WF: Tell us a little about your background, what brought you into financial advisory and how has the journey been so far.
Pramod Saraf: I am a commerce graduate and did my CFP in 2009. I started my career as a tax consultant and realized that this was not my cup of tea and that I was more comfortable marketing financial products. I started with life insurance in 1997 and then gradually shifted to full-fledged financial advisory.
Swan Finance Limited is a group of three professionals working in three different areas, incorporated to give a common umbrella and a bigger size to the firm, with knowledge and experience sharing as well as reference generation as the primary motive of coming together. My partners are involved in fund syndication in the industrial financial consultancy. Our scale and profile as a group has benefitted my growth in this business. I believe strongly in the quotation 'Love the work in which you are involved and do it like no other can do better than you'.
WF: Pursue excellence and the results will follow - that's a great motto to live by! When did you move from an IFA to the Swan Finance umbrella?
Pramod Saraf: I was doing a radio show in 2006 called 'Hello Mutual fund', where I was the host. One of the listeners came up with a proposal for me to join Swan Finance which I did, after doing an initial due diligence on him and the proposal.
WF: Could you take us briefly through your business model i.e. the number of branches, client segments, number of clients, products and AUM?
Pramod Saraf: We work on a direct marketing model; there is no sub-broker system with us. We have offices at Indore and Bhopal. We have a clear segregation of client segments at different levels with HNI clients, mid-sized clients as well as clients with investments as low as 500 rupees. Our basic motto is to provide customer satisfaction to each and every investor. I have around 2,000 investors with an SIP size of 1200 and an AUM of around 90 crores in mutual funds with roughly 70% in equity.
WF: Apart from mutual funds what are the other key products that you advise?
Pramod Saraf: We deal with life insurance especially in the segment of term insurance mainly required for investors, and a bit with FDR and CD promotion also.
WF: You mentioned that you acquired the CFP certification in 2009. What prompted you to go for a CFP and in what ways has it specifically helped you in terms of enhancing your business?
Pramod Saraf: What actually happened in 2008 was that one morning I was on a corporate call to meet the CFO of a company for liquid treasury investment planning. After looking at my company profile, he rejected my proposal outright on the grounds that I had no professional qualification for it. I came out determined to equip myself in the area and acquired my CFP. The certification has been a confidence booster both for me and my clients. Incidentally, I was the second person in Indore who did CFP.
WF: In markets like Indore and Bhopal how do clients actually react when you talk to them about a financial planning proposition? Is there sufficient awareness of or appreciation for financial planning?
Pramod Saraf: In most of the tier III cities like Indore or Bhopal, most people have their basic personal investments and are very interested real estate. Their first choice of investment is real estate. Financial planning is therefore difficult here and a challenge for me and my colleagues. Awareness too was very less, but I think we IFAs and the AMCs have done a good job in creating awareness about financial planning since the last two years, so much so that now every third person who comes to my office or I visit asks about financial planning! We keep on creating awareness and now with the internet and television, financial planning is penetrating a lot. The one thing I must say is that in the age of the internet and TV, no town is a small town in terms of awareness. People see the same media here that they see in Mumbai and Delhi. That has helped enhance awareness a great deal.
WF: I understand that you recently rejigged your front office model to split sales and service functions. What was the rationale behind that?
Pramod Saraf: Actually I have around 13 people in my team with one branch head each in Indore and Bhopal. I have four front-office and two back-office people at Indore. At Bhopal, two people take care of the whole office. I realized that, with the earlier set up, sometimes clients were not comfortable with a particular RM or sometimes he was not available to the clients: sometimes with the RM taking complete care of the client, it was as if the office was no longer involved! This also gives rise to situations where an RM can potentially mislead a client or even create situations where frauds are possible - when the RM is the only point of contact for a client. So, what we did is that we split the sales and service roles, we gave service responsibilities to staff in our office and asked RMs to continue to do the sales and advisory jobs. That way, automatically a dual control system was established - which brings a lot more control for me on the business, derisks us from situations where RMs can misuse a client's trust and very importantly, keeps clients very happy because they can always get whatever information they want, much faster. If they had to depend on the RM for service issues, many times RMs are away on other client meetings. But our office is always available to take calls - so it works out very well for all concerned.
WF: What are the new areas of business you are targeting now for growth?
Pramod Saraf: We are presently looking at preparing for exchange-based mutual fund business which will do away with a lot of clerical problems. I am surprised to see that signature mismatches and a lot many small issues continue to cause a lot of pain for investors. This can really come in the way of the industry's growth.
We have recently registered ourselves with the MP Stock Exchange as a trading member, which will give us de facto membership of the BSE and NSE as per Section 13. So we will act as the BSE/NSE member and all due diligence and audit will be taken care of by the National Stock Exchange.
We have also started pitching for group gratuity and pension business. I come across a lot of corporate SMEs who do not have the provision for group gratuity and pension plan, which is compulsory as per law. So I am trying to convince them to plan for this as allowed by the finance ministry through any life insurance company, which will help them reduce their employee turnover also. Though this is not an area that will directly generate revenue for me, I will enlarge my customer base by doing this. If I convince an SME with 400 employees to take up a group gratuity plan, I don't get any money for that - but I get 400 more leads to go and offer my advisory services to. This initiative is giving good results.
Another plan we are actively working on is promoting liquid and ultra short term funds among SMEs as a treasury management option. I think there is a lot of scope for us to develop relationships with SMEs using this as the lead vehicle - and there is a lot of potential to exploit in our kind of markets.
WF: You mentioned that you were hosting a radio show called 'Hello Mutual Fund'. What are some of the investor education initiatives that you have been running ? Do you actually see investor education helping you with client acquisition or is it more of a knowledge dissemination service that you are offering?
Pramod Saraf: We keep organizing regular awareness programmes for new clients like say a group of professionals or in some specific area locations. We always try to keep product knowledge sharing to the minimum level; instead we focus on knowing what they are doing about their personal finances and what are the issues they are facing.
WF: At a gathering, do you actually ask people to start discussing with you, without any presentation? Do people open up that way?
Pramod Saraf: It is almost always nil presentation. When we organise, say, an investor servicing camp, first we tell them that we are open to queries and have solutions for most of their problems. That gets them to discuss their specific issues - which is most important to them anyway. Often, we go back to these investors the next day with specific proposals where we say that based on what they have said, we believe these are the areas they need to rectify or look into, and then take the relationship forward and hopefully sign them up as clients. Investor education should actually be more of listening than speaking.
Small things make a difference. So, when we host a painting competition for children, we actually frame these paintings and hand them over personally at these peoples houses the next day. People are very happy to see framed paintings of their children. One of the AMCs gives away SIP cups - we fill them with chocolates and give them to the child when we give the framed painting to the parents. These little gestures puts them in the right frame of mind to talk to us about their finances, and that helps begin a relationship.
WF: Do you think that the 100-rupee transaction charge is a step in the right direction? What is your view on a fee-based advisory proposition?
Pramod Saraf: I am not comfortable with the transaction charge of rupees 100 as it gives a benchmark of 100 rupees as the value of my advisory service. The fee-based advisory model will take some time to penetrate but it will become a success eventually. We are gradually evolving into a fee-based model ourselves - but it is not an easy journey at all.
WF: Are people willingly paying you a fee for financial planning?
Pramod Saraf: There are still a lot of people questioning how much money we make from them. If I get 1% of the AUM as my remuneration on an average between trail and upfront, I am satisfied with it. So, I am not moving in a big way as yet on charging fees. When clients know that we are getting around 1% on their assets, they will also ask why we should get an additional fee. For the fee model to be accepted, what is required is a good amount of awareness building from the side of regulators, say SEBI and AMFI, to educate the investors and the common man that this is the model in the industry which is good for them.
WF: One of the high points in your career was the CNBC award for the best performing IFA - North cities that you won last year. What are some of the things which you think you did differently which helped you stand out in a competitive field to get this award?
Pramod Saraf: The reasons for my award was the single motto of providing need-based solutions and products to clients. Regular and consistent growth in my business and a strong team are merits that helped us stand out. The principles on which we work I think is the most important thing going for us. As I mentioned in the speech thanking CNBC for the award, the zero entry load environment gave me a tremendous opportunity to grow - we have doubled our business in the last 2 years. The zero entry load eliminated non-professionals from the market thus ensuring fair competition.
WF: What are your aspirations for your firm over the next five years?
Pramod Saraf: For the next five years I want Swan Finance Ltd to work with the same passion and try to make it a brand for the financial planning needs of each individual in our area. Profits in this business, in my opinion, are the by-products of a successful relationship with the client. Passion is more important. Passion and confidence are the two key ingredients for success. One thing I do want to say here is that Wealth Forum has given me extraordinary confidence and motivation to scale up and grow successfully !
| 
