage people to look at the following Cafemutual articles that share the reality on the ground – clients are willing to pay fees. (See this 2013 article, and the most recent one in 2014). The fact is that the percentage of clients willing to pay a fee is increasing! There are several reasons for that but what is important here is the ‘value addition’. As soon as the investor realizes that the financial planner is working in his best interests he would he to pay a fee. Three of us (Uttam, Sachiv and myself) have been making fee based financial plans since 2011 and have been getting references from our existing fee paying clientele only because we have been able to add value to their financial lives. So, we have the faith and belief in ourselves to carry forward the good work. The SEBI RIA certification will be only enhancing our credibility.