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WF : Heartiest congratulations on your firm being conferred the prestigious "Best Institutional Financial Planner" award at the Money Today - FPCIL Awards 2012. What in your view are some of the factors that led your firm to win this coveted award?
Lovaii : Many thanks. It is always a joy to win any award, but this one is special as it covers the core of our business -- financial planning. The criteria for the awards covered financial strength, prudence & performance, size & scale, product effectiveness, customer service & satisfaction (highest weight), operational effectiveness & risk management and regulatory compliance. But above this all, my belief is that the team that comprises International Money Matters helped us to get there.
WF : Can you please take us through a brief journey down memory lane from the time you started your financial planning practice to today, when your organisation is recognised as the best institutional financial planning firm in the country? What were the key milestones in your journey? What were some of the biggest challenges you faced and how did you overcome them?
Lovaii : Challenges, in my mind, are opportunities, waiting to be tamed first and then exploited. The past 11+ years of our business has seen many ups and downs, starting with the tech bubble burst. It's not been just the markets but also the market makers, aka regulators, which allowed us to innovate and survive. I suppose it may be true of any business, but if one believes that there is just one way of surviving, and growing in this industry; that's a sure fire recipe for disaster.
I started the business with two simple objectives: to act in the client's interest (which very few were doing then in 2001) and to educate my clients so that they are informed in the sphere of personal finance. (I did some sort of a financial plan when I was 38, and wished someone had told me at 28 what to start doing.) They say that a tall multi-storey building may look beautiful but the strength of the foundation determines how it weathers many a storm. I felt that if I follow these two guidelines, I would survive, and the building would get taller floor by floor. It started as a personal passion, and one of the challenges was to ensure that this passion was translated to the team as well.
Among the milestones and challenges of which there were many, I would like to highlight two. In 2003, I started charging fees from my clients. Some of my early clients actually asked me why I was not charging a fee as far back as 2002. It took some personal market research and guts before I did start. My thought at that time was: "If I don't put a value on my services, no one else will." To the disbelievers who say India is not ready to pay fees, I have a simple question to ask: What will make your client wake up one day and say, from today, I will pay you fees. You have to provide value and demonstrate/ highlight that. We did lose a few clients initially but we were happy to let them go, as this (fee-based) was our business model.
As a financial planning firm acting in the interests of clients, we always believed that our value will be noticed and appreciated when markets were down. We got the answer in 2008. During that tumultuous time, when equity markets fell 35% (in 2008-09), our assets grew, we added clients; but we ended up making a cash loss. We felt vindicated that we had acted in our clients' interests and parked their funds in the money market rather than in equity funds - we may have lost the upfront commission in that year, but we went up many notches in the eyes of our clients.
WF : We see in India as well as in many developed countries many successful financial planners but very few large financial planning organisations. What are the key challenges that come in the way of a financial planner growing into a leader of a large team of planners? How do you overcome these challenges?
Lovaii : Managing people has to be one of your strengths if you need to lead a team. I was fortunate to have spent 18 years in the corporate world before starting International Money Matters (or Money Matters as it was in 2001), including 10 years as part of Management Teams in different organisations. Then of course is the challenge of retaining employees, while asking them to function as owners or entrepreneurs.
What we have followed is to ensure that there is a high level of learning for new entrants, and pack it with higher responsibilities for them so that they are continuously motivated and challenged. It could take a couple of years or more to get the employees to think and act in this mould. Thus far, I would say that we have succeeded.
The other factor to remember is that this is a marathon and not a sprint. So all decisions on costs (I look at most of these as investment) have to be taken with that perspective. Processes are as important as sales and delivery; and some spending on technology is essential.
WF : Some people worry that quality and consistency of advice may suffer as a firm adds more and more planners to its team. Is this a valid concern? In what ways have you tried to ensure quality and consistency of plans and advice as your organisation has grown over the years?
Lovaii : This is true. What we have done is to have a central financial planning and research team which drives the organisational decisions, and which lays the boundaries within which the creativity of relationship managers is allowed to be exercised. I have been blessed to have most of my senior team intact - my first two employees will complete 10 years in the next couple of months; and they along with other team members ensure that newcomers get to speed with our beliefs and processes quickly. So while the relationship manager has met the client, he is part of a team which discusses the financial plan workings and document along with this central team, so that the quality and consistency is maintained.
WF : With the advent of the advisor regulations, how do you see distribution and advisory models evolving over the next 3 years?
Lovaii : Actually, it is too early to say. However, my belief is: if you are acting in the client's interest, if you are charging fees for advice, if you are transparent with your entire earnings (if the client desires to know), and if you have processes & team members to ensure that there is no vested interest between the advice and execution/ distribution, there is nothing for you to fear. For all this, corporate or professional structures are better suited, and hence there may be a movement towards this structure. Logically, creating umbrella brands may work. For example, a planner/ advisor in West Bengal, or Punjab, may be interested in using the research and reporting services of a firm such as ours; while ensuring they deal with their clients and follow the ethics and standards, as well as processes of our firm. I think the first steps in these directions will be taken within the next 3 years.
WF : You are Bangalore based and a member of KAMFA. What prompted you to join FIFA? How has your experience been, working alongside your fellow FIFA directors and members?
Lovaii : When I first heard about FIFA, I was reluctant to join. I had an apprehension that they may be large distributor biased, and hence the issues they may take up may not be in sync with my beliefs. However, as I met the founders over a few months' time at common events, I realised that they had a genuine concern for the community. They had a huge locational advantage of being in Mumbai and being physically close to the regulator and other industry bodies. I could choose to remain on the outside and critically analyse all the steps they took; or I could join them and represent my views to them. I chose the latter. I must say that my experience has been extremely positive. While I am one of the few fee based financial planners on the Board, they have always been open to listen to my views. The visit that I made with two of my fellow Board members, Dhruv and Roopa, to Indore for a day long trip in February where we interacted so closely with advisors, allowed me to know them better. We followed that up at FIFA with a session for investment advisors in Kolkata a few days ago; and I must say that those two days have been extremely satisfying. Since I am part of the industry at virtually the sunrise stage, I personally believe that we need to contribute and shape the industry rather than complain about how it is shaping up, or how the powers-that-be are not doing things which are to my advantage.
WF : There is a perception that FIFA is ideally suited for larger IFAs and that an alternate association is required to best address the issues of the small IFA and give him his due voice. How valid is this observation, in your view?
Lovaii : I think the roles of local and central associations are different; they are not dependent on size. Let me take the example of the Indore association. They have been meeting regularly every month, if I remember right; and will ensure that their members get educated, share knowledge and network to resolve problems or issues that they face. They meet locally, and the inputs that they get are local. Once they become members of FIFA, they now have the opportunity of getting "advice" from other advisors - I am not even saying more experienced ones. Personally, I believe I learned a few things from the local Indore advisors and the local Kolkata advisors when I visited them. The key is to keep your mind open, and use every interaction as an opportunity to increase your learning and broaden your horizon. So, to answer your question, a local association can conduct programs at the local level; and an association like FIFA could hear the views of these associations and discuss them with industry bodies and regulators. FIFA has encouraged outstation members to take up Board positions and ensure their views are heard, and I am one prime example.
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