Amit Jain strongly believes in independent research and extensively uses a variety of data based models to get clients comfortable with the investment strategies that he suggests. He, like so many other advisors across the country, faced a challenge in convincing clients to opt for ELSS funds as their tax savers, instead of PPF/NSC. He went back to what he does best - and created a simple and effective set of data tables that showcases exactly why investors are better off choosing ELSS funds for their annual tax saving investments. Amit has met with considerable success in getting clients comfortable with ELSS despite weak market performance over the last 5 years - and has very kindly forwarded his data to Wealth Forum, to enable advisors from across the country to go through it and decide how best to leverage it to convince their clients. We are indeed grateful to Amit for this kind gesture.

In many ways, Amit perhaps represents what most investors would look for in a financial advisor. Professionally qualified, highly ethical, humble, strong focus on independent research and an uncompromising attitude to putting clients' interests first. It is this attitude that has seen his business grow to over Rs. 50 cr AuM in the last 5 years of his firm's existence, from over 750 retail and HNI clients.

Amit has developed a proprietary equity valuation model that enables him to pick high quality undervalued stocks for his clients - or as he says, to differentiate between "outstanding stocks and ordinary stocks". This model has helped him deliver significant value to clients over the years.

How can we get sceptical investors to believe in ELSS funds?

Another facet of his work is the manner in which he marshalls data to convincingly make a case for investment strategies that he strongly believes in. Most advisors today believe that ELSS funds are a far better bet than PPF/NSC or other tax saving schemes to help their clients not only save tax, but also create long term wealth. Many clients are however not so convinced, given the last 5 years equity market performance. As we get into the tax season, and investors make their 80C investments, there are likely to be many lost opportunities to create wealth, due to the understandable fears of investors. How do you get investors to gain confidence in ELSS funds, despite weak performance in recent years? Amit did some number crunching which showcased exactly how much investors would have made in different tax savers as well as bank FDs for investments made over the years. His data has helped reassure his clients and restore faith in ELSS funds as the preferred destination for their tax saving investments.

Do your homework well, to convince your clients

Reproduced below is a set of tables that Amit takes his clients through. Each table is for a 5 year period : 2000-2005, 2001-2006 and so on until 2007-2012. In each table, he demonstrates how an illustrative ELSS fund (the legend ICICI Tax refers to the ELSS scheme of ICICI Prudential MF) would have performed over the next five years and compares this with performance of PPF/NSCs and bank FDs over the same period. He assumes that the investor invests Rs. 100,000 each year in the same ELSS fund over a 5 year period and compares that with a similar investment strategy of Rs. 100,000 per year for 5 years in bank FDs (at the then prevailing rates) and similar amounts in NSCs/PPF over the same 5 years.

The graphical representation alongside each table shows how the portfolio value moves on a year of year basis. Valuation lines of PPF/NSC and bank FDs are predictably straight and ELSS is predictably choppy. But, what Amit is clearly able to establish with this data is that in every 5 year period barring one, the overall portfolio value of the annual investments in ELSS comfortably beat the returns from bank FDs and NSCs/PPF. The graphs visually depict that there are times when the portfolio value of ELSS dips below the fixed return alternatives - but, over all but one 5 year periods, long term wealth has truly been created by ELSS funds and not their fixed return competitors. Even in the solitary case where ELSS loses out (2004-2009 period), where the portfolio period closes in the worst bear market we have seen in recent history, Amit goes on to establish that if the portfolio would have been held for just 1 more year, ELSS would have come out comfortably on top.

Here are the tables that we have been discussing :

Click here to access pdf file.

What do you think?

What do you think of the way Amit has put together this data to showcase the benefits of ELSS funds? Do you think you will be able to use this to pitch ELSS more effectively with your clients? Do you believe ELSS funds are better long term wealth creators as compared to all other tax savers that investors have available to them? How do you convince your clients to invest in ELSS despite recent poor market performance? Share your thoughts with fellow advisors across the country - just as Amit has - its YOUR forum !