Vadodara based Ulpesh Raj, founder of Ishwar Financial Services, is one of the veterans in the financial services industry. Having started his venture in 1988, Ulpesh has come a long way. He has seen many market cycles, and the followed the evolution of mutual funds closely.
A fact which Ulpesh used to his advantage was that there were hardly any financial advisors in his locality. He says that few distributors look to serve retail clients, especially since they bring in small ticket sizes. “Distributors want HNIs so retail tends to get neglected. I saw this as an opportunity, and decided to focus on the retail segment,” says Ulpesh.
His continued focus on the segment helped him acquire a large number of retail clients. His average ticket size for SIP is Rs. 1,000 and Rs. 10,000 in case of lump sum investments. Market highs also helped. Ulpesh says that he has acquired a lot of clients during bull runs. “There was a lot of interest in equities as the markets shot up. We didn’t have to go all out to acquire clients. It was a pull,” recalls Ulpesh.
With as many as 5,000 clients, serving them can be quite a challenge. Ulpesh says that technology has helped him immensely to service his clients. Ulpesh has provided log-in access to his clients on his website where they can view their portfolios. When asked what do investors value most – technology or human interaction, he says, “It is both. A lot of my clients see their portfolios online. So technology makes them self-reliant, and less dependent on me. However, when it comes to making an investment decision, they prefer to meet me in person,” says Ulpesh. He adds that his clients meet him at least thrice a year to get an update about their investments.
What is it about Ulpesh’s business model that helps him have such a large client base? The model he has used is something which not many IFAs pursue. Instead of building business individually, he appointed a fleet of sub-brokers. A sub-broker is a person who conducts his business under the umbrella of a larger entity in order to benefit from both - the economies of scale, as well as expertise. Thanks to his advisors spread across Vadodara, Ulpesh has acquired close to 5,000 clients in mutual funds.
Let’s look at how Ulpesh’s team of distributors has helped him. Having sub-brokers has many advantages. They are greatly motivated to grow their business as their revenues depend on the number of customers they acquire. Since IFAs get a majority of their business through referrals, imagine how many referrals 40 sub-brokers would get as opposed to someone who operates individually! To grow his business, Ulpesh has to motivate his sub-brokers to aspire big.
However, one of the challenges of such a model may be the ability to monitor the quality of service and advice investors get from sub-brokers, and ensuring uniformity in quality of service rendered. To help his advisors deliver a consistent advisory and service experience to investors, Ulpesh makes sure that he is in regular touch them. “I research the best funds and send them this list of recommendations. The chances of mis-selling are less because they make the clients understand the risks associated with mutual funds. Also, investors here are savvy with markets so the level of awareness is high. Also, I remain in constant touch with them on a quarterly basis.”
Using this sub-broker model has helped Ulpesh capture a large part of the Vadodara market. Interestingly, quite a few of his clients have realized the merit of the advisory business, and have joined Ulpesh as sub-brokers. This stands as a testimony of his skills at running the model, and the experience delivered to investor. A modest Ulpesh says, “They realized the potential of this business and some of my clients became my sub-brokers,”
With a SIP book of Rs. 45 lakh, Ulpesh manages AUA of Rs. 130 crore in mutual funds and 80% of assets are in equity. He has two branch offices where his investors come to get their queries resolved. These offices also service his direct equity clients. It is quite remarkable that this scale has been built through word-of-mouth and walk-ins, as among the primary sources of new client acquisition. He does not market his services or use social media to promote or to acquire clients.
While a large part of his business comes from direct equity, Ulpesh is seeing a shift of preference from direct equity to mutual funds. This is a good trend for distributors like Ulpesh who operate in a market where most investors are familiar with markets. “Some of them burn their fingers with direct equity and start investing in mutual funds. I’m seeing that not just first time investors, but experienced investors are also taking active interest in mutual funds,” he says.
According to Ulpesh, IFAs who don’t have the necessary resources and infrastructure to provide back office support and online transaction facility can consider becoming sub-brokers. The model has several advantages for the owner and the partners. Without technology, scaling up can be a challenge for many IFAs. Their ability to acquire more clients can be relatively limited if they operate individually.
Ulpesh has close to 400 sub-brokers who largely deal in stocks (FD, bonds, other fixed interest products) while 35-40 are active in mutual funds. With a growing demand for mutual funds, he expects that his stock broking sub-brokers who largely deal in equities will also find mutual funds lucrative.