On-boarding clients through STP
Markets are swinging towards an all-time high as are valuations. Some market participants are predicting a correction and IFAs may not be sure what to advise their clients. Now imagine if your client wants to enter equities by investing lump sum, and you don’t want to say no.
What would you recommend in such a scenario? Many advisers would advise clients to take a staggered approach to investing in equities through SIPs. While SIP works best, another approach is to ask clients to park money in a debt fund which would yield a decent return and do systematic transfer plan (STP) in an equity fund.
This way, the client earns when the money is parked in debt funds and gets to participate in equities by transferring an amount every week/month, thereby mitigating volatility, to some extent. STP can be a useful tool for business owners, entrepreneurs and self-employed individuals who wish to invest lump sum. Even salaried individuals who receive a bonus can be recommended to use STP to enter equities.
Jaipur based IFA Jagdish Bansal is one such IFA who has been using STP for his clients from a long time. “Investors who do STP benefit if the market falls. Thus, I make investors invest in debt funds and do a STP in equity funds,” says Jagdish.
Conviction in SIP
Jagdish has been an early advocate of SIPs. When asked how he discovered the wonders of SIP so early in his career, he says, “I observed that timing the market doesn’t work. Investments require discipline and conviction. So I figured out SIPs bring discipline in investments,” says Jadish.
Jagdish recommends SIP to all of his clients who get a regular stream of income. We all know the power of SIPs in the long run. However, managing client expectations can be a challenge for advisers during volatile market conditions. Historically, it is observed that investors tend to stop SIPs whenever markets correct. However, this trend is witnessing a change. Jagdish says that clients calling him to stop SIPs during bouts of volatility are a rare instance. “I don’t have any clients who stop SIPs when markets go down. In fact, they know that SIPs generate better returns in a falling market,” says Jagdish.
While the average SIP tenure of industry is roughly at 3-5 years, Jagdish says that his SIPs are for more than six years. Jagdish attributes the stickiness of his SIPs to investments linked to long term goals. Jagdish says that he has many SIPs of salaried individuals who invest in ELSS through SIPs perpetually. “These clients will continue to invest Rs. 1.50 lakh in ELSS to save tax till they retire,” says Jagdish.
Journey
Jagdish donned the hat of an adviser by taking up distribution of post office schemes and mutual funds in 1984. His initial set of clients were people who came to seek his brother’s advice. His brother is a chartered accountant. While serving these clients, Jagdish began distributing 5 lakh pamphlets every year through newspapers. This activity got him a lot of clients. Today, he is a well-known personality in Jaipur’s advisor fraternity.
At 76, Jagdish is now taking it slow. His office is located in Jaipur’s plush C Scheme area which helps him get a healthy stream of walk-ins. His focus now has moved from client acquisition to servicing his existing clients well.
His four-member team ensures that his clients’ requirements are well met. He also keeps in touch with his clients through regular personal meetings.
While Jagdish is not a technophile he uses software to better manage back-office processes. He is yet to evaluate the stock exchange platforms and other online transaction platforms which promise faster transactions. “The R&T office is just around the corner so it just takes 5 minutes to submit my applications. I use a software which helps make transaction slips in 1 minute,” says Jagdish.
Client behaviour
At 0.78% market share, Jaipur contributes Rs. 10,770 crore to the MF industry. The city counts itself as the 9th 
largest contributor to MF industry’s AUM as on July 2016, shows AMFI data. However, Jagdish says that people in his city are yet to understand the nuances of mutual funds. “Since awareness about mutual funds is low I spend a lot of time educating my clients. I show them how important it is to stay invested for the long term to make money in markets. I show them client case studies and even my personal portfolio to convince them and it has paid off. This is the reason why none of my clients stop their SIPs when markets fall,” says Jagdish.
Nevertheless, Jaipur’s healthy contribution to MF industry’s assets can be attributed to the tireless work of advisers like Jagdish who are championing the cause of mutual funds.
Fund selection & personal investment style
Jagdish puts him money where his mouth is. When asked about his personal investment style, he says that he has invested his entire savings in mutual funds. In fact, his son who is a doctor also invests in mutual funds through Jagdish.
When asked about his fund selection criteria, Jagdish says that he prefers to recommend schemes which come with a good track record. “Most funds are good as long as you stay invested in them for long term. So more than fund selection, educating investors to stay put at all times is important to generate returns. The SIP is the fund manager for me,” believes Jagdish.
Jagdish says that SIP can be a powerful tool for advisers to build a sustainable business. “SIP is best because you don’t have to push clients to invest. Also, if SIPs are linked to long term goals like retirement and child education it ensures that your assets under management keep increasing,” points out Jagdish.
Today a retired accountant from a government undertaking, Jagdish manages Rs. 25 crore in mutual funds, majority of which is channelized through SIPs and STPs. He has 500 live SIP accounts and 1,000 clients. Thanks to advisers like Jagdish who are focused on selling SIPs, the industry has nearly 1 crore live SIPs now.
