WF: How far more does this correction have to run, in your view? What are you telling your clients to do now? Are clients nervous with this volatility?

Sanjay: I think the correction has just started and this will probably go on till the budget and a little beyond as well, is my sense. In terms of index levels, I think the downside is somewhere between 14,500 and 15,000. I think we will see some bad news in the budget - service tax and excise duty hikes, withdrawal of other fiscal stimuli etc. MFs may get some bad news in terms of taxation, there could be some announcements on the direct tax code etc.

For clients who are making bulk investments, I have asked them to wait and seek lower levels. We had anyway got out for clients between 17,000 and 17,500 levels - I have advised them to stay in cash for the time being. For other clients who are not keen on bulk investments, anytime is a good time to start an SIP or STP.

I don't see any panic or nervousness in clients as a consequence of this correction. So long as the funds chosen are good, you can ride through volatility. Yes, we've had a couple of lemons as well - funds from not-so-strong fund houses that have done very poorly in the last couple of years. In those cases, clients are nervous and I am nervous as well. Fortunately, the exposure to such funds is limited - but it is a lesson well learnt, none the less.

WF: Which are the themes that appeal to you? Is infra on your radar?

Sanjay: You've hit the nail on the head. I think the infrastructure theme has had a poor run since 2008 after some fantastic performance in 2006 and 2007. But, if you look at a country like India, infrastructure is where the big growth is going to take place. This is a theme that we want our clients to own - and buy into, when it has relatively underperformed. In fact, some of the SIPs we've started for our clients are in infrastructure funds. I think that anybody who does an infrastructure SIP now for a period of 2-3 years, will make money.

The other theme we are looking at is gold. We got out of gold for most clients when it was making new all-time highs. Now that it is coming down a bit, I am looking at it again for my clients. At US$ 1000 or slightly under that, is a great level to get back into gold. We have also been recommending STPs in gold for clients who do not want to make bulk investments, and who have a long term perspective. I think gold can easily touch Rs. 20,000 per kg, over time.

We have now taken a stock exchange terminal, to enable us to transact gold ETFs for our clients.

WF: Would you be inclined to execute your mutual fund trades on the stock market platform?

Sanjay: Not immediately, mutual funds will continue the way we are doing right now. But we have started advising clients on stocks. We have hired a trader analyst for stocks. Besides, ETFs are on the terminal.

Taking an NSE terminal for an AMFI distributor is a difficult thing. Because number one the cost and secondly the compliance issue - the compliance cost is too high. You need a compliance officer, you want quarterly audits etc - so another option is to take up sub-broking. But when you take up sub-broking, you surrender your clients to the main broker. If you've built up your franchisee over 6- 7 years, how do you surrender it suddenly to main broker?

WF: What is your take on the removal of distributor NOCs to change agent codes?

Sanjay: I think it is a positive move, because a client must have his discretion to whom he should go - I think the earlier model was a restrictive trade practice. The new model will be a problem for those distributors who are not servicing their clients - as their clients will want to move their business elsewhere. For advisors like us, this is not a problem. We support this move.

WF: Have you tweaked your own business model post the Aug 09 ban on entry loads?

Sanjay: We have told clients that we are not going to charge them till April and have asked them to let us know how they would like to compensate us post April.

In our kind of business, where individual ticket sizes are Rs. 50 lakhs and above, it is difficult to charge. Now if I ask somebody to make a cheque for Rs. 2 lakhs on a Rs. 1 crore investment, that's very difficult.

We have to live with the times now. We will not get 2 %. Our income will drop. And that is definite. Probably the earlier commissions were too much - maybe this is just as well. But the issue is we all have built up cost structures and research and client servicing infrastructure based on the earlier revenue model. Now, if the income drops, the infrastructure looks too heavy. If clients don't pay, then we need to seriously rethink how much we can support clients within the new income levels. Can we continue to do the indepth independent research we have been doing for our clients? Can we service and pamper our clients like we used to? These are issues that need to get tackled as we adjust to the new environment. At some point, I just may have to tell a client, boss, I am sorry but I can't do this any longer - unless you compensate me for the service.

There are cases where it is impossible for us to ever think of clients paying us a fee. Some of my clients are charitable trusts - there is no way I am going to ask a charitable trust to pay me. Then again, many of my clients are government institutions - like in the defence ministry. If I talk about fees, there will be a tendering process they will have to go through and invite 10 distributors to participate in the tender !

Margins in this business have shrunk - and we will need to adjust our cost structures accordingly. I now look at even the smallest costs - conveyance for example - more closely. To the extent it forces you to be more nimble, it's a good thing. But, if at some stage, client servicing gets impacted, that's not the most desirable outcome.

The biggest impact is going to be that less and less people will serve retail clients. We don't have a retail client base - ours is an HNI focused business - we have a small team that services our clients - we have no aspirations to set up a 500 member team and launch a retail distribution business.

But, for a large number of retail oriented distributors, there are serious challenges. Many have moved on to other lines of business - some tell me they are now selling holiday packages! You need to be reasonably compensated for the efforts you put in to any business.

Take my own firm - I am stepping up activities in the other half of my business - the cross border M&A work - the investment banking side. Since my work is cross-border, I deal with overseas clients - fees are never an issue with them, the work is rewarding for the efforts we put in.

Ultimately, every entrepreneur will put in efforts where the money is?..its just as simple as that.