WF: What is your business resolution for the new year?

Ravi Kohli: It is not a tough one; we hardly make any new resolution. Our journey of creating wealth remains the same; we are on the right path as far as the wealth creation is concerned for our clients. We really wish that in this New Year, more wealth flows into our clients' pockets. We will put in our best effort that with our credible advice they should be more wealthy and rich in this year.

WF: People are worried about a faltering India growth story, about high inflation, high deficits, FII outflows etc. What is your market out look for 2011?

Ravi Kohli: Well, if we are talking about the short term, there can be some concerns. But if we scratch our memory cells - when we started in the year 2000 - the last decade, we started with a massive fall in the indexes from 6000 down to 2700. The rest is history as far as the last decade is concerned. The last decade has been a phenomenal decade where 7 times or 8 times value creation had happened in equity performance. If this is some indication, this year - the start of a new decade - we have begun with a little fall in the indices. If you are talking about the next 5, 10 years, I think we are in a sweet spot in the history of Indian wealth generation and I am not too worried about the short term. Yes we have to have a cautious approach. We have to really respect our asset allocation. But as far as the medium to long term growth is concerned, I am pretty satisfied that this is the best time for wealth creation in India.

WF: How do you see the business environment this year for advisors and what do you think will be the key business drivers for the advisory profession?

Ravi Kohli: As far as the environment for advisors in the year 2011, it depends on how advisors have responded to the changed environment brought about by SEBI. Some advisors have changed their business models quickly and are looking at growth. Others who are reluctant to change will perhaps find it tough.

My advice to my fellow fraternity members is that we must change immediately, very quickly on to the new system. We have to understand that we have to deliver the service now at a lower cost to the investor. Therefore, managing your costs while maintaining high standards of service is the key requirement. For this, you must use technology wherever possible.

WF: What are some of the ways in which you have changed either your advice or service delivery to clients using a lower cost approach?

Ravi Kohli: We are increasingly dependent on technology and the technology is going to become an increasingly relevant delivery mechanism.

We have revamped our website and now have allowed our investors to access their portfolio through the web, because they can be anywhere in the world and they can access their portfolio.

We will be shortly introducing a web-enabled transaction facility for our clients on our website. We also realize that mobile is another significant technological marvel that we have to leverage. So what we are now planning to do is to give access to everything including investments and portfolio, on the mobile platform.

We have a firm belief that technology will not only reduce the cost but also improve the efficiency of delivery by reaching the customers hand directly with very little lost data in the process.

We believe that a centralized advisory system can be put in place with the help of the technology.

WF: In terms of product segments, which products do you see yourself focusing more this year - equity funds, debt funds, PMS, real estate, PE funds …

Ravi Kohli: This year, we will focus on equity funds, followed by debt funds and then real estate funds through the PE route.

We firmly believe in the wealth creation potential of equity funds. This year, it is likely that debt funds can also give a decent 10-12% return over a 1 year holding period.

A large part of household savings are going into real estate. We would like to participate in that part of a client's wallet too - by offering real estate funds and products.

We have decreased our PMS focus over the last couple of years, for various reasons. One, it is becoming very expensive. The time has come for us to give products to the customer at a much lower cost. So PMS does not make sense as far as the costing is concerned. PMS products are also not outperforming good equity funds. So, why give clients a product that underperforms, is costly and is also tax-inefficient?

WF: Will you continue your focus on the HNI segment or do you have any plans to look at retail clients as well?

Ravi Kohli: Well, we have focused all our energies on the HNI segment - that is a space we understand and we have built our skill sets to serve this segment. We are not averse to retail clients - but, you know, when the World Wealth Report says that there is going to be a bug surge in number of HNIs in this country, we are better off continuing to focus on this growing segment.

WF: Who do you regard as your biggest competitors in the segment you operate in?

Ravi Kohli: Foreign banks are perhaps our biggest competitors. They have a slight edge over advisors in the sense that they have access to the accounts of their clients to those and know how much money is flowing into their account. In our case, we have to be in constant touch with the customer to give him various products, to review his portfolio - only then he tells us that he has some money to invest. Whereas in the banking system, they already know that this client has some money lying in his account and they can always approach him.

WF: In light of the recent fraud case in one of these foreign banks, do you see the wealth management business changing in any manner? Do you see this as a positive for advisory firms like yourselves?

Ravi Kohli: We have been one of the few voices, who have been raising at various platforms that third party products should not be sold from the banking platform. In case banks are keen to sell third party products, they should separately setup an NBFC and sell those products. It should not be sold within the bank's premises.

When you allow both these services to be mixed up into one, you will get more of the kind of frauds that we saw in Citibank.

From an advisor's perspective, yes, this incident makes it a very challenging time for foreign banks - and is therefore an opportunity for advisors. We have always been advocating the merit of unbiased advice - somewhere that seems to be missing in banks. They have their near term revenue compulsions, we have our long term client relationships to protect and nurture.

I think SEBI will come out with comprehensive criteria for running wealth management businesses - which I believe should include minimum capital, education levels and experience levels. Then, it could be a new beginning for the wealth management business in India.

WF: Are you looking at alternative operating platforms this year? Will you look at the stock exchange platform for example?

Ravi Kohli: We have been exploring the possibility of various platforms, including the stock exchange platform. We are excited as and when these platform emerge including the stock exchange platform. I believe there are some hiccups in the exchange platform - once they are settled, they can become very effective in terms of doing transactions.

Platforms will become important, going forward - in terms of enabling advisors to offer a better service to clients and to lower our costs. We will be very happy to switch over to a good platform. I am sure there are many people who are working on platforms - in fact I wish that you should also launch a platform.

WF: Thank you for your encouragement - we will certainly look at introducing services that help advisors serve their clients better. There is also some talk about a possible AMFI move to revive the AMFI platform. Would you say that is the step in the right direction?

Ravi Kohli: I think this is not AMFI's business, this should not be seen as a business opportunity by AMFI. Because AMFI basically is a de-facto SRO. I think it is not the job of a regulator or an SRO to create a platform and start managing it. I think their job is very fixed and they should stick to their basic job of framing guidelines for mutual funds as well as distribution.

It would be better if AMFI gets all the big players - CAMS, Karvy etc to create a platform which they can run on a commercial basis. Let them invite many players - let competition take care of the commercials.

WF: Looking back at year 2010, what would you say were some of your most successful initiatives you implemented which either helped drive up revenues or helped control costs ?

Ravi Kohli: The beginning of last year, I remember meeting all our clients and asking them to come on board on our fee based advisory platform. That was our biggest initiative. I am very happy to share that almost 70-75% of our investors have now come on the fee based advisory platform. Further, 100% of our new customers are on the fee based advisory platform. This initiative has helped us come back to our 2007 levels of revenues.

WF: Is your fee structure now at an AUM level or at a transaction level ?

Ravi Kohli: At present we are running both these models. We give the choice to customer. If the AUM is very large and they do not want to pay a fee on overall AUM, then they opt for a transaction based fee. If some clients want to switch from one type to another, we accept that too. It is a very transparent system, we are offering them either charges based on the transaction or the AUM based fee.

WF: And finally, as a senior member of the advisory fraternity, what would you suggest to your fellow advisors in terms of the top focus areas to drive growth this year?

Ravi Kohli: I think we have to really put our heads together and have to think about how we are going to effectively educate our customers. We must admit that we have not created a big enough base of mutual fund investors. We have a lot of work to do in getting more investors comfortable with accepting mutual funds as a great wealth creation vehicle.

Second, we must always focus on asset allocation. In the coming years, you will not be able to sustain if you have a lop-sided, product led distribution model. Getting your clients into a proper asset allocation and maintaining it for them is the only way forward.

I would urge advisors to help create portfolios for their clients - not with a 1 year view - but a 5-10 year view. Have conviction in what you advice, and stick to your convictions.

Lastly, focus on your core competencies and focus even more on enhancing your core competencies. Keep learning all the time !

               

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