Advisor Speak: Straight Talk

6 golden rules to make your business regulation proof

Brijesh Dalmia, Dalmia Advisory, Kolkata

24th October 2016

In a nutshell

Distributors once again find themselves at a crossroads, their revenue and business models are once again going to see significant change consequent to another round of regulatory change. It's a story that's been playing out since 2009, and now seems to be moving into an even more challenging phase, with SEBI's RIA consultative paper suggesting radical change. How does one build a business model that is truly regulation proof? What should existing distributors focus on to meet and overcome the new round of challenges? What should new entrants focus on to build sustainable models? The straight talking Brijesh spells out 6 golden rules of success, distilled from his 20 years in this profession.

Investment advisory is a great profession to be in. It holds tremendous potential if you keep the following things in mind.

1. Integrity

Integrity is vital. It's like breath to investment advisory profession. If you get this right, you will reach the pinnacle of this profession. Protect the client's interest at all times. 'Client First' should be etched in every advice and service you provide. It is not going to be easy. Money is important and you may try to balance it out, especially in the early years. This will prove fatal. You may run a bit fast in the beginning but you will develop fatigue and lose the race eventually. Clients will settle for a little less return but will never deal with an advisor who lacks integrity. If you can pass through the test of 'integrity' each day in this profession, it will bring you huge fortune and you will become an icon in the industry for ever.

2. Competence

You must know your subject well. You must spend hours and hours in learning to make yourself equipped with knowledge to give the right advice. Using 'gut feel' is dangerous. Shallow knowledge is also not going to help. Convincing the client will not be enough. You need conviction. You must commit yourself to continuous learning till you stay in this profession. It must never stop. Time, resource and money should not be an excuse to gain knowledge. If you have decided to enter this profession, you better get yourself competence.

3. Client

Your clients are going to be your biggest asset. It is least likely that you will get big clients from day one. You may have to start small. It is your job to nurture them, guide them and walk with them. If you are not happy with a client, you can leave her but never talk ill about any client. Among a billion people, you just need a few hundred to make it big. You have to find them. You have to make sure they stay with you. Competition will be there at every step. It is upon you how you cater to your clients and how you develop the trust and relationship it needs to keep a client for decades. You can't expect all clients to be with you for life. Some will leave you for no reason. Some will go to competition. Some will die. Some will settle elsewhere and won't be interested in your services. All this is part of business. It is your job to ensure your clients stay with you. It is upon how this job is done will define how big you grow in the years to come. Remember, once you make a client; it doesn't become a guarantee of a lifetime. It is just a beginning and it is completely upon you to make it last a lifetime. Make sure you make loyal clients. For this there is only one rule; be loyal to your clients.

4. Revenue

The format of revenue may keep changing from time to time. It can be commissions. It can be fees. It can be both. As volumes go up and competition increases, revenues may fall. Whatever happens; to make money, the rule is simple; you must have assets under management along with client's trust. As far as you fulfill these two criteria, you will find a way for make money. Have faith. Guarantees usually don't always work.

5. Thing long term

This profession will yield great results in long term. I must tell you the definition of long term here. When I say long term, I mean 20 years and above. May be 30 years. So, if you are here to make some quick money, forget it. If markets are on a roll, if you get hold of some really big clients early on and if other factors are in completely in alignment to each other, you may make some money fast. I will call this being lucky. That's not the way this profession yields results in general. This profession is about compounding, both for clients and the advisor. The way it works is that you start small and you gain experience over time. You start with small clients. These clients over time will grow. Some of them will really grow very big. The key is to hold them for long, forever. These few will entrust their wealth to you and your assets under management will grow exponentially over long period. This is not going to happen in 5 or 10 years. The power of compounding takes longer. It will take 15 -20 years.

6. Take responsibility

You must take responsibility of your decision to enter this profession. Make sure you hold no one responsible tomorrow. Why I am saying this is because things will change in future. Nobody knows how and what impact it can have on your work. Whatever you build over few years may be washed away due to regulatory changes and other market forces. It may leave you frustrated, can have serious financial challenges and also legal constraints of doing business. You must change yourself. You must be ready to fight the odds. You must take responsibility of the situation and commit to overcome adverse circumstances. You can't hold the outer environment responsible because that will always happen and is part of every profession and even life. Your perseverance, commitment, hard work will definitely be tested more than once in the years to come before you hit big.

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