Tarakki Champions

Pearls of wisdom from a 72 year old investor


Hiralal Sabadra, MD, K V Fire Chemicals (India) Pvt. Ltd., Mumbai

Our Tarakki stories thus far (Tarakki Champions) have featured the business models of our Tarakki Champion Award winners, which give us insights into what goes into building sustainable, scalable advisory practices.

This is a Tarakki story with a difference - it's the story of how Atul Surana, Catalyst Financial Planners, Mangalore (our South Non-Metros Tarakki Champion for 2017) teamed up with his client Mr. Hiralal Sabadra, MD, K V Fire Chemicals (India) Pvt Ltd, to script a financial tarakki story that has seen 72 year old Mr. Sabadra fulfil all his educational aspirations for his children and grandchildren, and yet be in a very comfortable position to help his 4 grandchildren succeed in life in vocations of their choice. In his tarakki story lie some pearls of wisdom for investors and advisors alike, on what it really takes to become a successful investor.


Atul Surana of Catalyst Financial Planners, Mangalore (3rd from left) receiving his

Tarakki Champion 2017 award from Nimesh Shah, CEO, ICICI Prudential AMC

This partnership began in 2006 when Sabadra hired Atul as his financial advisor, amidst some scepticism from his chartered accountant about the need for an advisor in the first place. They started with a portfolio of around Rs. 3 crores, which Sabadra augmented regularly over the years with SIPs and STPs in mutual funds. Despite several drawdowns over the years to finance overseas education for his 4 grandchildren and purchase of a property 6 years ago, the portfolio has grown today to well over Rs.8 crores (would perhaps have been close to Rs. 15 crores without any of the planned drawdowns). Here's an edited transcript of the chat we had with Mr. Sabadra on his successful investing journey.

WF: Why did you hire Atul as your financial advisor?

Sabadra: Atul worked with me prior to deciding to become a financial advisor. When he approached me for business as a financial advisor, I told him that he needs to come down and meet my chartered accountants along with me. Until then, we had never hired any advisor, and my CAs were sceptical about the need for one in the first place, since they were already there. I told them to participate in the meeting and hear Atul out. My thinking was that while my CAs were there for my tax planning, for our financial statements, they are not well equipped to give me advice on wealth creation and financial planning. Then they raised an issue of costs - that this financial planning service will come at an additional cost to me. My response was that I would rather see what is the value I get for the cost I pay. The cost is worthwhile if the benefit of this planning exercise and the wealth creation advice is substantial. In any case, its not as if I can't unwind the arrangement if it doesn't work out, so what is the harm in trying it out?

See, it is important to have some foresight - to be able to visualize the benefits if things work out. When you don't have that foresight, you worry about today's costs, and you miss out on getting good financial planning advice.

WF: Atul has worked for 11 years with you as your financial advisor. Looking back on these years, what have been the biggest takeaways for you from this relationship?

Sabadra: When we began this relationship in 2006, my 4 grandchildren were all very young. My father used to say that education is next most important after your health, for you to succeed in life. I too believe in this totally. I came from a village to Mumbai and established myself here. My thinking was that if I could come from a village to Mumbai, I want to send my grandchildren overseas for the best education they can get in their fields. That therefore became one of the major goals for me when Atul started drawing up my financial plan. Today, I have accomplished that goal - all four of them are educated overseas, and this has been done without putting any pressure on me. The goals were planned well in advance, when the time came for drawdown, we could comfortably handle it. Today, when my grandson wants to set up a business, I am in a position to support him financially on that too. That is a great sense of satisfaction for me.

We planned early for my goals, and we reviewed the plans every year. Nobody can predict markets, so it is important to check annually where you stand on your goals. My brief to him was simple - I told him I will be happy if the portfolio delivers over the long term a 12% return net of tax. In these years, he has delivered above that.

Atul is very professional. What I like most about him is that he has no prejudices, no biases and does not bother at all about market ups and downs - his advice is always focused on long term goals and how to fulfil them. I have given him full freedom and I find that he makes recommendations only after a deep study.

WF: In this long journey of more than a decade, you must have had some disagreements with Atul. How did you handle such situations?

Sabadra: On the long term expected return, there was no disagreement. I had done my own study and my experience is that if you have a 10 year and above time horizon, you should be able to get around 12% return. The disagreements were on my direct equity portfolio. Over the years, I had built up a large portfolio of over 100 stocks - I used to read financial journals like Dalal Street Journal and buy scrips that they recommended. I made money from my equity holdings. But Atul used to keep telling me that it is not wise to try and time the market and get into individual stocks and that it is better to invest systematically in equity funds. I resisted initially, but he kept persisting with this advice even as he supported me on the direct equity side. Gradually, I began reducing my direct equity holdings and today I have hardly 10-20 lakhs in stocks - everything is now in equity and debt funds as per the goals and drawdown requirements. What's left in direct equity is stocks where some problems have to be resolved in the paperwork.

Frankly, its not that I lost interest in stocks - I keep reading still about stock recommendations, and I do sometimes get tempted. But Atul keeps telling me, now you are 72, you have fulfilled all your financial goals, why do you want to chase stocks and time the market. So, I stay away. I know he is right, and I happily recommend him to people who ask me for a good financial advisor.

WF: With your portfolio size, you must be receiving a number of calls from other wealth managers, advisors and banks, perhaps with many exciting recommendations which contrast against Atul's "keep it simple" strategy. What makes you stay with Atul?

Sabadra: Yes, I get a lot of calls and I talk to all of them politely. I tell them that I have my CA and my financial advisor and if they think I must have some scheme or product, they are welcome to talk to both of them and convince them first. In many cases, Atul has shown me that what is being offered is not upto the mark, so there is no need to consider those alternatives.

See, I have no regrets in my choice of my advisor. I will look for an alternative only if I have a regret. I know some people like hopping - I am not one of them. Its like a marriage. You found a partner you like, you got married. After marriage, why will you still go around looking for another partner? If you are unhappy in your marriage, then go ahead - otherwise, what is the sense?

WF: Given your rich experience in life, your experience as an equity investor and your experience with a financial planner, what is your advice on the dos and don'ts for investors to become successful in their investment journeys?

Sabadra: I think it is very important to start planning early. Not just start investing, but start planning early for your life goals. My goals were accomplished very comfortably because we started planning early enough for them.

Get yourself a good advisor - ask around among your friends, interview a few advisors, see their track record and satisfy yourself that you are with a good, professional advisor.

I tell my children and my grandchildren to try and put away upto 30% of what they earn into investments. You have to inculcate that savings habit early enough. You may not be able to immediately achieve 30%, but work towards it as a goal.

Never put all eggs in one basket, however attractive that basket looks. I have my money spread across equity and debt funds, I have real estate, I have some gold - I believe in diversification.

Most important - don't invest based on tips from friends - they all have their own perspectives when they invest, you have yours. Stick to SIPs in mutual funds based on a clear financial plan - that is clearly the best way to succeed in the long term, more than investing on tips.

Start early and build an investment discipline around your own financial plan - that's my advice to youngsters.

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