Advisor Speak

6th March 2012

Grow your business with self-financing SIPs
Hari Kamat, Goa


Hari Kamat has truly understood the pulse of the conservative retail Indian saver. And he has also figured out how to get cautious investors to begin their journey into market risk based products, at a pace and in a manner they are comfortable with. He has built up a huge retail client base of over 6000 PPF and postal savings investors - and over 4000 of them today are also mutual fund investors! Read on to understand how Hari Kamat has managed to achieve a 66% conversion of cautious savers into mutual fund investors - in a market where the average penetration of MFs is less than 5%

WF : How did you enter the financial advisory profession and how has been your journey over the years?

Hari Kamat : During my college days, to get pocket money and to support my family I had taken postal RD and PPF agency. By coming in contact with various people and their overwhelming response and suggestions I thought this is a great profession where I should enter. Journey has been really good. Whatever I have advised over the years, investors are happy with the same.

WF : You are widely regarded as one of the most successful retail distributors in Goa, with a very impressive client base of over 6000 clients. What are some of the factors that have led to your remarkable success - what are some of the things you've done differently?

Hari Kamat : I have been maintaining records for all my clients right from 1983. Every investment is recorded, and reminders go from my office - either by post or phone for every maturity, every action that needs to be taken - even for the smallest of amounts invested in NSCs or post office or PPF etc. All maturity related service is rendered by us. Sending these reminders has helped build a lot of goodwill that we are here to take care of our clients' money. It also ensures that reinvestments of all maturities and all fresh investments are done through me. Reminders have helped me build my client base - lot of trust and confidence is built up with such simple but meticulous actions - and that also generates more referrals from satisfied clients.

Secondly, I have set up my office in a very centrally located place and am available at my office till 8pm every day. I have always encouraged my clients to drop in to the office, which they also find convenient. By creating a system where my clients come to my office, I am able to serve many more clients than I could have, if I were running around to their offices and homes. This helps me increase my client base and increase my productivity.

Thirdly, when clients come in, I am involved only in the advisory part, in helping them with the decision on where to invest. After that, my staff takes over. I have specialist staff - one person who handles exclusively PPF work, one person for post office, two people for mutual funds etc. My job is only to speak to my clients - my team takes care of the rest. I don't have to use my pen at all ! This delegation has really helped me serve many more clients.

And most importantly, my conscious is very clear - I sell what the investor needs and don't sell what I am not convinced. So many mutual fund salespeople come to me and tell me that they are increasing their brokerage structures for this quarter on that product and all of that - I don't even collect these letters from them. I tell them only one thing - you give me what you want, what you think is right. I will sell what I think is right. That's it.

The CA community in Goa has a good regard for my unbiased advice. Whenever investors discuss tax with their CAs and say that they are seeking advice on tax saving instruments from me, the CAs tell them that they have gone to the right person. These CAs also refer many of their clients to me. That goodwill comes only when you are genuinely unbiased and act only in your clients' interests.

If you offer good advice and good service, relationships will automatically build up and business will not be a problem for you. Don't expect earning in each and every transaction. If your advice is good, investor will not only come back but they will bring more investors. This led to my success.

WF : The other remarkable aspect of your business is that you have converted as many as 4000 out of your 6000 conservative PPF and post office clients into mutual fund investors. How did you manage this - especially in a market that is known to be conservative in its investments? How does your MF AuM compare with other products?

Hari Kamat : Goan people are conservative and hence happy with Bank deposits & postal investments. Since retail investors do not have a lot of money, time and knowledge - mutual funds are actually more relevant to them. Its our job to find a way to educate them and get them started on the journey.

When my PPF clients come to me each year for making their deposits, I sit down with them and take down details of all their savings - PPF, GPF, post office etc. Then I show them that each and every investment of theirs is debt oriented and they have no equity exposure at all. I used to get them started with small SIPs - Rs. 1000 per month for 5 years. In fact, earlier, most AMCs were accepting only 5 year SIPs - not 10 and 15 year SIPs. So, I would get clients into 5 year SIPs. When the SIPs tenure got over and a discussion on maturity proceeds would begin, most clients actually committed to renew the SIPs with larger amounts and for longer periods.

I have been a strong advocate of UTI ULIP for my retail clients. I have done studies which compare UTI ULIP and PPF returns over 15 years (which is the tenure of PPF), which clearly show how much better returns one can get from UTI ULIP, with an additional advantage of a term cover. Rs. 1000 invested in PPF each month for the last 15 years means the investor invested a total of Rs. 180,000 in 15 years. The maturity value over the last 15 years is a little less than Rs. 4 lakhs. But, if you look at a 15 year return from UTI ULIP with the same 1000 rupee SIP for 15 years, the value would have tripled - plus you get a term cover.

For many of my PPF clients, I have set up self financing SIPs in UTI ULIP, through annual drawdowns from accumulated PPF balances. This being a 40-60 balanced fund structure, also helps reduce volatility in returns - which goes down very well with clients.

In many cases, we start with market oriented investments only from the interest earnings in the client's portfolio. If I look at the PPF pass books of my clients, so many now have balances of 10 lakhs, 15 lakhs. For all these people who are less than 50 years old, I tell them to withdraw the interest portion - which itself is over 1 lakh per year - and get them started on SIPs. This way, there is a lot more acceptance to try out equity oriented investments. For some, we even start with half the annual interest accrual - which still works out to over Rs. 50000 per year or a Rs. 4000 per month SIP.

If you set up self financing arrangements, clients are more willing to consider market risk oriented avenues like mutual funds, in the hope of better returns. That's how I have been able to get over 4000 of my 6000 clients who were originally into only PPF, post office and NSCs, to get started with equity SIPs and hybrid products like UTI ULIP and now also into UTI Retirement Benefit Plan.

Today, my retail MF AuM will be over Rs. 125 crores out of a total MF AuM of Rs. 220 crores - the balance is corporate money in debt and liquid funds. Out of this 125 crs of retail MF AuM, over Rs. 80 crores is in equity and the balance in FMPs and debt funds. My PPF AuM will be in excess of Rs. 100 crores.

WF : Are you seeing clients now coming back to you with worries on SIPs not giving decent returns over the last few years? How do you handle such situations?

Hari Kamat : Firstly, when I start a SIP, I always tell them that SIP is for long term - 10 years plus and not for 1 or 2 years. Secondly, you have to explain the benefit of buying at a lower cost in a falling market in a manner they can relate to. So, I always give an example of gold. When gold prices come down, you get more grams. You are happy that you could accumulate more gold and you mentally tally how much gold in total you have, after each purchase. You never feel bad that you bought gold when prices went down. In the same way, I encourage them to think of the number of units purchased in the same manner as number of grams of gold purchased. You have to help them understand that accumulating more units when the market comes down, will help them make more money when it goes up again.

WF : The MF industry is constantly worried about lack of retail penetration as well as lack of penetration in Tier II and Tier III towns. You interact with numerous retail savers in one such Tier II city. What needs to be done by the industry to achieve this much desired retail and smaller city penetration?

Hari Kamat : First, awareness about MF products should be increased on the larger scale. All institutions which are involved in this business like SEBI, AMFI, MFs and even Registrars need to have more interaction with investors, IFAs, may be through meetings, presentations with local bodies which are involved in financial activities.

Second this industry is highly regulated, it's good but all changes comes into effect suddenly without giving sufficient time to understand.

Financial concepts and planning should be taught in the college level itself, which will help the industry even at Tier III cities. Today, the common myth is MF is only a share market scheme....

WF : Your business has evolved from a pure Government savings schemes distribution business to a multi-product distribution business. How do you see your business evolving over the next 5 years? What are some of the key changes you think you will be making in your buisness model, in response to the changing external environment?

Hari Kamat : I always think that every change creates an opportunity to generate new business and I update/ upgrade to these new changes immediately. Earlier my records were maintained in a book, now I have software to take care of my client's data, valuation etc. 5 years is very small time. I feel this industry is still at its beginning phase, retail penetration is very low. I am more concentrating on retail client base, educating them and gradually shifting them from fixed rate to market related returns as per their needs...

WF : The regulator seems to be very keen on distributors becoming advisors and gradually moving towards earning from their investors rather than from product manufacturers. How practical is this? If superior advice, service and investor protection are the ultimate objectives, what is the best way in which this can actually be achieved?

Hari Kamat : For advisor like me who offer other non MF products like insurance etc.., charging fees exclusively for MF products seems to be difficult. There are different regulations on charges and commission with different financial regulators, and ultimately all financial products leads to a common goal for an investor. I feel there should not be such discrimination in charging of various financial products. Again in tier II & III cities relationship with the clients is more important than charging the advisory fees.

I am the biggest beneficiary of my unbiased advice, and good services over the last 25 years - as I have grown because of this. I was never tempted because of higher brokerage and incentives which has helped me not only to retain my clients but I think I have protected my investors. If all of us understand this basic fact - that we will be the biggest beneficiaries of our good advice and service, investor protection will automatically be achieved.

WF : What are your plans for your business over the next 5 years?

Hari Kamat : I am already using one of the best software for portfolio management and very soon starting my own website. Since I am advising on postal instruments, PPF, MF products and life insurance products, I am planning to complete the basket by entering into health insurance. I am also planning to arrange more n more client awareness/ education meets.

I also want to motivate my other IFA friends to remain in the industry by regular interactions. I am also not interested in grabbing anybody's AUM by changing broker code.. I have seen this happening even with some of my clients in desperation. I want to remain faithful to AMCs, myself, my fellow collegues and my investors.

Ultimately my biggest achievement is when my clients acknowledge me, when their goals are achieved. Just one example in a recent wedding, the father of the bride introduced me to the groom's family by saying "Here is the person who planned finance for this wedding years back....."