Advisor Speak

26th March 2012

At 26, he's achieved what many take a lifetime
Abhenav Khettry, Vyana Wealth, Kolkata
 

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An AuM of 165 crores and growing. Retail client base of over 1000, of whom 45% transact each month in liquid funds. Strong niche in the semi-institutional segment of Kolkata. Active secondary market bond trading for clients. Forays into loan products to strengthen revenue per retail client. Active on social media and SEO activity for his website, which generate retail leads on infra bonds. Branches in Kolkata and Jamshedpur, with more in the pipeline across East India. Actively working with software developers to create online solutions for non MF products. Abhenav has all of this to his credit - and he's only 26 years old ! Starting off his career at a tender age of 19, this bundle of high energy is all set to soar much, much higher in the years ahead...

WF: What led you to join Optimix and how was your experience there?

Abhenav: Soon after my studies, I started off with Kotak Life Insurance in 2004. I discovered that I wasn't really keen on life insurance, and therefore joined Aditya Birla Distribution Company, along with my boss from Kotak Life. That's where I actually got introduced to the mutual fund industry and got my ARN in 2005. Thereafter I attended FPSB's first financial planning meet in Mumbai in September 2005. That's where I got acquainted to the whole world of wealth management and financial planning. And that's where I met Mr. Ashwin Arora who was at that time just setting up Optimix in India. Mr. Ashwin Arora was heading Optimix Australia and he spoke about the open architecture platform, which I found very interesting. I also met Dr. Uma Shashikant there. She also thereafter joined Optimix and I kept in touch with them. And then the second FPSB meet happened in Kolkata in 2007 and that's where I met the entire team of Optimix again, including Mr. Sumeet Vaid. I got a call from Optimix, and then joined them.

The Optimix experience was actually quite interesting as I learned a lot about fund of funds and about how the distributor model works because we were interacting with distributors there. I learnt how to think from the distributor's point of view and not only from the AMC's point of view. Also, Optimix taught a great deal about how to choose between the funds. So as an aspiring future distributor, it was a great learning platform.

WF: What led you to set up your own firm, Vyana Wealth ?

Abhenav: Mr. Khaitan - who is related to the BM Khaitan group, was a distributor for us at Optimix. I worked closely with him and developed a good rapport. He had a good client base, good connections, but lacked an organization and was looking for somebody to help him run his firm. I discovered that I am more comfortable interacting with clients directly, rather than with the intermediary channel. So, I joined him.

After working with him for a while, I figured out that while I was hungry for growth and had aggressive plans, he preferred to go a bit slow and was more conservative in approach. So, I decided to set up my own firm. By then, I had also built up a reasonable client base.

WF: What was your initial business plan, and how did you come about to focus on the semi-institutional segment?

Abhenav: Frankly speaking, Vyana happened all of a sudden in Aug 2008 after I left Mr. Khaitan's firm. There was no cooling period to think about a business model or things like that. Simultaneously, the markets were also crashing. So clients were anyway running helter skelter and they did not know what was happening. The panic in the equity market coupled with very low level of understanding of clients in debt markets and my own passion on debt markets, gave me an opportunity to initially build my business around debt.

Though interest rates were very low but the assuring fact was that at least your money was safe somewhere. So I started working on debt and in fact initially we started off by marketing fixed deposits of HDFC Ltd and we also got into income funds but unfortunately at that point of time, yield touched an all time low of 4-4.5%. So the irony was that we were moving the money to safer assets and they took a hit at that point of time. So the initial six months were very difficult and we survived by selling only FD's. Mutual funds whether debt or equity were very difficult to sell because they were falling on a daily basis.

During my marketing pitches to my clients, I stumbled upon the semi institutional segment - like schools, charitable trusts, hospitals etc. Individual investors would freeze all investments in volatile times, but these semi-institutional investors always had surpluses to be parked in safe avenues. Whether recessionary times or boom times, schools and hospitals always had annual surpluses to invest. Many of my clients were trustees of such institutions, and suggested that I approach these trusts as well with my offerings.

WF: How did you build your differentiation in this segment? You have managed to capture a fairly large market share in this niche....

Abhenav: On the education front, they were only investing in bank deposits at very low rates and they didn't look at other deposits. So I introduced these trustees and finance managers to these HDFC deposits because they offered 25-50 basis points higher than the bank FD rates at that point of time. That was the only differentiating factor initially but later on, we started meeting them and educating them because banks gave them no service at all, especially the PSU banks. We started handling their tax matters like 15G, 15H then because they were not aware that even a trust can submit a 15G and claim the TDS exemption. These small things actually worked favorably for me. Apart from that what I realized was that the HNI clients of Kolkata do a lot of donation and charity work and through that, I was able to get into those charitable organizations. In Kolkata, we have a lot of colleges and schools which are sitting on piles of money and my clients are the trustees of these colleges. So it kind of worked very smoothly for me and that's how it started off.

WF: Have you succeeded in getting these trusts to also consider debt funds or are your still sticking with HDFC deposits?

Abhenav: Some of these trusts are quite rigid and they just seem to be completely opposing mutual funds because they were kind of hurt by them in the past. There is a lot of stigma attached to it. It's only natural that if somebody has already burnt their fingers and have had a bad experience, they don't want to get into it. I too feel that so long as the FD's are giving decent revenue, there is no need to introduce them to higher risk. I prefer not to mix my FD clients with debt fund clients because they are comfortable with that and I want that working relationship to continue. That is more important.

WF: The other aspect you seem to be active on is the secondary market bond trading activity for your clients. Why have you decided to focus on this, when many advisors opt for actively managed bond funds instead?

Abhenav: I am not against debt funds and in fact I sell lot of debt funds. But what I realized is that suppose if today I buy a Tata steel paper which is rated AA plus and has a 11.80 coupon on it and if I go through the mutual funds, there is a mutual fund expense to that. There is a management expense and various other expenses which make my net yield fall much lower. So I undertake these transactions only for 10 lakh rupees and above as smaller investments are not very liquid and I will require at least a week's time to sell these bonds to get the money back.

How this started off is that father of a very close friend of mine is a Jute mill owner. So I was managing his personal portfolio when he said that he has money lying in the PF account of the jute mill, which needs to be invested into bonds. So that's how I started the secondary market bond trading. Later, I met lot of people in the course of work who were also into the secondary market debt and one thing led to another and then we actually started marketing these bonds individually to HNI investors like one bond at a time. Earlier the lot size was at least 50 or 60 bonds but now even one bond can be worth 10 lakhs.

WF: Are these tax efficient?

Abhenav: Our clients mostly buy and hold - they don't trade. The trading happens in our books, where we buy a block and sell it onward 1 bond at a time. Coupons are quite high in some of these instruments. We have been working with very good names, like Tata steel, Tata power, Tata motors, Tata capital etc. We have also worked for Dewan Housing finance where they were getting 12.75, so the coupon was already so high that even if you reduce 30%, still you will be generating 9% post tax return. So that's not something that the clients worry too much about. And the best part is there is no TDS on these bonds.

WF: Apart from these semi institutional segments you also have a retail client base?

Abhenav: Yes, we have a large retail client base. Just last week, we crossed the 1000 retail clients mark. I stay in a very large housing complex and I started off initially from my neighborhood, basically the people in the complex we meet on a daily basis or who we interact with. We started working with them. We started sending a lot of emailers and started sms campaigns for these people. They realized that I am talking sense and there is some value proposition that I am offering to them. So I built an initial base of about 80 clients in my complex itself. Also through them, I got references and it kind of developed from that. Also, I did a lot of campaign and brand building with Business Standard. They come out with very cheap advertising campaigns and through that, I got lot of references and built my base from there as well. From these initial bases, we built quickly through referrals and have now touched the 1000 clients mark.

WF: What is the profile of these retail clients?

Abhenav: It's a heterogeneous client base actually. The salaried class is about 35 to 40%. The next big class is professionals like Doctors, Chartered Accountants, and Engineers who work independently. And the balance will be a mix of businessmen.

WF: And your AuM is about 160 crores now?

Abhenav: 165 crores but that includes all the assets : mutual funds is about 80 crores and the remaining 85 crores are alternate assets like fixed deposits, bonds, non convertible debentures etc. The semi-institutional segment constitutes the large part of our AuM. Retail is still a little small in AuM, but is growing well. The one thing I have been focusing on in retail is liquid funds - I have 12 crore AuM of retail liquid money. 45% of my retail clients are regular investors in liquid funds, who transact each month.

WF: What led you to open a branch in Jamshedpur? How do you manage branches across cities?

Abhenav: For me Jamshedpur was a natural choice because I come from Jamshedpur and my parents live in Jamshedpur. I have been working with Tata motors and Ashok Leyland, so I have a very large and old base in Jamshedpur. So it is actually an extension back to from where I came from. So I already have a captive client base there. For me, the main challenge is not clients but it is of course competition as in Jamshedpur, there are one or two big distributors there who have the majority of the institutional business - the Tata group business. So I am trying to win that and I am also trying to get into the schools because in Jamshedpur no one has tapped the schools and the colleges segment. It's a virgin market and most of them are only investing in bank FDs. So I am trying to meet schools and explain them the concept that how better fund management can give them a higher realization. Again, there are two types of semi institutions also. One are those which are very cash rich. They just have surplus funds and they keep investing that. The other ones actually survive on the revenue and the income generated on these investments is used to run the organization. To pay the bills, to pay the salaries, to pay the electricity bills and things like those. So we have to be very careful with those kinds of institutions because there the fund management has to be absolutely accurate. There, we try to explain people that you are getting 8.5% in a bank FD and if I can get you say 9.5% you are getting 100 basis points higher. For two crores rupees, you will be getting two lakh rupees extra every year - which can help you pay some of your bills more comfortably. So, that's the pitch.

WF: One of the things that you have been very active on is the use of technology from both perspectives - servicing your clients and marketing for new business through social media. Can you just take us through what you have been doing on the technology side for the service as well as on the marketing side?

Abhenav: I was very clear that I wanted a website when I started. We actually registered a domain in 2008 and we built our website in 2009. We did a complete makeover in 2011. Through Investwell, we have given all our clients an online user id and password. And they can track their mutual fund investments through that. Since we also have a large non mutual fund base as well, that is basically IPO's, bonds and CDs and FDs, I am working with Mr. Jain to actually develop a non MF software, which can be accessible online. He already has non-MF software but that is offline completely. So we are doing it together and I am explaining to him how it is done.

Apart from that, we have a page on Facebook and we have already got about 109 people liking it. Through Google analytics and Facebook, we can actually track who is visiting my page and how many minutes they are staying on the page on an average etc. We have also spent a lot of money on the SEO that is Search Engine Optimization. As soon as one types wealth management, Vyana comes up high on the search list. We are doing the SEO marketing with a firm called ECHO. We have tied up with them and they are doing online marketing. We are generating good leads for infra bonds and other things online.

WF: You are all of 26 - and you already have a great AuM, a large retail base, a couple of branches, an active online strategy and 7 years of solid experience behind you, having started off at a tender age of 19. What are your plans for Vyana over the next 5 years?

Abhenav: What I realized is that the insurance business delivers a good margin while I am into a low margin business. Though I have 165 crores of AuM, my net revenue is only about 38 lakhs this year. So the average is only about 0.2% to 0.3% which is quiet low. So this year, I want to enter into higher margin businesses with the same client base. One of the products that I am starting off, are home loans. I have already tied up with some banks to introduce clients for their home loans. For loan against securities, I have tied up with Aditya Birla Finance and also with Deutsche Bank for various types of property loans, loan against property and so on. So I am basically working on the loan aspect right now and trying to be on the both sides of the balance sheet of the clients - so I can be a single point service provider for everything that he may need.

Now we are also trying to get into general insurance because the client base is already there. The clients already come to us for all these services and what I realized is that servicing for general insurance is very important also because nobody services a small client properly. Margins are also quite decent there and so it is something that I want to develop. Apart from that, I feel the knowledge aspect in this business is very very low and lot of employees and clients really don't have the knowledge to actually pursue this business properly. So I am actually looking towards the knowledge aspect of it. I want more people whom I can train properly and then maybe start up more remote locations. I am going to start three or four more branches in the next two years. That's the plan right now. Initially Kolkata will get two more branches, one in Salt Lake and one in Dalhousie. Those are the two good hubs. And of course the main branch remains in the centre of the city, at AJC Bose Road.

Also, I want to come up with maybe a one more branch, in a rich mining area - east zone is full of mining spots. For me, Ranchi is a very good place because the entire mining money comes there or somewhere like Rourkela in Orissa. But the basic problem is the lack of people and also the lack of white money in such places.

One very important thing that I have done is, I have tied up with at least 25 chartered accountants in Jamshedpur and made them our business partners. What I have realized is if we do not keep the CA's in good humor, then a lot of their business which will come to them will not come to you. Even for these smaller locations, I will be tying up with CA's and working with them.