Sumeet Vaid has given up cosy corporate life to join the ranks of independent financial advisors. He’s setting up an advisory business that could be a role model for others, says Ravi Samalad
Sumeet Vaid gave up a lucrative, high-flying corporate career in 2008 to be a financial planner. Vaid has spent most of his career in the mutual fund industry, starting with distribution in Bajaj Capital and then on the fund sales side in ICICI Prudential Mutual Fund. Vaid worked with Rajiv Bajaj, now Joint Managing Director at Bajaj Capital, to set up a mutual fund desk in the mid-1990s. He was part of the initial 10-member core team which launched Prudential ICICI Mutual Fund in 1998, and rose from the ranks to become its National Head-Retail Sales. He has also been the President and CEO of Networth Stock Broking.
In all these responsibilities, he saw a huge vacuum in financial planning advisory. In 2009, he launched Ffreedom Financial Planners to fill the void. He is striving to make the individual investor the central figure in the whole cycle of financial advisory service. In an interview with Cafemutual’s Ravi Samalad, Vaid said the mutual fund industry still needs to evolve on the financial advisory side. Edited excerpts from the interview follow.
How did the idea of starting Ffreedom financial come about?
I was on the manufacturing side. We used to go to the distributors and found that nobody was client-centric. Everybody was manufacturer centric. The essence of Ffreedom lies in the client centricity. We don’t have loyalty to any manufacturer. It became very clear to me during my sixteen years of corporate career that my future is in being closer to the client. It’s not an easy market to be in but there’s a huge potential.
You are a graduate in industrial relations and personnel management. What drew you towards finance?
I graduated from Delhi University in industrial relations and personnel management with the simple logic that I didn’t want to do a generic course like B.Com or BA. It was one of the few vocational courses offered at that point of time. My view at that point of time was that if my future is in business management then a personnel management or human resource management would be the key skill required. Did I know that I wanted to be in finance? The answer is: No. In fact I used to be scared of finance till I did MBA. It was my lucky break at Bajaj Capital. Sanjiv Bajaj and I were batch mates at the same institute.
It’s been nearly two years since you started your venture. How has been the journey so far?
I am a big time fan of adventure rides. Starting an enterprise like Ffreedom Financial has been a roller coaster. It’s up one day; it’s down the other. But I am definitely enjoying it. Every day, it’s a challenge. I am living my dream. Am I making money out of it? No. When will I make money out of it? I don’t know. But I am still very happy.
What is your differentiating factor?
We spent quite a lot of time initially to get our model right. So there is no transaction which happens at Ffreedom. If you come to our office today and tell me Sumeet, I have got ten lakh rupees; please give me an MIP (monthly income plan), I will not give it to you till the time we write a plan for you. It might be a single goal plan, it might be a retirement plan, or it might be a comprehensive plan. Until we know you, how can we advice you?
Have you developed your own processes?
We have developed an in-house technology system called “advisor factory,” which is a whole client cycle management process. We spent close to six to seven months with a set of three to four people developing this and also proving the concept right. Every investment which we do is goal-linked. We send a goal based statement to the client. It’s not easy; it takes time to convince them.
Do you market yourself?
We run campaigns. There is a campaign management system. We go to a corporate house and tell their employees what financial planning is. We go to a housing society and give its members a presentation. We sponsor small events or conferences. We work with some websites through which we get some leads. Referrals are one of the big ways to get clients.
What kind of client base do you have?
We are managing portfolios of approximately 200 families and most of the clients have been acquired in the last six months. As I said, we took six seven months to settle down. The clients are mostly mass affluent and HNIs, a majority from Mumbai and a few from Dubai and Singapore.
Has your business reached break even?
Financial break even will obviously take some time. But what we have been able to achieve is conviction. We have proven the concept of charging the clients, who are ready to pay. We are convinced that over a period of time all the other benefits of being client centric will follow.
What would be your advice to IFAs who are not able to charge their clients?
Our market is transaction driven. An IFA today feels more comfortable pushing a transaction than going for advice. You need to understand the dynamics of market. If you are a financial advisor you don’t have to worry because you will be able to charge your clients. If you are an agent, broker or a sub-broker then you offer pass backs to your clients. Then you can’t charge. There is a difference between a doctor and a chemist. Chemist also advises but he doesn’t charge. He charges you only for the medicine. The choice is to become a chemist or to be a doctor.
Mutual fund is a push product rather than a pull product and in the absence of adequate incentives how will advisors reach out to smaller towns?
The question is more at a structural level of saying how will the industry expand. Mutual fund industry’s expansion should be through use of technology. In the stock broking industry, the cost has only come down over a period of time. Today in spite of the stock brokerage commissions getting reduced every year, they are present in most of the town by virtue of creating technology platforms and infrastructure. So we have to live with technology.
How do you think the regulatory changes will impact the industry?
I think it will impact the industry in a very good manner because what SEBI is trying to do is to empower the customer. Transparency is good for customers. If the end customer is happy, then the industry will grow. In the short-term many of the advisors who do not have quality or who do not have ability to face the customers might go out of the industry.
What changes would you like to see in the industry?
I think the mutual fund industry needs to evolve further on the financial advisory side. There are too many products which need to be lesser.
What advice would you give to youngsters who wish to be financial planners?
Youngsters wanting to be financial planners should first become certified financial planners (CFPs). Without CFP, it’s like you are a practicing doctor without having a certificate. I will say no even to someone who has done an MBA. It’s like pursuing medicine after graduating in engineering.