Sell Well - Grow Well, a joint initiative between SBI Fund Guru and Wealth Forum, is an effort aimed at encouraging and guiding distributors on a path towards right selling - which we firmly believe is the best way to grow well on a sustainable basis.

Selling to non-profit institutions including charitable and religious trusts and societies is a different ball game altogether - quite different from mainstream institutional business on one hand and HNI business on the other. One couple who have mastered the art of engaging this segment is Murli Krishnamurthi and his wife Jyothi Murli, Pune. Specialists in this niche, their client base extends far beyond Pune - reaching upto Jammu & Kashmir and Uttarakhand. What makes Murli and Jyothi the gurus of this market segment? What do they offer that makes their proposition attractive to this segment of clients across the country? Read on as Murli shares his perspectives on offering financial advisory services to non-profit institutions.

WF : How and when did you venture into the financial advisory business and how has it grown over the years?

Murli : I started as an agent of UTI way back in the 80s and was a fixed deposit mobiliser, hawking bonds and IPOs through 90s.This was along with my regular job in the corporate sector till 1999, after which I quit and set up my own independent practice. I had been in Delhi till 1998 and moved to Pune with my job, which I later quit in 1999. We tried to control our assets built up in Delhi through a colleague, who later started independently from where we got off, and he took care of the Northern India portfolio.

My wife, Jyothi who also worked in the corporate sector till 1999 quit her job and joined me in my regular professional practice and we slowly started rebuilding our practice. We have a small office in Pune and do not have any staff. We rely entirely on outside agencies, for support services.

We concentrate almost entirely on one segment, viz. Sec.11(5) investments for trusts and societies. At one time, our northern most client was in Baramullah (J&K), and the highest (10000 ft) in Joshimath, Uttarakhand. The current assets under management has been built entirely by way of referrals and personal presentations. Incidentally, we were one of the first certified financial planners in Pune and are slowly expanding into pure advisory for life time goal achievements.

WF : What prompted you to focus on the semi-institutional segment?

Murli : Since our focus had been entirely on capitalising on skills built over several years, we specialised in the non profit corporate segment. It had evolved from being an entirely fixed deposit run practice into an aggressive investment advisory. Further, it enabled us to continue to work on our own terms at our own pace without having to take care of any employees, nor be under pressure to chase numbers.

WF : In what ways are the investment needs of these trusts and societies different?

Murli : Investments by the non profit institutional segments are governed by the Income tax Act, Foreign Contribution Regulations Act, and the local public trust acts as also Corpus and donor mandates. Within the confines of these limitations, we have to fit in the requirements of the institutions based on the need for recurring return, safety, and accountability.

Accountability is a key factor in such organizations. In typical non-profit institutions, treasury heads report to their boards and finance committees at frequent intervals and year ends. Year end is a big phenomenon in such entities. A valuation dip on March 31 of any year could pose a problem - especially when officials may have changed during the year. Even otherwise, no treasury head would like to show losses in the portfolio, especially on reporting dates, even if they are only on paper. Many treasurers therefore seek to regularly book profits to avoid potential valuation dips on reporting dates. A lot of them have this ingrained that no profit or low profit is better than paper losses.

We try to deal with these situations by shifting of options in the same scheme for booking the profit while trying to explain the long term nature of the investments to the board and committees and highlighting the perpetual continuity of the institutions vis a vis the change of office bearers.

WF : What is it that you offer that makes your proposition attractive to this segment?

Murli : Unlike big brokerage houses and banks, we are hands-on for our clients and review the files almost on a daily basis. We are there for the investor anytime unlike others where there could be a change of people manning the desks. Further, we are upto date with the legislations covering the sector and ensure compliance. There is a personal trust that we have developed over the years.

Since we specialize in this segment, we have a good understanding of their requirements, and have built our capabilities to serve them well. We actively research funds, we focus more on looking ahead to identify future outperformers, we offer an online capability to enable them to track their portfolio anytime.

Needless to say, we advocate equity only for long term investments of the corpus. However, having tasted blood on equities over the last few decades, some institutions do not mind dips and take it in their stride, where the board has a strong faith in the leadership of the treasury heads. By booking profits constantly, where it is so sought, and redeeming funds whenever required irrespective of the valuations, the long term XIRR of over a decade shows a high double digit return on the investments. Though not so short term in nature, it is our endeavour to try and come off weak schemes and get into promising ones at the appropriate time, which calls for active surveillance and constant monitoring.

WF : What are the challenges in dealing with this segment?

Murli : The biggest challenge that we have faced in dealing with this segment is the change of office, when a new treasury head may have different views on the aggressiveness of the investments or the need for cash flows by way of dividends, or for booking of profits without change of portfolios.

Second big challenge is the change in the legislations, such as the FCRA which recently mandated that mutual funds are "speculative" in nature, thus closing the doors on one big segment of funds that could have been deployed.

Thirdly, since the investments are lumpy, direct investments by seasoned investors could pose a problem for our assets.

WF : What are your key learnings from engaging with this segment?

Murli : One of the key learnings has been that the nature of the risk that one takes for an institution may change drastically with a change of office. Therefore, one needs to tread carefully and keep our reputation intact for that is the biggest asset in this profession.

All articles in the Sell Well - Grow Well section are created by Wealth Forum. These are not to be construed as opinions given by SBI Mutual Fund.

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