12th June 2011

WF: What brought you into the financial advisory profession, and how did Asset Managers happen?

Surya Bhatia: I am a chartered accountant who found pure audit and tax work slightly monotonous. Some people I knew were starting up a venture with funding from Intel Capital in 1999-2000, when the dotcom boom was on. Those days, there were very few wealth managers and I thought no harm in trying it for few years. If things didn't go well, I could always go back to my accounting profession. I joined a firm called Parasmoney (now called Allegro) and worked there for three years. I then left them and started on my own in September 2003.

WF: What prompted you to branch out on your own rather than work with Allegro?

Surya Bhatia: The people of Allegro were ex-Arthur Anderson folks whom I knew very well and shared good vibes with. Since I was already independently handling client relations segment, I thought with three years' experience, no harm in branching out on my own, just to see if it worked!

WF: How will you describe your journey so far as an entrepreneur? What are some of the high points and some of the challenges that you faced?

Surya Bhatia: Good and bad. Every day was a learning experience what with meeting new people, new challenges, new tasks. Just as soon as you think you have mastered something, life has its own way of throwing new challenges at you. Our clients are all well educated, hence the kind of queries we get from them keeps us on our toes too. We have to keep learning to answer them. That's the good part.

The one thing that is really lacking when you are an entrepreneur is training. If you are in an MNC, that comes automatically but when you are on your own, your personal grooming and development suffer. Because we have to do everything ourselves, personal development takes a back seat as you have no time for it.

WF: You mentioned that your clients are very educated and knowledgeable. Can you tell us a little about your business model, the size of your business, the client profile and your team?

Surya Bhatia: We have built up more of a referral base than a business model as such. Since we work on a referral basis without any cold calling, our client base also tends to be mostly corporate executives and professionals. We are more of a family office for many of our clients because we try to do complete handholding across the spectrum from an investment perspective. We cover not only investments but look at the taxation part for the client too. Our typical threshold is Rs. 1 crore in financial assets for any family who we serve.

We have a two-wing set up, one is private wealth management and the other is a chartered accountancy firm. We manage close to Rs. 250 crores just in mutual funds. Our total assets would be nearly double that amount covering around 200 families. Our total team strength is around 15 people, including the taxation wing, with four people in the advisory mode.

WF: One challenge a lot of advisors have is ensuring consistency of advice beyond themselves. When you hire people, how do you ensure that they speak the same language and give the same quality and consistency of advice that you do?

Surya Bhatia: Not easy, that is one of the biggest challenges you face, because you can't create clones of yourselves! So you have to pass on the work to your team and peers in a gradual manner. We ensure that anyone we hire first goes through the process of operations. He has to observe the entire process, how we work, how we actually address the client's concern to his/her satisfaction. The challenge lies in how you make sure that your team stays consistent.

The negative aspect of this is that you can't have many people out on the street and still offer the highest level of services to your existing clients. If you are in the mass market game or are targeting mass affluent clients, you can create models and run the business on those models. But, if you are creating a niche in private wealth management, its difficult to grow fast. You realize the limitations and then see what you really want to achieve.

WF: Would your principle competitor segment be private banking teams from global and Indian banks?

Surya Bhatia: Typically it would be private wealth managers and bankers but I think our competition is ourselves, how many clients we can service, how many hours we can work, etc.

WF: How do you actually ensure that you stay a step ahead of the competitors who have resources, brand etc? Why should a prospect HNI choose Asset Managers over a big MNC branded private wealth management service ?

Surya Bhatia: The kind of services we offer our clients is our USP. There are not many people who offer advisory services along with taxation advice and that's where we have the edge over others. When we offer investment advice, we look into the taxation aspect of it too on the client's behalf and having three chartered accountants in my team of four advisory staff is a big advantage. We see what the clients want from a taxation perspective, and sometimes the call we take is more tax efficient. We file their returns, attend to scrutinies - everything relating to their personal taxation, in addition to managing their wealth. That kind of a comprehensive service is not something that banks can offer.

WF: How have you fared in transiting towards the fee-oriented model?

Surya Bhatia: Good actually. I am saying this because right from day one ours has been a fee-based model. Since we have always been charging fees for our services, maybe now we can increase it! Everyone is hit on the revenue side but the fee-model still works for us.

WF: What kind of fee model do you have?

Surya Bhatia: We charge a flat amount and not AUM based unless the client wants that. We give our clients the option but we prefer the flat-fee model.

WF: If it is one crore how much would a client pay you as an annual charge?

Surya Bhatia: The bottom line is the kind of service the client wants. We have devised various fee structures which we share openly with all our clients. We just ask the client which model he wants and whatever is feasible for the client, we start billing him on that model. Models vary based on the extent of tax and wealth management services that clients wish to avail from us. It works out to anything between 0.25 to 1% of assets.

WF: I notice that over the last few months, you have been steadily building your media profile. Considering that you offer niche service, does this help at all with client acquisition? Do you get a lot of leads that are not worth your while since you do not offer a retail proposition?

Surya Bhatia: Yes, it works both ways. Sometimes we get good leads which don't materialize. Other times, you get leads which you don't want to follow up. The advantage of media profiling is recognition. When a prospective client recognizes your name, it puts you in a better light. It's a marketing strategy.

WF: From an overall industry perspective of the advisory profession, what are the biggest challenges that advisors face and how should one meet them?

Surya Bhatia: Discounting the fees part, the biggest challenge right now is training. Most of the IFAs lack domain knowledge. They are not aware of the nuances of the products they sell and hence don't understand how to pitch the products. Selling a product just because the fund house offers a product and brokerage is paid is the last thing anyone should do. Anyone who comes from a fund house is biased towards his own products. We are bombarded with so much information that deciding which products fit your clients may not be easy. So I think the challenge lies in the training which is currently lacking from individual fund houses. A platform, maybe it can come from your side, needs to be there to educate them.

WF: Yes, we do conduct practice management workshops for precisely this reason, and we work closely with some fund houses to offer these workshops to their IFAs. But, if I may come back to my earlier question, a lot of people have been writing off the future of the advisory profession as the margins are thin and charging fees has been a challenge. How do you see the future of the advisory profession?

Surya Bhatia: I don't know why people have this apprehension that advisory services will not do well. It is your own conviction that gets enhanced if you are reasonably qualified and have the professional knowledge to back you up. Like I said, it all comes back to training. When you have training, you gain confidence and the client senses that in you and respects you as a professional. Once the client does that, I don't see why he will not pay you for your time. You need to understand your strengths and offer niche services. Nothing is easy in this world! You need to be clear what you want, strive for it and build it up.

WF: Absolutely. Finally, what are your growth plans for Asset Mangers? Where do you see yourselves five years from today?

Surya Bhatia: We don't have any specific numbers in mind but otherwise the sky is the limit! We work from quarter to quarter and a five-year stretch looks too long for us. What we really want is to be recognized as good advisors.