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WF: Can you take us through your background and what led you to set up Prudent Investment Centre ?
Kamath: I worked in Corporation Bank for 28 years. Once you complete 28 years, you get an additional benefit of 5 years for the sake of pension. As soon as I completed 28 years, I opted for pension and I quit the bank. It was not a VRS - I resigned. My wife was working with Syndicate Bank. She too resigned in January 2001. I quit in August 2001.
Then I joined Pelican Wealth Managers - a Chennai based wealth management firm - on the Board of the company, because Babu and Bala were my friends. They gave me a small stake in Pelican, for a cost. This continued from 2001 to 2004. During this 3 year period, Prudent was set up - as a sister company of Pelican - which I headed. Prudent was set up to purely focus on retail clients. Pelican was moving into wealth management and other things. So I just took charge of this company and I started building it up from 2002. Existing clients were there and new clients were brought in, and I could increase the staff also. We changed the location, went to a better place.
In 2005, Pelican was looking at bringing Prudent back into the fold. They wanted me to combine, I told it is not possible now, it was too late. So I thought better we part as friends. By mutual agreement, I returned back my stake in Pelican and in return, I got Prudent. Since then, my wife and I are the two partners in Prudent Investment Centre and are also the two directors in Prudent Investment Consultancy Pvt. Ltd.
WF: How has the journey been these last 5 years since you took over Prudent ?
Kamath: These five years have been very very interesting because I had the passion to work. This passion only has got me so far. Even today I have the same passion. I work on Sunday's also even today. I am not bothered about my status. Today also I travel by a two wheeler only. I have not purchased a car also. So that passion is there. That fire is still burning within me. And so that has taken me this far I believe.
That is the only thing which has helped me. Most importantly I had this urge to give quality service to the clients. So that is the main reason I wanted to run Prudent independently. Because I felt I was not happy inside me if customer service was not provided in a proper way. If your client calls you, you should be able to go and meet him. If you say you will come and then you don't - that is not acceptable. I am very particular about quality service.
WF: What is the AuM of Prudent now ?
Kamath: To tell you frankly I don't look at numbers at all. During the March 2009 downturn, we did a due diligence for our company - that's when I saw that we had about Rs. 25 crores in mutual fund AuM - about 95% of which is in equity. Today, it may be around 40 - 50 crores - I haven't tracked it after March 2009. I know its growing because the trail commission is growing well. I don't believe in figures. For me, service is important and charging for the service is important. I am a one-man show - no team to service clients etc.
WF: You never felt the need to create a team ?
Kamath: No because the reason was, I wanted somebody to give the same service what I give. It is very difficult for two people to give the same service. So as long as my time permits, as long as my health permits, I will give this quality service. My clients have got good relationships with me and they feel comfortable also.
WF: How many clients do you have ?
Kamath: Roughly, see if you take our records and see it will be about 400 clients but actual active clients will be only in the region of 200.
WF: That's really great because with 200 clients if you have an AuM of about 40 crores, then you have fairly meaningful relationships with each of the clients.
Kamath: Yes, because all are retail and nobody withdraws the money for 10 years. No problem for me. Because once they invest, they stay invested - that is the thing.
WF: You mentioned about charging. What is the basis of your charge and how has been your clients reaction to your decision to charge them ?
Kamath: Actually to tell you frankly right from August 1st when the new ruling came, I wrote to all my clients that change in loads is going to take place and this is happening and I request your support and I request you to pay me, because without your payment I will not be able to manage the office. I had written to them in an open letter to all the people. And everybody has read the letter also and later when I went and asked them for the charge, they paid me the money also. There were of course a couple of people who were arguing - just like when you buy some vegetables - 10 rupees per kg why not you give me for 6 rupees, so such things are there. One or two glitches were there. But in totality everybody has started paying. And we are charging 1% flat on the amount invested. Per app is 1% and there is a graded system. Upto 1 lakh per application, it is 1% irrespective of what is the amount. Above that, 1 to 5 lakh for a single transaction, it is 0.75%. Then there is a slab for 5 to 10 lakhs, then 10 - 25 lakhs, then 25-50 lakhs, then 50-100 lakhs. Above 100 lakh everything is free. That is the way we charge and people have paid me and I did not have any problem. Even for SIP's we are charging 1% in advance for the next 5 years or 10 years.
WF: How do you deal with objections from clients who are unwilling to pay you fees?
Kamath: To be frank with you there was no objections. When I charge them there was not objection. And I told them politely - we will give you quality service but we expect the charges to be paid. They asked how much ? I told them that the charge is 1% and I explained to them that you were paying 2.25% earlier, now you are paying only 1%. So anyhow you are benefited. Beyond this what I have done is, since I am charging only 1%, we are charging for redemption, change of bank details, change of address etc. Even for KYC I am charging 250 rupees - for doing new KYC and getting the attestation from the bank managers and everything. All those things I take care and I will give you the acknowledgment - 250 per KYC. I charge 75 rupees for processing a redemption, 50 rupees for change of bank mandate.
WF: This is really phenomenal - and is one step ahead of most of the advisors in the country. What are the things that you think you do different, which enables you to charge - when most of your peers in Chennai and indeed elsewhere in the country are facing huge challenges in charging clients a fee?
Kamath: I don't have many points only one point I will tell is customer service. That is the one thing, quality service. You call me today at 10.00 clock, I will come to you. You call me in the morning at 5.00 clock, I will come to you. Sometimes they say my fixed deposits get due in the bank tomorrow - I volunteer to take it and deposit in the bank, so it will be credited to their account. And that money comes to me later.
I help them in every aspect of their personal finances. I help them pay their taxes, their water tax, house tax, collect charges. I help them resolve all issues first - then charge a fee for my service. I charge 500 rupees for transmission of mutual fund units - but I first ensure that the transmission is done. Whatever follow up is required, I do it.
You should win the trust of the people first. Honesty and integrity are very important - as important as having a strong service attitude. Once they get the faith in you, they are prepared to do anything for you. I don't go for any canvassing, only word of mouth the clients come.
So that is the reason I would say that is one thing which I think I have done differently - and that is customer service. Everybody can do this. I feel everybody can do this everybody can charge. I am not a big person or anything. I am an ordinary person. If I can charge, all advisors can charge.
I just talk to my clients nicely, never get angry with the customer, and try to solve all their issues - and then charge for that. I also charge for fixed deposit investments of my clients - 500 rupees flat irrespective of the size of the FD. But then, I take full responsibility of the paper work and deliver the FD receipt at my client's doorstep. Why won't he be happy with that service? And then, why should he not pay me my 500 rupees?
WF: In your experience, it is the service level and not the quality of advice that matters more to clients - is my understanding correct ?
Kamath: We review every customer's portfolio every 4 months. We fix the review meeting in advance, we go through the portfolio, we recommend any changes in portfolio based on performance etc. We provide them portfolio statements from our software. All this is very important.
But, what makes clients really happy is if you provide excellent service - and if you can take care of all their personal financial issues and resolve them. I have some aged clients - they cannot move out of their house. So, I do everything for them. And they are very happy to pay me. No problem. It's a personal relationship that I have built up. Personal relationship is most important.
WF: There has been a lot of talk on platforms. Do you see the need for a platform to help you manage your business?
Kamath: As far as I am concerned I don't feel that it is necessary, because my clients are all retail clients - in the 50 - 60 age group, some even older than that. Older people - wherever they invest - they expect a receipt or something similar to that - like a statement of account - where they can verify the amount invested. They don't want to download some printouts - they want a physical statement or receipt.
Probably over time, they may change. But right now, the attitude has not changed - and therefore for me, a platform is not relevant.
WF: We have seen a sharp fall in mutual fund investment volumes in the last one year. Apart from distributor apathy due to lower commissions, do you also sense investor wariness - because of higher market levels or because of market volatility ?
Kamath: Not at all. I tell all my clients that the only product which will create wealth for you, is equity. If you can't do your own stock selection and buying, go through the mutual fund route. We are not seeing flows reducing. Last month, we got fresh investments of 60 lakhs in equity funds.
There is a lot of potential. Unfortunately, nobody is talking to clients - everybody is saying market is dull and all these things.
WF: Why do you think distributors are not talking to clients about equity funds as the best route towards long term wealth creation?
Kamath: I can understand your question. I think distributors are not talking and educating the public or the clients properly. See you just give them a form and sign and just fill it up and give it off - that is not enough. They have to educate the people, the pros and cons have to be informed. You tell them only one side - that you will get 20% or 30% or 40% or whatever. But what happens if 0% comes. So those things also should be informed. Investors should be educated that the more you stay in the market, the more you make. That is most important - you have to educate, see educating the ordinary layman is very essential. Educating in the colloquial language is absolutely necessary - in a manner that they can understand and appreciate what you are trying to tell them.
Unfortunately, many distributors are targeting only the high end customers - whereas I am targeting the low end. That is the difference. One 10000 application also I am ready to pick up. There are many people I have seen - when you tell them there is an application to be picked up, they first ask - what is the amount. If they say only 5000, 10000, - the distributor does not want to go. I go there because that 10000 will fetch me one lakh someday. He may refer me to somebody else. That has happened actually.
WF: That is really an inspirational message…..
Kamath: Everybody can do it, I am not a very intelligent person I am an ordinary person only, so everybody can do it. There are so many intelligent people.
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