16th January 2012

WF: What led you into the financial advisory profession and in particular, why did you start off as an insurance agent?

Ashish Golechha: I graduated in 2002. At that time, the industry looked bad, the job market was tough and the global markets were gloomy. I was an NIIT student. In June, I got an interview call from Citibank through NIIT. Being strong in math and accounts, I was confident about anything related with numbers and wanted to leverage on my skill. Eventually I did not get through at Citi. I did crack a job somewhere else in Megasoft but I did not pursue it as I felt I would not stick there for long.

In the meantime, I tried my hands on money exchange business for three months and then the insurance industry opened up. ICICI Prudential was recruiting advisors. My brother suggested me to start as an agent with them. My father gave me the option of starting my MBA in 2002 and pursuing work later on after two years. But I thought an MBA could always be done later, even after starting work. Being from a marwadi community, settling at the age of 24-25 is common perception and so I started to look for settling down also. I started out with insurance. However, I did not want to touch my natural market - relatives, friends etc. The only option left was cold calling.

WF: Why not your natural market? What is the issue with that?

Ashish Golechha: At that time in the insurance industry, many times insurance policies were bought out of a sense of obligation towards the agent - who happened to be a relative or a friend or son of a friend. I knew that my father won't be comfortable with such an outlook. Being the youngest in the family, I had a lot of time of doing it on my own. So I started with insurance in ICICI. They even trained us on how to undertake cold calling. It helped and I ventured with posh localities in Chennai. I continued with the insurance till 2006.

WF: How did you manage this cold calling given the fact that you are not a tamilian in a market like Chennai?

Ashish Golechha: From 2002 to 2006, I have had a lot of Tamilian clients. However, I only knew English and we had only English conversations. I could understand if they were speaking in Tamil but I never responded to them in Tamil as I wasn't good at it. I did my schooling from an Anglo Indian school and my college also mostly consisted of a North Indian crowd. This left me with little opportunity to speak fluent Tamil.

WF: Did you find that as an impediment in client acquisition?

Ashish Golechha: Its not true that if you don't know Tamil, you would not have a Tamil client. You certainly lose business but at that point of time, it seemed immaterial to me as I had just started out with the new venture. I started doing cold calling and in the first six months, I can say with pride that I did not take a buck from my father.

I earned 18000 rupees in the first six months of my work and by the year end; I had earned nearly 1.8 lakhs. I had a diversified clientele. When you are in the cold calling market, you will have clients from all business backgrounds. I was blessed to meet a few good people in the industry as well. Like the treasury team of Standard Chartered Bank - these people never gave me business, but they drilled me well. They asked me to compare benefits of my products with various others in the market. Such questions prompted me to learn the business in its entirety. I started working out the bonuses and the valuations and started giving presentations to them. Few guys were impressed, few guys were not but they asked me questions which helped me to improve my knowledge. It was beneficial in the long run. I met a few clients who had the potential to give me a crore but gave me business worth a lakh only. However, that was not an impediment. At least I was making a beginning with them.

WF: When did you gravitate towards mutual funds and why?

Ashish Golechha: In 2005. I was doing well in Insurance and making decent earnings out of it. During insurance scheme trainings, I was inspired by a book which was given to us which said, 'Burn your bridges, so that you will have only one way to walk'. I believe in excelling in one venture and then moving on to another. In 2005, on doing self introspection, I realized that I am settled, self independent and can now make a good living by selling insurance. It was then that I thought I could now venture into Mutual Funds. One of my clients gave me a proposal for investment worth 9 lakhs every year for a purely ULIP insurance plan. During those days, we gave calculations supportive of ULIP and it made sense to hold it for 15-20 years. At that time, mutual fund expense ratio was 2.5% and entry load was 2.25%. So, we proved to the clients that ULIPs for 15-20 years were better off when compared to mutual funds. We even gave him a performance comparisons and lots of details. But, even though the presentation was convincing, he didn't give me the business because the proposal was not diversified. Putting all the money with only one company and one fund was not acceptable to him. That really made me think that if I have to provide a solution to a client for his lifetime, it won't be fair to ask him to put all his money into one product and one company.

That's when I started looking seriously at mutual funds. I still remember I used to get 1000 rupees SIP cheques those days. These people had the capacity of investing more and I started wondering how I could get out more money from them. Their only worry was whether they will be able to generate returns or not. My first association in mutual funds was with Franklin and I hold great regard for them as they also trained us well. After studying the mutual funds performance over the years, I found out that the average rolling rate of returns for a 5 year period was 12% but it had volatility.

I started telling my clients that 12% growth is what we are looking at in 5 years and if you are giving me 1000 rupees per month, you would have a corpus of 60000. At 12% return, you will achieve 80000, 20000 being your profit. But 20000 would not be creating wealth for you considering that your present salary is 60000 per month and 5 years down the line, it will be around a lakh. I convinced them to push their savings to 5000 which will generate a corpus of 3 lakhs for them and a return of another 1 lakh. This could create an asset for them, say a car or a dream holiday or even a down payment for a house. The idea was to get them to commit higher amounts in SIPs such that the projected value 5-10 years down the road was a meaningful amount for them - and not a small amount that would just get spent away.

WF: Post August 2009, you are one of the few advisors who introduced a fee based model to supplement falling margin. How did you actually convince clients to pay fees? What were some of the initial objections and how did you deal with those objections?

Ashish Golechha: Before the entry load was abolished, there was something known as invest direct where there was no entry load. One of my clients actually gave me a 6 lakh cheque and asked me to invest direct. He knew that if he does it normally, there will be an entry load of 2.25%. He was ready to pay me a commission of 1%. He was a 55 year old Sindhi gentleman - I only bring the community in the picture because all of us know how difficult it is to extract fees from a Sindhi ! I explained to him that since the time I started advising him, I had never sold him funds which were not required by him and always tried to switch within the same fund house to avoid an entry load to him. I had always found ways to save his money rather than find ways to make money from him. If he were to cut on my earnings like this, I will not survive in the industry. And if I can't survive I will not be able to service him. He thought for a moment, but then gave me the transaction with my ARN code.

In August 2009, entry load was abolished. When I entered in the industry, few of my clients used to ask me how I am being paid. I used to say that there is an entry load which is taking care of me. When the entry load was abolished, I told my clients that in the mutual fund application itself, it is mentioned said that there is not entry load and you have to pay the fees directly to the distributor. All companies printed that and I explained to my clients that when you used to invest with me earlier there was an entry load of 2.25%. Since now it is not there; I need to collect the money. Like all businesses you will have those 5% of the clients who will say NO. Its better either you make them understand and get them with the fee structure, or leave it to them. Down the line, they will burn their fingers and come back to you.

There is plenty of opportunity available in the market. You should be willing to let go that 5% of clients who won't pay despite all your efforts, and find more clients who will do business with you in the manner you prefer.

WF: What is the current fee that you charge? Is it on a per transaction basis?

Ashish Golechha: I have two fee structures. One is transaction based and the other one is AuM based. I charge my clients a transaction based fee when we are passively managing their investments. They look at longer term investments and not at booking profits as is the case with actively managed portfolios. The day we execute the transaction, we collect the fees. The fee structure ranges from 1.75% to 1%. It is based on the assets which we manage with the client. If the assets are less the fee is high and if the assets are more, the fee is 1%.

The other fee structure is based on the AUM. We charge this fee to the clients who want us to actively manage their assets. They are aggressive people and are continuously monitoring their portfolios to book the profits. A transaction based fee will become very expensive for them and that's why we collect fees on a half yearly basis on their equity AuM. The charge is between 0.75% to 0.4% per annum - 0.75% if the assets are less and 0.4% for large AuM.

WF: Do all your clients pay you fees or do you have exceptions?

Ashish Golechha: All my clients pay me fees. The only exceptions are when clients want to invest only in tax saving funds. We know in our industry, tax saving schemes offer a good amount of brokerage and so I don't bother to ask them fees. But if I am doing a regular investment for them, I am going to charge them a fee.

WF: We are all aware that the percentage of advisors across the country who are charging fees is still very small. What is it that has enabled you to charge fees, or If I put it differently, what is it that other advisors should do, to put themselves in a better position to seek fees?

Ashish Golechha: They should be able to show the value on the table. The advisor has to make the client realize that it is not worth arguing for 1 or 2% when we are managing their portfolio and making money for them. We have to make them see that we do not have an intention of churning their portfolio just for our income needs rather we are asking for a percentage because we are giving genuine advice to them and creating value for them. We are regularly interacting with the clients for whom we are actively managing portfolios and giving them the right advice at the right time.

One of my HNI clients asked me why I was asking for a fee. I pulled out a report and showed to him that in 2010, I pulled out money from three of the funds; and invested in better performers. I showed him that had he remained in those funds till now rather than acting on my recommendations, his portfolio would be worth much less now.

One of my other clients argued with me that similar thing was being done by another advisor but he is not charging him fees. I made it clear to him that I am not an opportunist and the other guy may not charge you fees today but someday he will make good money from your investment portfolio. If he has to survive in the business and service you well, he has to be paid by you.

WF: You took an unusual step of pruning down your client base at a time when the mantra seemed to be to expand your client base. What caused it and has it worked for you?

Ashish Golechha: We did start to prune down our client base in 2009. Way back in 2005, I had a client who had invested in Franklin India Prima Fund for an SIP of 3000 rupees. The value of his corpus was only around Rs. 38000. In March 2009, I advised him to come out of the fund as I thought the fund wouldn't perform well and I also suggested him to put his money into IDFC Premier Equity, which I was very bullish about. I talked to him for around 18-20 mins explaining him the logic of switching. However, at the end of the conversation, it was astonishing for me that he asked me to send an email showing performance of both the funds along with the write-ups and past track record based on which he will take his decision. I figured out that if I am going to spend 20 mins on a call and then do all the performance comparisons and send them - all for an AuM of Rs. 40,000, there is no value in it for me. That day, I realized that there was no point having huge number of clients. Having a huge number of clients does make sense when you are in the distribution business as there is no accountability of performance involved. But as far as advisory business is concerned, it is better to concentrate on fewer clients and increase your asset size with them.

From my peak client base of 450 in 2009, I started shortlisting them into 3 categories. We drew up a list of 100 clients who I wanted to continue offering advisory services - they were the remunerative clients for me. Then another list of prospective clients with whom we feel there is a potential and we need to break the ice with them. They were about 70 of them. These are the 170 whom I actively service, actively meet.

The rest are in sleep mode. It's like the day they get up and think what will happen to their money, we tell them their position. These 280 clients account for less than 5% of my AuM. But, putting them into this inactive list frees up a lot of my time to focus on the clients who I want to grow my AuM with.

WF: You also started General Insurance recently, isn't it?

Ashish Golechha: I was in the General Insurance business for the last 5-6 years but I was never active in it. We were into the basic business like house insurance. We never undertook office insurance and avoided those areas where servicing issues are very high. We told the clients we had no expertise in it.

What we started to look at is mediclaim and personal accident insurance which are very important and something that most of the people don't have. When the market crashed in 2008 and revenue streams dried up from usual sources, our focus on general insurance that year helped me earn a consistent income in that year as well. I am consciously building up my general insurance business to diversify my income streams. From a position where mutual funds accounted for 90% of my income, I am now at a level where 30% is coming from insurance and 70% from mutual funds.

WF: How has your AuM growth been and what are your plans ahead?

Ashish Golechha: Right now, my AuM is around Rs. 25 crores. In 2009, my AuM was Rs. 12 crores. It doubled to this level in 2010. In 2011, AuM has not grown. But, with renewed focus and a healthy pipeline of SIP registrations, I think my AuM should be back on growth path in 2012. In 5 years time, I want to reach an AuM of Rs. 100 crores. The other big focus for me will be general insurance - particularly health, personal accident and home insurance. I believe there is a huge potential in this area.