29th March 2012

What makes a handful of India's IFAs so much more successful than others? Is it superior knowledge? Is it better relationship skills? While both are undoubtedly important, there is another crucial factor which determines success - how sharp is your business strategy, how clear is your customer segmentation and how easy is it for your prospects to understand how you are different from others. Winning market share is about differentiating yourself in a crowded market place - and that was the focus of this very absorbing panel discussion held at the recently concluded Wealth Forum Platinum Circle Advisors Conference on March 23rd, 2012.

Why is it that out of 40,000 + registered ARN holders, only few go on to build very successful advisory practices? What differentiates successful advisors from others? While the reasons may be many, one common thread that runs among all successful advisors is clarity on which segment of clients they target and considerable thought on how to build a competitive edge in that segment. As an advisor, you can't be everything to everybody - as more often than not, in trying to chase every piece of business that seems available - you may land up not serving anybody particularly well. Successful advisors understand that they need to build their practice around their core competencies.

Developing a clear business strategy and narrowing your focus to the segments you relate to the most is vital to win market share in a competitive market place. All the advisors in this panel discussion have done just that - and have achieved commendable success. The objective of this panel discussion was to highlight diverse strategies - not necessarily to showcase any one in particular - but to highlight clarity and focus in each one - and therefore get the participating advisors to start thinking of where they need to sharpen their own strategies to win market share.

Ajit Menon set the tone for this panel discussion with a very well received presentation on "Shaping your practice to align with emerging trends" (http://wealthforumezine.net/AMCSpeakDSP270312.html)

Aditi Kothari observed that IFAs need to sharply differentiate themselves from some of the larger distribution oriented firms through superior advice and personalised service. Given the increasing need for quality advice, there is a large gap in the market place, which IFAs are best positioned to address.

In terms of winning new business, Aditi strongly advocated active use of digital media and social networking sites to connect with young investors. She discussed DSP Blackrock's own experiences with these media and pointed out that contrary to popular belief, there are numerous young investors in the age bracket of 18- 35 years, who regularly track updates from their fund managers and engage actively on DSP Blackrock's Facebook page. This is a segment that IFAs too should engage with.

All four advisors on the panel focus on the HNI segment. But, is there further differentiation within this HNI segment, or are all investors who have portfolios in excess of your desired thresholds, your target clients. Are you selective, and why are you selective - these were the questions Vijay asked the panellists.

Surya Bhatia mentioned that the reality is that when you start off, you take on all business that comes your way - because your focus clearly is to ramp up your AuM and establish business viability. But, its very important once you are beyond that initial growth phase, to become very selective about who you want to work with - what kinds of clients are best suited for your advisory model, what kind of clients will derive maximum value from what you have to offer. In Delhi, for example, HNIs can be broadly divided into professionals (senior executives in large companies as well as professional entrepreneurs) and businessmen. Surya's firm does not target the businessman variety of HNIs as what they probably want is different from what his firm has to offer. Declining business that does not fit into your model is very important.

And, what then should you do with some of the earlier clients you took on, in your initial period, who now don't fit into your ideal target client segment? Do you ask them to go away? Doing this will free up your scare resources to go after more profitable prospects and thus improve your revenues.

Surya mentioned that this has to be handled tactfully, but it does become important at some point to part ways with some clients who become a drag on your resources or whose expectations are not aligned with the philosophy of your firm. Before considering the exit option, what he does is to try and delegate that account to one of his team members, so that he can free up his personal time to devote on targeting higher value clients. Only where the expectations of the client are not aligned with what your firm is geared to deliver, should the exit option be exercised.

Nilakshi Louzado mentioned that the best way to do this is to explain why your firm may not be the best choice for such a client and how you are not adequately geared to deliver to their expectations - rather than stating it the other way around. She agreed with Surya that initially you can't afford to be choosy, but as your practice stabilises, you must get more sharply focussed on what kinds of clients you want to target and serve. One of the biggest tests here is to see whether your clients and your wave-lengths match. If wave-lengths don't match, if your philosophy and approach are not aligned, you will struggle and eventually part ways. Better to have that clarity upfront and avoid pain later. She also mentioned that parting ways later can often be tricky - especially if you have built your business on referrals. If you ask one client to go away, he or she may create ill-will for you in their circle of influence - many of whom may be your existing clients referred to you from others within the same circle. That can do a lot of damage to your business.

We must understand that just as a client has a right to choose his advisor, the advisor must also exercise his / her right to choose clients that he / she wants to work with. When you sign up a client, you are committing to a very long relationship - 10-20 years at least. How can you enter into such long term relationships when your wavelengths don't match, wondered Nilakshi.

Vijay mentioned that a key take-away from these discussions was for all established advisors to pause and reflect whether they have narrowed down their focus towards a specific set of target clients or whether they are still doing business in the mode when they started up. The scarcest resource for an IFA is his own time - to drive growth, each advisor must achieve clarity on what kind of clients they really want to serve and find ways of spending the least possible time on clients who do not fit that focus.

The next issue discussed was differentiation. Once you are clear who you are going after, how do you build your proposition into a compelling and competitive one - ie, why should your target client choose you?

Shiney Sebastian mentioned that even though she started off in Kochi without any client base or personal network to fall back on as she had moved from Mumbai to Kochi, she nevertheless was clear from day 1 that her firm would only seek to attract clients who perceived value in her advice. If we cannot add value, we don't get in just for a transaction - was her mantra from day 1. She had a good understanding of markets and products, and used it to build competencies in investment advisory - particularly on the debt side - which is often less focussed on by many advisors. Many of her large clients are those who have substantial assets in debt portfolios in their businesses and began trusting her expertise in that segment. Along with the debt portfolios, came the family portfolios as well.

Shiney is also of the firm belief that getting the woman in the family to participate in the financial planning exercise is vital for success of the plan. The family saves what the woman of the house saves and it is therefore essential to have her complete involvement in preparing and executing the financial plan. When she buys into the plan, it will be executed very smoothly. This philosophy has helped Shiny get many families to stay committed to their plans, through good and bad times.

A final thought that Shiney left with all advisors is that one of the saddest consequences of removal of entry loads and therefore margin pressures on advisors is that the retail segment - the small investor - who really needs advice the most - is the one who is being denied quality advice because he or she is not a remunerative client any longer for any advisor. It is time, she felt, that successful advisors take out some time to offer free advice to the needy - as a way of giving back to society. Vijay congratulated her on this fine thought and added that the legal profession has an accepted practice of successful lawyers doing pro-bono work - where they offer free legal advice to the needy section who cannot pay - for a limited time each month. It is time for India's successful financial advisors to emulate the legal profession and commit themselves to doing pro-bono work, maybe 1 day in a month, by holding a free financial planning camp.

Vijay asked Pallav Bagadia what strategies he adopted to make a mark in smaller cities like Tezpur and Guwahati. Pallav talked about his early days, when getting clients to look beyond deposits was a challenge, especially in small towns. He would agree with select clients a profit sharing arrangement beyond a reasonable threshold return to provide clients some initial comfort. Once clients saw healthy returns from a judiciously managed portfolio, they became willing to do away with the thresholds and assumed full portfolio risk. Now, with strong referrals from satisfied clients coming in, he does not have to venture into such arrangements any longer - but when he looks back, he believes this was useful in getting his initial set of clients to get out of their inertia and look beyond deposits.

Strategies may differ - but clarity and focus are a common thread

Each of the advisors on the panel had a different strategy and each is very successful in their own markets. The point is not whether one strategy is better than the other. The key take away is that successful advisors have clarity on what kind of customers they want to attract and which kind of customers they do not want and also have a clear differentiation which helps them convince their prospects to do business with them. Winning market share in a competitive market is about creating your differentiation - as these panellists have demonstrated so well.