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A simple tool to open your clients' eyes

Akhil Chaturvedi, Senior VP & Head - Sales & Distribution, Motilal Oswal AMC

3rd August 2016

In a nutshell

Many investors have direct equity portfolios which they manage on their own, while you advise them on their mutual fund holdings. Most retail investors aren't very savvy with their direct equity holdings, and can do with professional management of this segment too. The issue is how to convince these clients about the value that can be added in their specific portfolios through professional management. Akhil takes us through a simple tool that his AMC has created, with the help of which you can showcase to your clients, using their own equity portfolios, the exact value that can be added by moving to a well-managed PMS provider, advised by you. This is not data on outperformance vs market - its hard hitting data on outperformance vs their own equity portfolios.

I have written last October on Wealth Forum about how PMS is a complementary product to Mutual Funds:

Subsequently, a focused session on the benefits of PMS was conducted for select B-15 IFAs immediately after the conclusion of the recent Wealth Forum Conference held on 2nd July 2016, in Mumbai. The presentation by Aashish Somaiyaa received an overwhelming response which indicated the inclination of the IFA community - even in smaller cities - towards the benefits of PMS.

Simple tool - available on our website

Much of the presentation comprised of live demonstrations that highlighted the benefits of a unique tool; also available on our website and made exclusive for our valued advisors.

What this tool enables you to do is to approach clients with direct equity holdings with confidence that you will be able to demonstrate how you can tangibly add value to their equity portfolios. Results from using this tool on your clients' actual equity portfolios will more often than not be quite an eye opener for them, on how much more value can be added to their direct equity portfolios, with professional management.

There are two parameters this tool allows you to compare your client's actual equity portfolio against:

  1. Compare portfolio against various indices

  2. Compare portfolio against our PMS strategies

To compare client stock portfolio with various indices, please click on the link below:

& to compare client portfolio with our PMS strategies, use this link:

In this article, I intend to give further updates on this tool, for the benefit of a larger audience that were unable to attend the presentation and derive benefits from these essential tools.

Before I commence, I would like to recall the premise of my earlier article, wherein a large portion of current overall market cap (almost 14-15%) is owned by retail investors. Yet, a small percentage of these investors own quality companies, which can be viewed as an example from the holding pattern on BSE Sensex - Top 30 companies (approx. 10%), with a larger percentage holding in BSE 500 (12%). This implies that there is a yearning to own cheap companies over quality, belief in book profits instead of losses, frequent churning in lieu of being patient. This would result in nothing, but a queue of worthless junk stocks.

An actual case study

Further, I would like to present before you an evaluation of a model stock portfolio done for a client using our unique tools; and the findings are as follows:

1. Total portfolio of 60 stocks, out of which more than 50% (i.e. 34 stocks) do not fit or we have no view upon as per our 'Q G L P' research process


The above is given to explain the concept and are for illustration purpose only and should not be used for development or implementation of an investment strategy.

2. Let us have a look at performances with various indices on 5 year basis:



Data as on: 1st August, 2016

As per the graph given above, the model portfolio has clearly underperformed Nifty 50 by 5%, Nifty Free Float Midcap by 32% and Nifty 500 BY 13% on absolute return basis.

  1. Stock selection

  2. Stock allocation

  3. Stock concentration

The above parameters make it evident that the portfolio of the client was absolutely misaligned to achieve any meaningful result and serves as an exemplar of wealth erosion.

This is amongst the several reports that evince distressing results; however, this does not imply that all client portfolios are composed poorly, albeit there are a handful of the good ones in the lot. Talking about good portfolio, assure your faith in me, it is only with conviction, courage and patience that facilitate in maintaining a good portfolio.

Also, in my opinion PMS takes form of a guiding light to the distracted direct equity investors by offering them professional help. To explain this further, I would like to give you all an example of client whose model was examined above. So, if this client had invested in MOAMC's 'Value' or 'Next Trillion Dollar Opportunity' strategies, then believe you me, the outcome would seem quite different:



The Above strategy returns are of a Model Client as on 1st August, 2016. Returns of individual clients may differ depending on time of entry in the strategy. Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments. Strategy returns shown above are post fees & expenses.

'Value Strategy' has delivered 31% outperformance against client portfolio,and 'Next Trillion Dollar Opportunity Strategy' has delivered startling 198% out performance against the client's portfolio

Simple activity to let opportunity knock on your door

So, a simple activity can actually let opportunity knock on your door, and your client's door. All you have to is to identify clients that have a knack of investing in direct equities and seem to be actively buying or selling stock, request them to share their 'Demat' holdings, revert to them with your review and present facts using our tools, (links to the tools are appended above), and discuss the meaningful value add and stand a chance to gain from acquiring the portfolio under your advisory.

And you sure would be able to offer meaningful value add and also stand a chance to gain from acquiring the portfolio under your advisory.

On this note, I would like to conclude with an excerpt from '100 Baggers by Mayer Christopher'.

"Why do people buy and sell stocks so frequently? Why can't they just buy a stock and hold it for at least a couple of years? (Most don't.) Why can't people follow the more time-tested ways to wealth? I'm sure you can guess my answer by now.

People often do dumb things with their portfolio just because they're bored. They feel they have to do something. (Here I recall that bit of wisdom from Pascal that "all men's miseries derive from not being able to sit in a quiet room alone."

PMS offers clients to hold stocks under their own ownership, see portfolio 24/7, flexibility to TOP Up, do SIP, receive dividends from companies directly in their bank accounts, etc. What PMS doesn't offer is to decide what to buy and what to sell; this is what is outsourced to professionals for a small fee, which is worthwhile after all.

Should you have any queries or require assistance, contact your relationship manager at Motilal Oswal AMC or feel free to write to me at

Happy Selling!!!

Akhil Chaturvedi

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