WF: What prompted you to set up a financial advisory business?

Shyam Singhania: During my MBA in Delhi, I did a project on mutual funds - that kindled my interest in this business. On completing my MBA, I joined Bluechip and worked under Mr. Ravi Kohli for a year. That gave me a very good exposure to the financial advisory business, dealing with clients, handling queries etc. When my parents called me back to Guwahati, I went back and started my own financial advisory business in Guwahati. I noticed that advisory in Guwahati was very nascent - there were hardly 10-15 people in this business, when I started in 2003. Having seen how this business can be run and scaled up in a big market like Delhi, gave me the confidence to start out in a market which was largely vacant - at that time.

WF: Tell me about the Guwahati market - about investor preferences, understanding of markets, appetite for risk etc.

Shyam Singhania: Basically people here are very conservative towards their investments. LIC and post office are the most popular investment choices. Hardly 2-3% of investors invest in mutual funds.

My client base is largely the service community. While I have convinced all of them to invest in mutual funds, most of them also invest with LIC. The business community prefers LIC and instruments like NSCs - because they can get a loan facility against these instruments - which can help them when they need it for their business. Stock trading is quite active among a small section of the business community. The service community has largely stayed away from stock trading.

Businessmen in the north-east have seen a lot of incidents of extortion etc - that also fuels the desire to be adequately protected with LIC policies.

HNIs in Guwahati are also quite risk averse. They invest in debt funds, FMPs etc - but only a very small portion in equity funds. Capital protection is a big concern even among HNIs. I suppose some of them feel the business environment is a little uncertain - which makes them want to protect their savings very carefully. They don't want to lose their hard earned income.

WF: What is your AuM and client base now?

Shyam Singhania: My AuM is around Rs. 30 crores, which comes from about 550 families - around 1350 investors. About 95% of my clients are retail investors and they are largely service community people - who work for private sector as well as in Government jobs.

WF: How has the advisor community grown in Guwahati since the time you started in 2003?

Shyam Singhania: From hardly 10-15 in 2003, there were over 100 IFAs in Guwahati by 2007. Post Aug 2009, there are only 20-30 IFAs left, who are sincere about this business. The majority have left because they are not able to charge their clients.

WF: Have you been able to switch over to a fee model?

Shyam Singhania: Yes, I am charging 100% of my clients. I charge 1.5% on lumpsums and for SIPs, I charge Rs. 250 per application, irrespective of size of SIP.

WF: That's really encouraging. You must have found a lot of customer resistance?

Shyam Singhania: One or two clients were there, they have gone to other distributors - I did not mind that. Without fee I am not going to do my business.

WF: What are some of the things that you are dong differently, which enable you to charge a fee - in a market where over 80% of advisors are not able to charge fees?

Shyam Singhania: Basically, I am only into the mutual fund business and nothing else. It's my bread and butter and I can service my clients at any time of the day. I don't mind doing these things. To deal with servicing issues for my retail clients, I have created my own website so that they can login there and see their portfolios and all. So I am giving them those facilities because now it is very difficult for me to give them the services of sending them their portfolio on a monthly basis.

WF: Do clients actually go and login into the website and download their portfolios? Are they tech savvy enough?

Shyam Singhania: Most of my clients are well educated and are comfortable with technology. So, I don't have problems in getting them to use my website.

                                                                         Shyam Singhania won the runner-up award for Eastern Region - Non
                                                                         Metros for new SIPs registered as well as live SIPs as of Mar10 at
                                                                         the Wealth Forum Advisor Awards 2010. Aashish Somaiyaa and Ranen
                                                                         Gandhi of ICICI Prudential AMC - sponsors of the awards - present him
                                                                         with his richly deserved trophy.

WF: You are one of the most successful advisors in the Eastern Region in terms of new SIPs registered - you've also picked up our Wealth Forum Advisor Awards for SIPs. What are some of the things that you are doing to drive your SIP business?

Shyam Singhania: My SIP clients are generally in the 25 - 35 age group. I have been focusing on children's education and retirement planning. I always encourage clients to go for SIPs - and dissuade them from doing lumpsum market-timing oriented investments.

I try to get my clients not to look at markets daily - but focus on their goals. I always start a new relationship with a SIP. SIPs build long term relationships with clients - lumpsum investments do not. Salaried people can always find the money to start a SIP at any time - they may have lumpsums only 1 or 2 times a year. It makes much better sense to get them to start with SIPs rather than wait for that lumpsum amount to be available for investment.

Clients are not really that keen to keep monitoring markets on a daily basis. They ideally want a long term plan and are happy sticking with that, if educated properly about the benefit of executing long term plans through SIPs.

My advice to clients is very simple - first go for term plans and then whatever money is left from monthly savings - start SIPs. In SIPs, we encourage only long term SIPs - 5 years to 20 years. If clients ask us to start a 1 year SIP, we reject the application. We do not want clients who will do only a one year SIP.

WF : How do clients react when you refuse to entertain a 1 year SIP?

Shyam Singhania : See, what I am advising them is in their best interests. If I listen to my clients, I am not really their advisor. If I am their advisor, they should listen to me.

WF: Industry statistics show that we are having continuous redemptions on a month-on-month basis. We are told that clients are worried about market levels and are therefore booking profits. That's quite at variance with what you've just said about your clients behaviour. Why are we seeing continuous redemptions ?

Shyam Singhania: Basically, investors have not been educated properly about how to invest. If investments are made on the basis of the investor's financial goals, it will remain for long term. But, so many people show fancy 6 month and 1 year return charts to induce people to buy equity funds. When you sell return charts and investors don't see those returns in the near term, they get disillusioned.

Secondly, this race for selling the current best performing fund is something I cannot understand. The best performing fund over last 6 months can well become the worst over the next six months. Its always better to choose funds with a solid long term track record - and don't worry about their rankings on a month-on-month basis.

The other factor is that after the crash, more people have started going for safety first. FDs and LIC policies are becoming more popular.

WF: Given your fantastic success rate in charging fees - especially in a smaller city - what would you suggest advisors do to enable themselves to begin the journey towards a fee based practice ?

Shyam Singhania: First of all, I think the biggest problem is that distributors themselves fear that clients are not going to pay. They must first overcome that fear and start a conversation on charging fees. Until we ask clients, they are not going to pay us.

Secondly, upgrade your level of service. Invest in software, create a website, make sure you are servicing your clients the way they want, to the best of your ability.

Once your service levels are good and you overcome the fear of asking for fees, you will find many clients willing to pay you - and you will find some who won't pay. Its better to let go of clients who won't pay and focus on acquiring more clients who will pay for your superior service.

WF: But, surely you must have come across clients who "shop around" for the best deal….

Shyam Singhania: Recently, one of my clients came and told me that his bank is not charging him anything - so why should he pay me. I told him to go ahead and invest through this bank. Then he found out later that the bank was deducting a service charge from his account on his mutual fund transactions. He came back to me, said that the bank cheated him - and that he was better off paying me a fee transparently.

If you have a strong relationship with your clients and you are servicing them honestly and efficiently, I don't think you should worry too much about clients shopping around.

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