‘I want to be an investment advisor for the middle class’

Commission-free direct plans of mutual fund schemes didn’t exist when Joseph started. He still avoided distribution tie-ups. He would advise clients on how to manage their investments and they would buy products on their own on his recommendations. Direct plans were introduced in 2013. “After that, all my clients moved to direct investing. They would buy insurance online on my advice," he says. Jospeh applied for an RIA licence immediately after Sebi regulations came out in 2013.

Edited excerpts from an interview:

What was your career like before you became an RIA?

I was an employee in the life insurance sector from 1989. I worked with LIC of India for 11 years. Then I worked for three private sector life insurance companies in the next 10 years. I started my career in the clerical cadre with LIC and slowly moved into higher cadres. I was heading the Institutional Alliance Channel of SBI Life Insurance Company in their head office in Mumbai at the time of my leaving the corporate sector in 2010.

What was the financial advisory landscape like before RIA regulations were introduced by Sebi in January 2013?

When I started my practice in 2010, there were no regulations in this sector. Anybody could call himself as an advisor. I wasn’t very comfortable with the way industry worked. It was fraught with mis-selling. Companies and employees were making good money while clients were being taken for a ride. That is when I decided to start something of my own.

 

Who was your first client and how did he or she come on board?

Most of the public was unaware of the concept of financial planning in 2010. It was difficult to get clients who pay a fee for advice when free advice was available from agents. I started writing articles on personal finance and posting them on my website. I slowly started getting clients. But it was very difficult in the initial 3-4 years.

Can you walk us through the growth in your practice?

My fee collection was less than my expenses in the first four years of my practice. I was living on my past savings. Only in the fifth year I became revenue positive. Then, there was steady growth of business year after year. Now, I am getting more clients than I can manage. From April onwards, I’ll reduce the number of clients I onboard. I’ll cater to only middle class who actually need this service.

Do you put into practice what you advise?

Yes. I suggest simple financial products to my clients. My portfolio also has similar simple products.

What has been the most challenging part about being an adviser?

After leaving a high-paying job in 2010, waiting for clients was a challenge for the first four years. Fee-only financial planning was a new concept in India. I was not aware of any one who would charge a flat fee at that time. Taking the road less travelled by has its challenges but it is thrilling. I enjoyed this journey which helped me establish myself.

What's your proudest memory in being an adviser?

I have a client who is a retired colonel of Indian Army and has been my client for the last 12 years. Five years ago, he motivated his son to be my client. Now, his granddaughter is also my client immediately on her first job. He was very particular that his granddaughter

should learn the basics of personal finance from the beginning of her career. Having the trust of such people makes me proud and humble.

Have there been any tough times with a client?

I had a very senior person of the Indian Navy as my client. He was an aggressive investor. Still, I never allowed him to keep more than 30% of his portfolio in equity after retirement. Just after the market correction in 2020, he called me and complained that I have not informed him about the likely correction due to covid so that he could have moved even this 30% to debt. He pretends to be an aggressive investor always, but a small correction revealed his actual risk appetite.

What do you think is holding back the growth of advisory business in India?

If you want to become an RIA, you should have a post graduate qualification in finance and five years relevant work experience and clear two levels of the NISM examination. As per Sebi regulations, an individual advisor can handle only 150 clients. A flat fee advisor cannot survive with 150 clients. If he wants to serve more clients, he should get a non-individual licence. He/she should invest ₹50 lakh to get a non-individual licence. Compliance cost is also very high. So, new advisors are not coming to flat-fee advisory model. There are many advisors who are cancelling their licence or planning to charge a percentage of the asset as fee. This is not good for the clients. They don't have many choices to select a good flat-fee financial planner in India.

Is there anything in the Sebi regulations that you would like changed?

I think any graduate with three years of relevant experience can be considered for RIA licence. He/she should be allowed to handle at least 500 clients if he is into flat fee model. Besides, there are different types of RIAs which need separate classification. RIA is almost a generic name now. Robo-advisory mutual fund platforms such as Kuvera are also getting RIA licences. Advisors have different models - some are charging a flat fee and asking the clients to execute the financial plan, while others are charging a fixed percentage of the assets every year as fee. I feel SEBI should classify each category separately and give different names, so that an investor can select the advisor according to his requirement.