20th January 2012

WF : Can you please take us through your journey in the financial advisory business?

Vana Krishna : I started out 11 years ago, after completing my MA in Economics, as an insurance advisor with Om Kotak Life Insurance - which is now known as Kotak Life. I was the first insurance advisor for Om Kotak in Vijaywada. I have built this agency consistently for the past 11 years. I strongly believe in term insurance. In fact I am the only advisor in my branch who sells only term insurance.

My entry into mutual funds was in 2005, thanks to the ULIP boom. I found my clients buying ULIPs and becoming victims of very high charges. After seeing this, I did some research and analysis and found that mutual funds would be a far better solution for my clients. So, I got into the mutual funds business, to ensure that my clients got better products, with lower charges.

WF : One of your biggest successes is the manner in which you have ramped up your client base to over 2000 retail customers. What were some of the customer acquisition strategies that have worked for you?

Vana Krishna : When I expanded my product portfolio from life insurance to mutual funds, I was able to increase my client base to nearly 1000 retail customers, because I found more products that I could offer to them. Then, I started seeing that clients also have a lot of general insurance needs. So, I also started offering general insurance.

In GI, we focus on mediclaim policies, personal accident policies and vehicle insurance. The first two - health and PA are part of any financial planning process. The third - vehicle insurance - is a great customer acquisition strategy for us. Any two wheeler owner has an ability to start one SIP if we convince them properly. They know very well about inflation because they purchase petrol regularly. While working out their motor insurance policies, we have a chat with them about inflation and inflation-beating investments. And we explain how by starting a SIP, they can beat inflation, and how the returns will also be tax free. We see a 65% conversion of motor insurance customers into SIPs. After starting our general insurance business, we were able to double our customer base to over 2000 clients - because now we have many more products and many more ways to start a relationship. Once the relationship is started, then it is a question of how you cross sell mutual fund SIPs to them.

WF : What were some of the steps you took to professionalise your advisory practice?

Vana Krishna : First, I converted my individual entity to a market entity with the brand name " V K Associates" and established a fully equipped office in a prime area of Vijayawada. Our firm's tag line says " one stop solution for investments and insurance". I have a tie up with two auditors and two loaning agencies. I convinced them about the mutual benefits of referring clients to each other. I recommend my clients for IT returns to these auditors, and to these loan agencies whenever they need loans. Similarly, they refer their clients to me for investment and insurance purposes. So, it's a win-win referral arrangement that we now have in place.

I also Started my website, 'www.vkadvise.com' for providing services to NRI clients across the globe, providing online access of their portfolios and putting requests for any service issues.

And finally, I acquired the NISM certificate of "Certified Personal Financial Advisor", which helps me position myself as a qualified advisor in the eyes of my clients.

WF : You have achieved remarkable success in charging fees. How did you get customers to agree to pay you fees? How much do you charge? How did you overcome client objections to paying fees?

Vana Krishna : Yes, we charge all our mutual fund clients - for lumpsums as well as SIPs. Out of our 2000+ clients, over 1200 have invested in mutual funds through us - they are all purely retail clients.

In the initial client meeting itself we will explain our services which include :

• Fund recommendations based on risk profile and client goals

• Basic financial planning like retirement / children education

• Portfolio review every year

• Software driven detailed annual investment report

• Online access to portfolios on our website any time

• Full product portfolio across all investment and insurance avenues - all in one place

Clients are satisfied with this list of services and are ready to pay our service charges. Currently we are charging @ 1% flat fee on all lumpsum mutual fund investments. And for SIP's we are charging 1% on annual investment and collected in advance.

We create an image that it is not just transaction based, it includes so many other things in it. Clients are convinced that we will give them hassle free service and good advice all in one place, which is appealing to them.

WF : Many advisors in your city do not charge fees. How do you convince your clients to pay in such a situation? What in your view are the main reasons your clients are willing to pay you while others do not pay their advisors?

Vana Krishna : My strategy is very simple. I explain all my services to client in the initial meeting itself. This indicates my differentiation versus competitors and convinces them about my fees. Service, uncompromised advisory & product and market knowledge are our foundation pillars.

WF : If an IFA wishes to start charging fees, what in your opinion must he do to put himself in a position to command fees from clients? What are the kind of clients an IFA should focus on if he were to try and build a fee based model?

Vana Krishna : These are the five main steps that IFAs should take :

1. Strictly commit yourself to the highest service standards

2. Advise rationally on the returns part.

3. Take technological help for maintaining & recommending portfolios.

4. Incorporate life & general insurance along with the mutual funds basket.

5. Acquire technical qualifications like CPFA of CFP.

The best customer segment to focus on, if you want to build a fee based model is young and middle aged salary earners. They don't have pension facility. They can take risk and stay invested for long term which is exactly suitable for equity mutual funds.

WF : What are the new initiatives that you are planning this year to grow your business?

Vana Krishna : Our mutual fund AuM is presently around Rs. 15 crores. I believe future growth will come by concentrating more on financial planning. Luckily, your Wealth Planner will help a lot in this aspect. With this as well as Sunil Jain's wonderful portfolio software, I think we have enough technological support to acquire many more clients. We have grown through referrals from satisfied clients - that focus will continue in future as well. Our business actually became much stronger when entry load was abolished and when we started our fee based model - because that helped us differentiate ourselves in the market. Likewise, whatever is the new model that the regulator now asks us to follow, we are ready.