Manu gave up his dream of being a part of the armed forces and ended up joining his father’s advisory business. Today, he is one of the successful second generation IFAs who commands a 2 percent upfront fee from his retail clients in Patna
Bijay Kumar, a physics professor at Bihar National College in Patna started selling small savings and PPF in Patna to supplement his income in 1970s. Manu Mehrotra, his son, wanted to join the armed forces after finishing his graduation in commerce. However, luck had different plans for Manu.
After retiring as a professor, his father ventured into advisory on a full time basis. Meanwhile, Manu finished his graduation in 1993. His entry into financial advisory was solely due to his father’s insistence. Manu’s father was overburdened with the work and wanted Manu to take over the reins.
Manu’s father was the top distributor of UTI MF schemes in Bihar. He was also one of the biggest agents of PPF. Being in this big league of advisors, Manu’s father had set his foot strongly in Patna market and knew the ropes. So Manu had the benefit of receiving hands-on training from his dad. Manu also began with UTI MF and in 2002 slowly started shifting his focus towards private sector mutual funds.
After taking over from his father, Manu has built an AUM of Rs 30 crore till now. He has only retail clients and consciously stays away from HNIs.
One of his major strength is that he is able to command a fee from his investors. From August 2009 onwards, Manu started explaining to his investors about the changing dynamics of his business. Slowly and steadily, most of his loyal clients started toeing the line. He parted ways with those clients who did not agree with him.
Manu evaluated two approaches on charging his clients. The first was to charge them a flat retainer fee or a transactional fee. Since Manu did not have a huge client base he decided to implement a 2% upfront fee on equity schemes. He never charges fee from his investors on subsequent transactions. He doesn’t charge for debt schemes either.
Manu says that Patna’s population is less conversant with mutual funds. They generally equate mutual funds with the ups and downs of the stock market and stay away from investing in MFs. The awareness is so low that he hardly gets any walk-in clients even though his shop being located on a busy street. But Manu is determined. He has been educating his clients about the benefits of mutual funds.
Manu spends two to three hours in his shop and is mostly out on the field. He shares the office space with his brother who is also into advisory business. Both brothers have their own clients. He has employed three people who take care of the office work.
He is not happy with the manner in which some of the fund houses conduct investor awareness camps in Patna. According to him, holding one hour talk in star hotels with a few HNI clients does not help create awareness about mutual funds in the larger population. His request to AMFI and AMCs is that they should educate investors on the need to pay their distributors in the investor awareness drives.
His father now looks after PPF and he handles mutual funds. Manu was the first candidate to successfully pass AMFI exam in Bihar when acquiring AMFI certification was made mandatory.
He says that before the ban on entry loads, IFAs in Patna were active and covering neighbouring countryside in boats and tractors in their attempt to get business. Now all this has stopped. While IFAs efforts have reduced, existing IFAs having a modest AUM are continuing business due to a lack of alternate job opportunities in Patna.
Having toiled to build a 1,000 retail client base in Patna, Manu is taking life easy these days. He has grown his business primarily from references.
Manu’s case study is an interesting tale of an IFA based in a place like Patna can command a fee despite all the odds.