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Background
Swadeshi Vastu Bhandar was set up by my grandfather 80 years ago, primarily as a khadi bhandar. He was in fact the first person in Jamnagar to hoist the Indian flag in 1947, even though we had a king in Jamnagar at that time. Over time, SVB also started selling books and gradually took on selling financial products as a side activity. When I joined SVB in 1995, I made financial advisory as our main business and books became secondary. Now we are purely into financial advisory. Although I am a third generation entrepreneur in SVB, our business has changed completely over the years.
Our current position
Despite operating in Jamnagar, which is much smaller than many other cities in Gujarat, we are counted among the largest retail distributors of mutual funds in Gujarat by leading AMCs like Reliance, HDFC, Birla Sun Life, Tata etc. Last week, we crossed the 100 crore mark in mutual funds. Ours is a purely retail business, with over 19,000 investor folios in mutual funds. We have over 2,000 PPF accounts and have historically been a large player in postal savings schemes.
Our business model
Ours is a pure retail, pure walk-in model. Clients come to us for everything they need for investments and insurance. After sales service is our major focus, our major strength. We hear of so many cases that our IFA friends tell us where investors redeem without telling their distributors, where they reinvest elsewhere and the distributor doesn't know that this has happened. We have fortunately not seen this in our business. We have been tracking every maturity of every savings scheme that investors put money into - and this has been going on for years. We regularly send out postcards informing clients of their upcoming maturities - in post office accounts, KVPs, FDs - all savings instruments. Clients always come to us with their matured instruments and we handle the maturity payments. Clients are told to come back next day to collect the cheque from our office. They know that if they go to the post office they have to stand in line, if they go to LIC office, they have to stand in line. But when they drop into our office, they hand over the papers to us and come the next day to collect the cheque. The reminder service through postcards along with maturity proceeds service makes them automatically come to us for all their financial needs.
Service - LIVE !
After sales service is critical in our business, and we spare no efforts to offer the best service. We serve clients for all their financial products - we never say no to any product. Whatever is the issue they have with any financial product, we try our best to resolve it. What appeals most to our clients is that we try to solve the problems LIVE - right there in front of them. We straight away call the respective product provider - in front of the client - and obtain whatever clarification / resolution that we need instantly. When clients see us instantly dealing with their issues and see themselves walking away from our office with their queries resolved instantly, it gives them great satisfaction. It lets them know clearly that resolving their service issues is the most important thing for us - and that we are willing to put everything else aside to help them resolve issues - LIVE - in front of them.
Keep the mutual funds sales pitch simple
Each month, on average, we have around Rs.2 crores maturities in various post office schemes. We track these very closely, send out postcards well in advance, help clients get the maturity proceeds and then advise them to invest these proceeds into mutual funds - a combination of debt and equity - based on their risk appetite.
I have adopted a very simple strategy for mutual fund selling. For clients who are very keen on certainty of rate of return, if FMPs offer higher than HDFC deposits, we recommend FMPs - else its HDFC deposits. We don't try to offer any other debt funds to them and build hopes of good returns, but which will be variable. Today, we don't get FMPs that offer more than 9.4% which is what HDFC deposits offer, so no FMPs are recommended. Of course the tax angle also is considered when making recommendations on effective yield basis.
When we recommend debt funds like dynamic bond etc, we make it very clear that clients must come to us every year for a review. We clearly state that they should not just buy a debt fund as a long term investment. Debt funds are likely to give good returns now, but clients will have to come to us each year to revisit whether they should remain invested in them or no, and we will advise them based on our own return expectations from debt funds.
For equity funds, we always tell our clients that when investing in equity, they must be in it from one cycle to another. Getting in and out within a cycle is dangerous. Getting in during one upcycle and exiting before the next upcycle is the surest way to destroy wealth. We keep reinforcing a simple point : stay invested from one cycle to the next, if you really want to make money. If you don't have that patience, don't go for equity.
Dealing with mutual fund redemptions
When it comes to mutual fund redemptions, I think in many cases investors perhaps don't consult the distributor when redeeming, because they are apprehensive that the distributor will persuade them to remain invested in the scheme. They therefore execute redemptions on their own. In our case, this does not happen. The main reason why this does not happen is clients know that we are not going to hardsell anything to them, including staying invested if they don't want to.
Investors get influenced by media reports. When there is negative news, they get anxious and want to exit from investments that they think are unsafe. We have to understand that their decision to redeem is coming out of fear, not conviction that equity will do badly. There is an important difference here. If we as advisors have conviction in what we tell them, chances are good that they can go back reassured and not exit out of fear. Our own confidence and conviction in equity must be high if we want to help clients understand that this is not the time to exit, rather this is the time to invest in equity.
I ask my clients a simple question : who do you think is cleverer and better informed about equity markets - you or the FIIs? They mostly agree that FIIs know more about stock markets than them. I then ask them why they are selling when FIIs are buying. I tell them to simply follow the FIIs if they want to be successful - buy when FIIs are buying and sell when FIIs are selling. That gets many of them to at least think whether they are doing the right thing by deciding to sell now.
We never hardsell or persuade clients to stay in the same scheme. If we think the scheme is good, we explain to clients why they should consider remaining invested. In our experience, half the customers listen, half don't - they have made up their mind before they came into our office. When we see this, we go ahead and process the redemption, and ensure that they get their money on time. But simultaneously, we get working on how to re-invest these redemption proceeds in alternative products which are suitable to the client and which the client is now willing to consider. Every redemption is a reinvestment opportunity that should not be lost - that's my mantra. That way, my AuM gets protected. Money can be reinvested into another equity fund or into a debt fund or into HDFC deposits - it depends on the risk appetite and willingness of the client. But, the money should not go out of the system, unless the redemption is for meeting certain expenses etc.
When clients know that we are not going to "pressurise" or "persuade" them to remain invested in the funds they want to redeem, they are comfortable coming to us for getting the redemption done. It is important that they continue coming to us for all their requirements - else we lose our opportunity to retain the AuM.
Often when clients come to redeem from some equity funds, we look at their portfolio and suggest which underperforming schemes they should consider redeeming, if they have made up their mind to reduce equity exposure. At least that way, we can help them stay invested in the better performing schemes, which have good track records.
Key success factor
In my opinion, in addition to excellent service, the most important success factor, especially when you are dealing with pure retail clients, is your own self confidence. Retail clients are not so well aware about financial markets and look for reassurance when making investment decisions. It is our job to first have our own self confidence in what we are saying and doing and conviction in what we are recommending, and then pass on this conviction to our clients to help them get the confidence in making investment decisions. As long as we work on developing our own self confidence and conviction, we will help investors invest successfully.
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