25th May 2012

Mumbai is not just the largest market for mutual funds, but is also the most competitive in terms of advisory services. The corporate salary segment - and especially the middle to senior executives segment is clearly the one that sees the most competition as it represents the most promising segment for every bank and mass affluent wealth manager in the city. And that's the space that the unassuming and soft-spoken Sameet Chaudhary chose to concentrate on. Despite being a one man team, with no big brand behind him and no fancy tech solutions to boast of, Sameet has accumulated an MF AuM of over Rs. 110 crores from 225 satisfied clients - each of whom has bankers pitching for their business every other day. Good old fashioned virtues of honesty, integrity and simplicity seem to be potent competitive strengths even in the toughest market segment...

WF: How has your journey been as an IFA over these last 10 years since you started your career in 2003?

Sameet Chaudhary: The journey of being an independent financial advisor begin a little earlier than 2003 when I started as an insurance advisor with AVIVA. In 2001, the private insurance companies had launched themselves in India. I had some understanding of the insurance and mutual fund products in the year 2001 and after getting some inspiration from a family member, I entered the financial industry. I was a part time earner in my college days and had worked with Standard Chartered when they launched their personal loans in 1995-97. I was a part of the sales team and I was getting the opportunities to meet the clients because these personal loans were especially targeted to the manager cadres of public limited companies. I was interacting with the people in the corporate world already and I garnered the sales and marketing knowledge then.

WF: You used some of those contacts when you set up your own practice?

Sameet Chaudhary: Yes, I had developed good contacts and references with these people whom I had offered personal loans. I was contacted by them every now and then whenever they required some type of services. After graduation, I started with insurance which was very challenging because the private insurance companies were competing with the big giant LIC and there was a lot of pressure from the sales manager.

Right from the beginning, I knew my goals in life and what I wanted to do - I got married in 2001 and therefore became a lot more aware of financial goals early on. I was very focused and I firmly believed that if I had to do a good business, I cannot rely only on the family policies or obligatory policies and I started making cold calls at that point of time. Those days, I used to scan the entire buildings of Mittal Towers, Nariman Point upto Rabale Industrial estate in Navi Mumbai. ULIP's were the prime product of private insurance companies and AVIVA also had them and I stated understanding what exactly ULIP is and how markets were. I had graduated in B.Com side but being from a Maharashtrian family, I didn't have much of a stock investor's background though I had a Gujarati friend circle that had some knowledge about the markets.

My wife lent me a good support at that time and I began talking to a lot of people in the industry. In my initial days of mutual funds in 2003, I enjoyed a very good support from Reliance Mutual Fund. They had a good team and were also growing at that point of time. They provided me the required sales and the industry knowledge on the products side. I was fortunate to get a as an IFA mentor, Ms. Roopa Venkatakrishnan. She always guided me on products, on industry and on advising clients in the correct manner. From 2003 onwards, I focused mainly on mutual funds.

In the past nine to ten years, my clientele has grown and they have also started referring clients to me. I got a few large clients as well and the bull market of 2004-2007 also helped in scaling up my business. I always advised my clients to stick to the basics of investment needs, risk and horizon. I feel very nice about my clients who while investing this money had foreseen their needs such as daughter's marriage or son's education. And after five-six years, when that money was required, it was made available to them with the amount that was expected by them.

WF: What is the client profile you target and what is the size of your business now?

Sameet Chaudhary: My clients are mostly salaried executives. I can classify my clientele into three categories. Firstly, lower retail. These are the people who have just started with their jobs and I encourage them to start investing - even though their investments are small, they will earn a good value over a period of time. Then there are young clients, especially from the BPO's or airlines or pharmaceutical companies - they do not have responsibilities as of now and are earning between 40000 to 50000. They have now started understanding the importance of investments and I group them and educate them about different asset classes and the risks and returns associated with them. And I have started SIP's for them. The third category is the upper retail clients who are the good salaried people. They make lump sum investments and they also have SIP's amounting between 50000 to 100000. They are in the age group of 40-50. I position their portfolios in the form of retirement plans basically as the needs of their lives are already been taken care of.

Middle to senior level company executives is my main focus area. I have around 225 active clients and a MF AuM of around Rs.110 crores.

WF: With an average portfolio size of Rs. 50 lakhs and that too in the corporate salary segment in Mumbai, you are clearly operating in probably the most competitive segment of the market. Every bank would be wooing exactly these kinds of clients - and will find access a lot easier with their corporate salary account as the entry strategy. How do you compete in such a competitive segment - do you lose business to banks?

Sameet Chaudhary: Actually it is the other way round now. The bank RM's are facing competition from IFA's because the basic intention of IFA's in managing the portfolio is very personalized. The bank RM's are more incentive oriented and both the retail and the HNI investors have slowly started to understand that. They have faced such problems in the past. When I advise a client, it is totally based on his requirements unlike a bank RM who is more interested in pushing a particular product. This is the feedback that I directly received from my clients itself. So, I believe that ultimately the competition is won by following the principles, through proper management and through integrity only.

WF: What is your view on the fees? Have you been attempting to charge fees for your advice?

Sameet Chaudhary: I have a set of clients who had invested with me but have now retired. I have built up their retirement capital for them and now I have to just monitor that. I had already charged them the upfront commission which has already been paid to me and a trail has also been given. So, it will be slightly impractical if I ask them for a fee for monitoring their portfolio now.

WF: What about new clients?

Sameet Chaudhary: I am approaching the new clients with an annualized fee structure, which is a percentage of AuM. I wouldn't say its easy - clients are taking their time and I am also not pushing it too hard. Some clients are skeptical about paying fees.

WF: AMCs have been promoting liquid funds as an alternative to idle bank balances - especially in the corporate salary segment that you focus on. What is your experience with this strategy - how comfortable are clients with this approach?

Sameet Chaudhary: Actually, I have been recommending liquid funds from late 2006. I started with STP's from that point of time. I have also been recommending liquid funds for parking the funds which can then be shifted to other asset classes easily. When its positioned as temporary parking, pending investment elsewhere, clients readily accept liquid funds. This is true for my bigger clients.

But, promoting liquid funds to retail clients as an alternative to idle balances in a bank account is more difficult to convince. For many investors, you have to start with a lot of education. Retail investors are a lot more difficult to convince - many of them still view mutual funds as only equity.

WF: The fund industry has also been promoting short term plans as an alternative to fixed deposits. How is your experience with pitching them in this manner to your retail clients?

Sameet Chaudhary: Again the debt funds are misunderstood. We need to take a lot of efforts in creating awareness of these products as they have not reached FD clients in retail at all. Short term funds and FMPs have garnered good attention among the bigger individuals with larger portfolios. But awareness in the real retail level is still lacking.

The challenge for IFAs really is that we should understand debt markets and products first, to give us the confidence in recommending debt funds to our clients. When I look at Roopa Venkatakrishnan, I learn a lot more on how to understand debt markets and how to position debt funds to clients. Once you have that kind of expertise, it gives you a lot of confidence and you can position these products correctly.

WF: As an advisor, you are taught to focus on asset allocation and periodic re-balancing. How practical is periodic re-balancing - when you are dealing with 200+ clients?

Sameet Chaudhary: Quarterly or half yearly rebalancing remains impractical. We carve a portfolio on the basis of the need, risk and horizon. So, if an investor's need is child's education and you have ten years, by the time eight years have gone by, you need to lower the risk in the portfolio. That's when you need to re-balance and that is also when the client will be willing to rebalance. So, it's more a function of need.

For HNIs, you may be able to do a periodic rebalancing and they may also seek such inputs. But for retail clients, goal based planning is more relevant and practical than asset allocation and periodic rebalancing.

WF: One of the major challenges that IFA's are facing today is client dissatisfaction on SIPs as even 4 and 5 year old SIPs are not showing encouraging returns. How do you deal with such disappointment? D o you get many requests to cancel SIPs?

Sameet Chaudhary: Yes, it is difficult to explain to the investors that SIP model is not a three or five year affair. Only 5 years plus or 10 years plus SIP would generate a substantial return. Also, when there are negative returns invested for 3 or 5 years, we have to make them understand that if this money was invested in lump sum for 5 years, returns would have been more negative than SIP as one has averaged the cost in SIP. I am giving clients the comparative figures and showing them that in the past ten years, you would have seen so many ups and downs and still you had made a CAGR 20 plus. That is how SIP is effective.

I too have clients wanting to close SIPs. I spend a lot of time convincing them against it. Yet, 5% of the clients go ahead and cancel SIPs - I am happy I am able to dissuade 95% of them from doing so.

WF: You have a philosophy that whether it is a 500 rupee SIP or a 50 lakh transaction, you treat each transaction and each customer with the same amount respect and attention. A lot of IFAs are unable to do that in the current low margin environment and unfortunately small investors are not getting enough attention as they are not remunerative enough with the current margins. How do you sustain the same philosophy in these margins?

Sameet Chaudhary: I believe that the small investors mostly require a first time proper guidance. We just need to make them understand what they are doing and a regular report is also okay. A first time proper hand holding and guidance is done to these retail investors and once you give them the proper scheme which is not a very volatile one, they are okay with it and they continue with it. Ongoing service is not an issue if you have done a good job at the beginning. On the other hand HNI's are so well informed that they require more frequent interactions. They will hear many opinions, want your input on these opinions - all of this makes them service-intensive. As I do not find small retail clients service intensive, I give them adequate attention at the beginning itself.

Although I am the only client advisor in my firm, I do have support staff for transaction execution, for software updation and sending emails and reports to my clients. Mine is not a tech-savvy operation - I don't provide online services etc. Just honest advice and good service.

WF: Why have you not chosen to diversify beyond mutual funds?

Sameet Chaudhary: Though I understand equities, I lack expertise in stock markets like technical analysis and so on. So, I prefer not to advise in equities rather than advising clients wrongly. I have my cousins associated with life insurance and health insurance - one is focused on life insurance and other one takes care of general insurance only. So, I forward them my mutual fund leads rather than advising them myself. But I make it a point to collect the information from the client to judge whether he is underinsured and by what amount as a general precaution.

WF: What are your plans for the future of Samsang Financial?

Sameet Chaudhary: I look forward to grow my AuM by following my principles and values. I only pray to God that he should not let me do anything which I have not done in the past, which is even remotely anti-investors. And yes, I do want to win your Wealth Forum Advisor Awards sooner rather than later !