At a time when advisors are trying to find new ways to charge fee from clients, here is an advisor from Bangalore who provides financial planning services to his clients for free. It is not due to client’s unwillingness to cough up fee. “My clients ask me how much they have to pay. But I refuse it. I’ll charge when I can’t sustain my business through commissions from manufacturers,” says R. R. Kannan, a Bangalore based advisor who runs Harmoney Wealth Advisory Services.
Kannan has been writing financial plans free of cost since 2002, mainly because commissions were enough for him to stay afloat. From 2006, he decided to take clients who had minimum investible corpus of Rs. 12 lakh to make up for his free service. While many of his peers charged fee, he stuck to his model. From 2010, he increased the minimum ticket size further to Rs. 25 lakh.
Kannan has been practicing life planning, a concept which has recently caught on in India. This involves him spending at least 30-40 hours on a prospect before onboarding. “I give a presentation to my prospects in my first meeting to show how I work and the kind of services I offer. I’m selective when it comes to choosing clients. They need to have certain aspirations and goals which I can help them fulfil. So far, I have written around 400 plans.”
Kannan gets all his clients through referrals and they are ready to provide him all the information that he seeks without any discomfort. “I realize that the prospects are serious because they are ready to provide all the confidential data without any hesitation,” says Kannan.
In order to cater to a select set of ‘ideal’ clients, Kannan has pruned down his clientele from 1,500 to 100 now. “I continued to support my existing clients till they redeemed. Financial planning services requires a lot of time and effort and thus I decided to prune my clientele,” says Kannan.
Also, he directly manages Rs. 26 crore in a PMS which is licensed by SEBI, which fetches him 2-3% management fee.
Like many advisors, Kannan started his journey as an LIC Agent during his college days, which he took up as a part time job. Interestingly, Kannan has no formal degree in finance. He studied Agriculture and Horticulture. “My parents are from agricultural background so they wanted someone in the family to study agriculture. I developed an interest in finance when I had gone on a 2-month vacation to meet my brother who used to deal in stocks.”
During a study tour to Singapore in 2001, Kannan came across the concept of financial planning. Impressed by this professional approach, he decided to incorporate financial planning approach in his practice.
However, it was not an easy task to replicate this model in India as the concept was novel back then. Kannan, along with seven other agents decided to enroll for CFP. Three of them passed and one became Associate Financial Planner (those who clear just one module are entitled to call themselves Associate Financial Planner). Nevertheless, they decided to form a company so that they could learn from each other’s experience and work towards a common goal. As the market evolved and the partners got a grip on their practice, some parted ways. Now, he works with three CFPs and one qualified Associate Financial Planner, managing about Rs. 100 crore across various asset class with 500 clients. Kannan is now in the process of winding up Harmoney and going solo. “I want to concentrate on a few select clients which is why I’m going solo.”
He has no plans to charge fee from clients even now. When asked about his plans if there is any regulatory push to shift to fee based model, he says “Going forward if the need arises I will charge and clients are more than willing to pay. I don’t have big ambitions to add more clients. For that I will require people who are compatible with my philosophy. I want to work with a limited number of clients whom with I can engage deeply.”
Kannan is certainly a rare breed among the advisor community.