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WF: Can you give us a brief background of Investors Point ?
Chetan Shah: Investors Point is a firm, which was managed by two partners initially - Shaibal Bhadhuri and Ajit Kumar Rajak. These two partners started doing business in 1995 with the local people of Dhanbad - initially they started with FDs, LIC, postal schemes etc. I came in contact with them as a client in 1999. I was an investor in mutual funds - right from the starting when Kothari Pioneer Mutual Fund came in, I invested some amount in Blue Chip at that time.
The partners approached me and suggested that I join them since I had a good knowledge of mutual funds and good contacts. Till then we were very good friends. So I joined them. Before I joined them, Shaibal's elder brother also joined them. So we started just as friends who wanted to work together and going forward we thought we will make it a partnership firm, if we found all of us thinking alike.
The time when US 64 got into trouble was a very crucial period for us. We went through a lot of informative magazines did a lot of homework and through our knowledge we encouraged all the investors to get out from US 64. That was a turning point for us. A lot of clients started valuing our advice after that episode. Earlier Shaibal and Ajit were primarily into FDs, but later we started coming into mutual funds. Shaibal in fact encouraged us to concentrate on mutual funds because of his conviction that mutual funds would become very big and important in the years ahead. We do not encourage too much of company FDs - there are enough cases of companies not paying back on time.
In 2005, we made a formal agreement among us 4 partners in the name of Investors Point. Today, our MF AuM is around Rs. 40 crores.
WF: You have over 13,000 live investor folios to your credit - which is truly amazing. That's a figure that many advisors in much larger cities have yet to scale up to. How did you manage to build this large base? What is the Dhanbad market like in terms of savings and investment habits and preferences?
Chetan Shah: As far as the Dhanbad market is concerned, there is good money in Dhanbad market but the main problem here is that the maximum money here is unaccounted. Accounted money is very less. People over here go for fixed income investments; they prefer fixed income investments rather than mutual funds and all. But we were strong believers in mutual funds. We have a belief that if you want to earn a better return or if you want to create wealth over a long period of time, it is equities or equity related instruments alone that will enable you to do this. So we have gone through many magazines, we have gone through RBI data and lots of research where we have seen that equity funds have delivered a return of over 20% in the long term per annum. In comparison to that we have seen that other investment avenues are not that reward fetching. We told our investors - if you want to create wealth over a long period of time it has to be equity or equity related instruments and going direct into stock market , you might burn your hands, so mutual funds is the best thing.
Slowly and steadily when we started selling mutual funds in Dhanbad - we started in 2000 - it was a little difficult. After the twin tower blast in 2001, the market bottomed out. After 2003, the market started moving up like anything. We made our clients invest right from 2000. By 2004, they had made very good profits. Until 2004, we used to book profits very often - markets were not going one way up at that time. After 2004, we moved to a buy-and-hold strategy and recommended to clients not to book profits at every rise, but to hold on for the long term.
Shaibal and I have been very convinced about equities right from the beginning. Shaibal used to go to Kolkata often to attend seminars and in these seminars, he understood the potential of mutual funds to create wealth for retail investors. Our decision to focus on mutual funds as a wealth creation vehicle I think has helped us attract and retain many clients over the years. Today, we have over 2000 clients and over 13,000 investor folios in mutual funds.
In Dhanbad, there are over 200 advisors. But we are among the few who focus on wealth creation through mutual funds. We also started with FDs and fixed income instruments. But, we would always encourage clients who wanted to invest in fixed income to invest 25% into mutual funds. Hearing us, they would agree to invest 10% in mutual funds and the balance 90% in fixed income. Once they saw the returns from that 10%, they would then be willing to invest larger amounts in mutual funds. That's how we built up our business.
Shaibal Bhaduri and Chetan Shah of Investors Point, Dhanbad prove a point on market penetration in smaller cities by picking up
3 impressive awards at the Wealth Forum Advisor Awards 2010 - Eastern Region:
Highest Growth in Investor Folios - Winner (Eastern Region - ex Kolkata)
Highest Live Investor Folios - Winner (Eastern Region - ex Kolkata)
IFA OF THE YEAR - 2nd Runner Up (Eastern Region - ex Kolkata)
WF: Some people tell us that since the 2008 market crash, MF volumes have completely dried up in smaller towns. What is your experience in Dhanbad - are customers willing to look at equity funds now or they are completely shy of any risk ?
Chetan Shah: Yes, in Dhanbad as well, we saw that post the 2008 crash, investors were unwilling to look at equity funds. So, we also changed our strategy. We started advising clients to go in for debt funds and then gradually got them to commit STPs in equity funds from these debt investments. The STP strategy worked very well for us and we made money for clients. That strategy also strengthened our presence in the market and got us many clients.
WF: Is there any Institutional market in Dhanbad or is it largely only retail ?
Chetan Shah: It is largely retail here. There are very few institutional investors. It is difficult to get institutional investors from here, because they are very much rigid in their investment guidelines - they can only invest in gazette notified instruments - which are basically fixed income instruments.
WF: What changes did you make to your business model post Aug 2009, when entry loads went away and margins shrank in the MF business ?
Chetan Shah: Post august 2009 we were hit very badly in terms of business and in terms of revenue. We faced problems in the initial stage and clients were reluctant to pay the advisory fee. They knew about the entry load earlier which were being borne by them and now abolished, even then they were not ready to pay. They said that initially what happened is there was a system - it used to get deducted and go and we were not bothered about that. They said that they understood that when they invested 1 lakh, 2.25% was deducted and only the balance was invested - and they were ok with that. But, now that the entry load has been abolished, they did not want to pay us out of their pocket - because the system does not have an automatic provision for deducting charges now. So, this hit us very badly.
We had to have very serious discussions with our clients to make them understand that we deserved to earn from them for giving them good advice. We have started charging fees and clients are now paying us. But, we don't have a rigid fee model - it depends on what appeals most to a client. We have four fee structures - a transaction based fee, an AuM based fee, a profit-linked fee and the fourth is a pure fixed advisory fee. So we give this to all our clients and tell them to pay as they wish. Mostly we see that people over here are interested in transaction based fees. Very few people are there who say we will go for AuM basis, or we will go for profit sharing basis.
WF: What is your experience on actually recovering these fees ?
Chetan Shah: There are many clients who have paid us without any problems. The small clients they are paying. The HNI's I think they are reluctant in paying huge amounts, we are not rigid with them also, because we think that if we are very rigid they will move some where else. And at this scenario it is not possible to lose any of the clients.
WF: You said there are 200 plus distributors in Dhanbad. Are others too charging fees like you ?
Chetan Shah: Very few, the people over here are not only MF agents - they are also into Post office deposits, they are into life insurance and other types of products - where they routinely pass back some of the commission they earn. So when you pass on the commission to somebody on one product, it is very difficult for you to charge for another product from the same customer.
In our case, we have never given a pass back. So that was a major benefit for us when we shifted to a fee model. We convinced our clients that if they want good advice and good service, they needed to pay us a fee. And we do offer much better service than most people in our city
We have CRM tools, we give clients consolidated portfolio statements with all details, whenever they want. Not many people in Dhanbad offer the kind of service we do. Some of the AMC people tell us that our service levels are better than many people even in bigger cities like Kolkata.
One thing that we need to understand is that in order to give good advice, we have to be updated in this market, industry wise, business wise, we will have to keep ourselves updated. But keeping ourselves updated there are expenses for that. So you will have to charge for that. You will have to educate your investor and they will have to pay for that. So nothing comes out free.
WF: Have you considered using the MFSS stock exchange platform or any other kind of platform ?
Chetan Shah: No, not right now and we are not very keen on this change. We have heard that paper less trading and paperless business will come in and all the paper work will go away. But I think it is a very early stage for the mutual fund business right now. Very small amounts are coming into mutual funds. And getting so many changes very frequently and in a very short period of time, I think this won't help much. Slowly and steadily if changes come in, people will be able to grab it. But very fast change, I think many people will get hurt.
Today the situation in the Dhanbad market is that many advisors have left this business. But we think that this business is very good and we see this as a big opportunity to win new customers.
WF: Yes, especially if a lot of advisors are leaving, it gives committed players like you lot of opportunities.
Chetan Shah: Those people are going to search from any other advisor. So that may be an opportunity for us. As far as online trading platforms is concerned, my thinking is that people over here look at equity trading from a short term perspective and are comfortable with online platforms. I don't think online platforms are good for long term investments like mutual funds.
WF: What are you plans for Investors Point now and what do the next few years look like?
Chetan Shah: We see lot of opportunity in the market and our AuM right now is above 40 crores. We want to take it up to 100 crores in the next 1 year. We are working towards that - lets see what happens. Unless we don't think big, we won't be able to achieve.
We would also like to expand our product portfolio to general and life insurance. We are also going to take up the CFP course. We like to keep ourselves updated and sites like Wealth Forum helps us do that.
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