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WF: Its not very often that we see AMC sales professionals join hands with an established distributor to set up a new firm together. What led you and Rahul to decide to join hands with Janak and set up Sapient Wealth? How has your journey been over the last 4 years?
Amit Bivalkar: Rahul and I worked for AMCs during the crash of 2008 and its aftermath. We noticed that many calls were coming to us from anxious investors, who did not have advisors to turn to, because many distributors were not really holding their clients' hands - maybe they found facing these clients a little difficult after hardselling products during the peak. The opportunity to set up an advisory oriented firm that focused on sensible guidance was very obvious to us. If we could just focus on good advice and not on commission, we could set up a successful practice - this was very clear to us. But, it took a while to actually resign from our jobs and team up with Janak - we finally set up Sapient together in June 2009. Rahul and I belong to Pune, we have our roots and connections here - so it was natural for us to look at setting up our base in Pune.
While Rahul and I had over 9 years experience in the AMC world and before that in distribution, Janak with over 14 years experience in distribution, had a successful HNI oriented practice with an AuM of around Rs. 50 crores. Janak brought in his AuM into Sapient, and we therefore started off with an AuM of Rs. 50 crores in 2009, in July 2009.
Sapient means collective wisdom, and that is the spirit with which we came together and grew the business together, by complementing each other well. When we set up Sapient, distributors were busy exiting the business, leaving investors without any support or guidance. Investors were not going to many distributors, and many distributors were not going to their investors. In a sense, we had an open and empty road to drive in and reach our destination.
From the beginning, we carved out distinct customer segments that each would focus on. Janak continued his focus on the HNI segment. I took on the responsibility of building the corporate and institutional business for Sapient and Rahul took on the task of building the retail and trust segments.
The other clear strategy we adopted from day 1 was to be a super specialist advisor in the mutual funds space. We don't do insurance, we don't do broking, we don't do bonds - we have a very clear focus on being an expert advisor in one space - mutual funds - and we put in all our efforts to build expertise in this one space.
From a start of Rs. 50 crores in July 2009, we grew well - we closed March 2010 with 200 crores AuM. By March 2011, we crossed 350 crores and by March 2012, we crossed 500 crores. As of now, we are at Rs. 630 crores.
Our HNI book is in excess of Rs. 300 crores today. The corporate and institutional segment is now around 200-250 crores and the retail and trust segment contributes around Rs.100 crores in AuM. We have over 1600 clients, of which in the HNI segment, we serve about 250 families.
In terms of product mix, about 150 crores is in liquid and FMPs and close to 500 crores is in what we classify as full fee assets - equity, hybrids, short term debt funds and other income funds. Out of this, about 100 crores is in equity and hybrids and the rest is in income funds which are full fee products (products where AMCs charge full fees and therefore pay normal commissions - as opposed to liquid and FMPs which are low fee products).
WF : That's an amazing 12 fold growth in 4 years from 50 crores to 600+ crores - and an extremely well balanced growth in terms of client segments. And, what's really commendable is that you have managed this scorching growth in the midst of volatile and weak markets and very poor investor sentiment. What do you think were the strategies that helped you achieve such stupendous growth?
Amit Bivalkar : The Pune market is around 26000 crs in MF AuM, with the corporate and HNI segments both accounting for roughly 40% each and the rest is the retail segment. In the corporate segment, we focused from day 1 on only a handful of good SME and corporate clients, rather than running after all large corporate investors. We focused on delivering good advice on the debt side and also built a strong relationship with the promoters, which in turn opened the doors for managing their personal assets.
The HNI segment in Pune is still quite conservative - perhaps because we still have a large segment of retired people in this city. Our strategy therefore has consistently been a sharp focus on the debt side, but equally ensuring that all appreciation goes into equity. On a 200 crore corpus for HNIs in debt funds, this means an appreciation of 20 crores a year, which is systematically put away into equity funds, in order to ensure that our clients are able to stay ahead of inflation over the long term. We have today over 1900 live SIPs in equity funds, with an average ticket size of Rs.5800.
One principle we have always followed from day 1 is that we never recommend any fund to a client wherein either Janak or Rahul or I have not invested our own money. I think this is a litmus test which not only keeps us sharply focused on selecting only the best funds for our clients, but also gives reassurance to our clients that we put our money where our mouth is. There was a time when we had over Rs.170 crores in FMPs which as you know earn only 5 paisa. We did that because we were convinced that at that stage FMPs were indeed the best option for our clients. Over time, a large proportion of that money went on maturity into duration based and accrual based funds, based on client needs, and the appreciation is steadily going into equity SIPs.
Another important principle we adopted is to keep things simple in terms of choice of products. We have never sold any structured products, no ULIPs, no real estate funds, no PE funds - just plain simple mutual funds with stable track records. We prepared a list of products that we believe HNI clients should not buy and spelt out why we believe these are not good for them. When we talk through this list with prospects, invariably they find that somebody else has recommended to them exactly these kind of exotic products.
Janak and I are active Rotarians and this is a good source of referrals for us. We have been fortunate that a few leading doctors who are happy with us have helped drive a number of referrals for us from the medical fraternity.
We have also become selective on the kind of clients we serve. In the beginning, we were hungry for growth and therefore welcomed any business that came our way. But over time, we consciously stayed away from clients who are either politically sensitive or those who may not meet PMLA requirements. This has helped in keeping our energies focused on genuine advisory related matters.
Another strategy that we are adopting is to encourage friends who are senior RMs in banks and distribution houses, who may want to become entrepreneurs, to associate with us through a sub-broker route. We provide all the research and infrastructure support and leave them to do what they do best - interface with their clients. We also go on joint calls with them for important prospects, where they need some support. We give them a monthly retainer and adjust accounts on a quarterly basis, where the retainer is netted off against their commission income and the balance is paid out to them. If there is a shortfall, we carry it forward to the next quarter and help them set it off later. We have three such people who have associated with Sapient, and I expect this segment to grow in the coming years, primarily because compliance costs and record keeping costs in this business are going up, and often this becomes an impediment in unshackling the entrepreneurial spirit that may be there in many such experienced wealth RMs. By taking on these responsibilities, we help them pursue their career goals.
I think we have used technology to help serve clients better and drive business too. We were the first in Pune to launch a mobile portfolio viewer, 2 years ago. It works on almost all the platforms Android, Blackberry or GPRS phones. On your mobile phone, you can get transactions for last month, your SIP details, your portfolio information, your Capital Gain Statement. This also gives you the XIRR for all the funds you had redeemed as well. Plus this gives you a benchmark comparison and this also gives you a pop up for reminders for maturities of FMPs or if your STP is getting over or your SIP is getting over. We tweaked this software and customized it to give clients an option to refer a friend through this mobile platform whenever they exit the application. Clients who are happy after using this application often refer their friends to us through this convenient referral mechanism - and we pass on these referrals to our sub-brokers.
We have been awarded a few times by CAMS as the largest user of the FINNet platform, which we use for scanning and submitting applications rather than physical submission. Currently we are running an SQL based software for portfolio reviews and we have couple of software which we use for research in equities as well as for mutual funds research.
WF: You have adopted very well thought out strategies to build your business. What do you see as the next growth driver for Sapient Wealth?
Amit Bivalkar: I think the SME segment is likely to be our big growth driver. This is a growing segment in Pune - across verticals including IT, auto and other sectors. We are well equipped to cater comprehensively to their investment needs - whether it is the corporate treasury, the promoters personal finances, the investment needs of senior management or the financial planning needs of their staff. The more retail side - which is staff of these businesses are typically passed on as leads to our sub-broker associates.
In terms of the product aspect of growth drivers, we believe that our approach which has served us very well so far, will continue to support our growth. One fund manager taught us one sentence which I think is important. He said "Predictions of rain is not important, carrying an umbrella is". The umbrella for clients is debt funds. Once you have this umbrella, you can venture out in the rain by investing the appreciation in equity funds through SIPs, in an effort to stay ahead of inflation over the long term.
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