Rajkot based adviser Ramkumar H Barchha joined his family’s manufacturing business after completing his graduation in 1994.
Responsible for supervising his company’s finances, he observed that his company had made huge investments in a mutual fund scheme and was amazed to see the volatility in returns. Intrigued, Ram began researching mutual funds.
Getting started
One day, Ram came across a news report that the closed end fund in which his company had invested was becoming open ended. Intrigued by this concept, he explored it further to understand the impact of the change. He learnt that the NAV of a close-ended fund could decline if it becomes open-ended due to change in accounting practices and introduction of daily NAV.
To protect his portfolio, Ram switched the entire money to gilt funds as he was expecting interest rates to fall down. This call worked in his favour and he became the talk of the town overnight as the NAV had plunged by 60%. Soon, his friends, acquaintances and family members started seeking his views on stocks and mutual funds. Ram found his calling and floated his advisory firm in 2002.
Business model
As Ram gained repute as a Mutual Fund expert, building his initial client base was not a tall order. His first set of clients were mostly HNIs and today he runs a niche practice catering to this segment.
Sharing the rationale behind this, Ram says, “Following a focused prospecting strategy helped me under understand the HNIs audience – their motives, likes and dislikes much better. It was difficult to do this at first but as I got established, I got more and more referrals from the same community. Also, having a homogenous set of clients helped me offer solutions best suited to their specific requirements.”
Catering to HNIs is a completely different ball game. When asked how difficult it is managing their expectations, Ram says, “We need to spend a lot of time with HNIs to understand them. It’s better to give them some time so they can be assured of your talent and knowledge. Once they are confident, they will surely do business with you.”
He never discusses funds and investments with prospective clients in the first few meetings. “The relationship between the adviser and the client is like a marriage alliance which is long term. Hence, it is necessary to build trust from both sides before jumping into business,” believes Ram.
Ram is selective in choosing his clients. At times, he refuses offering his services to prospects who he thinks are difficult. “If we feel that the client is difficult we don’t on-board them. In fact, we have refused 8 HNI clients so far.” His niche strategy has paid off as all his clients are still investing with him. Today, Ram is advising close to 200 HNI families with AUA of close to Rs. 170 crore in mutual funds and Rs.30 crore in PMS.
Retention strategy
Retaining HNIs requires higher service standards and in depth understanding of a number of products. Ram says that he offers a wide range of services like estate planning, tax planning and comprehensive financial planning so that HNIs get everything under one roof. He also deals in structured products. “HNIs are more evolved when it comes to investments. Hence we have enhanced our offerings. We also advise them products like arts, alternative investments and structured products,” says Ram. He is well equipped to provide these services as he has a team comprising CFPs and CAs.
Affinity for hybrid funds
Ram was able to discover the beauty of hybrid funds, which are tax-efficient and offer better returns than other traditional products, way ahead of many advisers. According to Ram, asset allocation funds can deliver decent performance in both bear and bull markets. “Such funds deliver adequate returns during a bull run and limit the downside risk in bear market,” he says.
Elaborating on his conviction for hybrid funds, Ram explains, “Even in bear phase, an asset allocation or a balanced fund can deliver better tax-free returns as compared to bank FDs. Such funds are ideal for especially for those falling under the highest tax bracket.”
Ram believes that asset allocation funds are better positioned to sail through volatile market as these funds can automatically change their asset allocation as and when needed. They help reduce risk in the portfolio, he adds. Not surprisingly then over 50% of his assets are in hybrid funds.
Fund selection
Ram spends a lot of time researching funds. The fund size matters a lot to him. He says that large funds tend to have lower expense ratio and are usually better positioned to deal with large redemptions. Besides, he also looks at the credibility of the fund house. “A fund house with a good track record enhances confidence of investors as well as advisers,” says Ram.
Lastly, he gives a lot of importance to process. He believes that a fund house should have a process driven approach to fund management. For instance, he says that he doesn’t recommend funds merely because a star fund manager is managing it. “Overdependence on star fund managers may affect the fund house adversely when they leave the organization. Thus, efficient processes ensure that the fund house is able to deal with such situations better,” says Ram.
Future plans
Ram wants to grow his business by leveraging technology. In fact, he has recently launched a mobile application for his investors through which they can monitor their portfolio on the go. Very soon, he is planning to enable transaction through this application.
Ram’s business model is an inspiring case study for those who wish to cater to HNIs clients.