In another example of consolidation of financial advisory business, 12 IFAs have merged their business with MoneyGain Consultants founded by Chandigarh IFA Shobhit Gupta and Delhi IFA Sachin Jain.
As a result, the combined AUA of the new entity adds up to Rs.1,000 crore spread across five states in North India – Punjab, Haryana, Delhi, Chandigarh and Himachal Pradesh. Other members are Prashant Goyal, Varun Sikka, Gaurav Kumar, Bharat Ghai, Ramandeep Nain, Varun Khanna, Geetika Goyal, Jagjit Singh, Ankush Sharma and Harjinder Singh.
Talking about Money Gain, Shobhit said that the idea of merging advisory business came to his mind from one of his clients. “One of my clients had asked me that what would happen to his wealth if anything goes wrong with me. This made me realize that IFAs should institutionalize their practices to plan succession, make existing clients comfortable and attract new clients. Soon, I met a couple of likeminded IFAs and encouraged them to merge our businesses. After a series of meetings, Sachin and I merged our businesses to form Money Gain.”
Seconding his views, Sachin Jain of Money Gain told Cafemutual that this synergy has helped them reduce costs and grow business. “Before Money Gain, I used to spend a lot of time doing mundane stuff like collecting forms, submitting cheques and back office work. In addition, it was an expensive affair for me. For instance, the average cost of running an advisory business with AUA of Rs.25 crore was around 25% of AUA. This cost comes down to 15% of AUA for AUA of Rs.50 crore. Clearly, as the AUA goes up, cost of operating expenses reduce.”
Since both Shobhit and Sachin had worked with banks before they became mutual fund advisors, they first approached IFAs having a similar background. “Banker or AMC official turned IFAs understand the importance of institutionalization of advisory business to grow business,” Shobhit said.
Gradually, IFAs have started seeing merit in this consolidation and today 12 IFAs have come together to form a large entity. The company is now open to merge business with IFAs without banking or AMC background to grow. However, the only criteria is hunger for growth, said Shobhit.
According to Shobhit and Sachin, here are the key benefits of this merger
- Reduction of costs by sharing various expenses such as execution platform, software, back-end operations, customer communication, marketing expenses and so on
- New and innovative ways to grow business
- Learning and mentoring from each other
- Better commission structure compared to individual IFAs
- Access to professional set up like call centre and centralized service centre
- Offer variety of product and services such as insurance, loan, AIFs, PMS, estate planning and tax advisory
- Presence across geographies
- Brand value
- Easy exit for IFAs if they find it is not working out
Talking about the challenges, Shobhit said that most IFAs feel that they might lose their identity and clients if they merge their business with a large distribution firm. We help them realize that such a merger would complement each other, Sachin said.
When asked how his company would deal with conflicts, Sachin said that since they work in different geographies, there would be no conflict in terms of servicing clients. “Though we have two IFAs in Chandigarh and Delhi, there were no conflict so far due to different client segmentations. Going forward, we would restrict to single IFA per city.”
A few months back, three IFAs Amit Bivalkar of Sapient Wealth, Pune, Paresh Kariya of Aargus, Mumbai and Pallav Bagaria of Brand New Day, Guwahati have merged their practices to form Sapient Wealth.
Two FIFA members Dhruv Mehta and Roopa Venkatkrishnan are said to be in the process of merging their business too.
