What Renu Maheshwari learnt from managing other's money
7 min read . Updated: 04 Jan 2023, 03:31 AM IST
PremiumThe RIA from Tamil Nadu says its a complicated job — especially when clients act on their greed and fear.
She is the first individual to have become a registered investment adviser (RIA) in Tamil Nadu and strongly believes that ‘personal finance is more about personal than about finance’. This belief, she says, was reaffirmed during her journey as an RIA, managing money for others.
Meet Renu Maheshwari, who started out as a financial coach and corporate consultant and then co-founded Finscholarz Wealth Managers along with her husband in 2012 to provide fee-only financial planning and investment management services.
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Maheshwari says money means different things to different people. “Financial planning is not just about recommending what products a client should buy. It is about being able to understand the different facets of an individual’s life, advise them about the vagaries of the stock market and put them on the right path. It’s a complicated job— one that gets tougher when clients act under the influence of greed and fear," she says.
Maheshwari, who manages the finances of about 120 families with assets under advisory (AUA) of more than ₹130 crore, shares her own journey as an RIA for more than a decade, in this special series commemorating a decade of Sebi’s regulations for RIAs (Mint has been speaking to advisers who have completed or are nearing a decade in the profession).
Edited excerpts from an interview.
Describe your career before you became an RIA?
I have always worked in finance after completing my MBA in 1988, and after a few years in corporate finance, I took a break for raising my son. I came back to the workforce with more certificates and practical experience as a coach, trainer and consultant. After doing CFP, I moved towards personal finance and started financial planning.
Around 2012, there was a buzz that Sebi is coming out with new regulations providing space for fiduciary advisers. With RIA regulations on the anvil, I co-founded Finscholarz along with my husband, Jagdish Maheshwari (an IITian, who created the IT infrastructure for the firm), to promote fee-only financial planning services and investment management services and also became the first individual RIA in Tamil Nadu.
What has changed in the financial advisory landscape in the last decade?
Before the RIA regulations of 2013, there was no distinction between an adviser and a distributor.
Earlier, when people would walk in, we had to explain to them what we do and why we are charging them. Now they come armed with that information, which is a big difference. I remember people telling me earlier that no one in India would pay for financial advice. They have been proved wrong.
Another major difference—for which I would give credit to the regulator—is that the markets have become safer now. Investors now know that market-based investments are a way of creating wealth for themselves and for the next generation. This is a remarkable change that has happened over the last decade. Further, more women are aware of their need to invest and take charge of their finances and so do not hesitate to seek professional help for this.
What have you learned from managing someone else’s money?
Money means different things to different people. In personal finance, emotions are attached to everything that we do. For instance, individuals say “I am not willing to sell this piece of jewellery because it was bequeathed by my grandfather; not this house as my grandmother had willed it to my father and he never wanted to sell it; this was my first investment; or this LIC policy was gifted by my father." This makes financial planning more complicated because finance works on numbers, but a person’s behaviour is subjective and will never be so numerically driven.
Clients may not be able to tell us what exactly they want. But, as an adviser, we need to understand their needs and then work around that.
Who was your first client?
One of our first clients was a young couple. The wife was contemplating a second break in her career and needed expert advice. We went through their current and future earnings and expenses, assets and liabilities, family background and future aspirations, and also did their behavioural analysis.
This exercise revealed that she could take a second break, but the couple would have to cut their expenses. They were, however, not ready to bring down their standard of living and so decided against going for a second child. They are now living a secured financial life and are on the way to becoming financially independent.
Can you tell us about your first year of practice?
The first year of our practice was all about innovation, ideation, struggles and hard work. The industry opinion around a fiduciary practice was full of disbelief and hesitation. We spoke to clients about direct investments and the need for experts to work from their side of the table. We were fortunate enough to have a few wonderful clients initially. They spoke about us to their friends and brought more clients to us. All our clients have come through referrals only. Since then, our clients grew at a minimum CAGR of 33%. I am sure that would be the case for most advisers in India because people need advisers.
What is it like to be a woman financial adviser?
You are from a different generation than me. So obviously, your experience of gender biases would be very different from my generation’s. And did I find it difficult? Sometimes, yes. There were plenty of prospects who walked into the office and thought that Jagdish (my partner and software engineer) would talk to them. My husband and I would sit next to each other and some of the industry representatives would direct the conversation towards him.
Such biases were there. But over the years, it has changed a lot. I think my life is very different than where it was 10-15 years back. On a lighter note, though, my grey hair helps me transcend these biases.
What’s the hardest part of being an RIA?
A lot of investors approach us the peak of the market. They see everyone making a lot of money from the markets. They come with expectations of making a lot of money within a short period of time. They think that an adviser is going to pull out the magical rabbit from the hat and make a lot of money for them suddenly from somewhere. They are the hardest clients to deal with and we reject a few of them.
Is the limitation on the number of clients an individual RIA can take prompting you to apply for a corporate license?
The fact that everyone thinks that we can’t scale up the individual RIA model because of the limitation on the number of clients is not entirely true.
You can service only a limited number of clients. It is not just about the regulations but also about the number of clients that you can spend time with. I have about 120 families right now. Even if I have two meetings with each family a year, it would be 240 meetings per annum. This is apart from the back-office work we need to do as an adviser. Sebi’s limit of 150 clients per individual adviser is reasonable.
We will go for a corporate license when we have multiple advisers in place. The process is on, and we hope to have qualified advisers in our team soon.
What’s the single most important reform that RIA rules need?
We believe RIA regulations are by themselves the single biggest reform for investors in India .
The high standards of qualification to apply for an RIA license will ensure that the quality of advisory in the country will continue to improve. Currently, an RIA should have a post-graduation in finance, with five years of experience in the advisory field, to apply for the license. The candidate should also pass two exams—NISM X-A and NISM X-B—to get the advisory license. NISM exams are of a good standard and ensure a decent level of competency. RIAs need to write both these exams every three years to renew the license. But doing so is a stress point, especially for senior advisers. This threatens the continuity of business for Individual license holders. (If they do not pass the exam, they cannot conduct any business till they pass it again).
Also, different advisers may focus on different areas of practice and may want to spend their energies in specializing in other courses and not write the same exam again.
Allowing CPD (Continuous Professional Development) points for relevant courses, professional work and conferences to renew the license is an internationally accepted practice. If Sebi allows this for RIAs, that can be the one single most important reform to ensure ‘ease of business’.
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