10 Years RIAs: Sadagopan’s Journey as a Financial Planner

Describe your occupation before you applied for an RIA in 2013.

I started practicing as a consultant in 2004. Obviously, the fee I could charge would be less. That was thanks to my understanding of financial planning and the nascent stage of the market at the time. So I had a fee and commission model. Over a period of time I have matured a bit in the financial consulting business and my fees have also increased. I was also a mutual fund distributor at the time and this supported me financially. We had a polite understanding with clients that if I did financial planning for them, they would come to me to pick up whatever product was suggested. And the customers are okay because in the end, they have to ask someone for this.

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In 2010, we switched to consulting model. We tell our clients that we will charge them a financial planning fee, make a plan, and give it to them. If they want to come to us (to buy products), they are welcome, but if they want to go elsewhere, that is their decision. It is not exactly a fee-only model, because at that time the supporting products, i.e. commission-free products, were not available anywhere. So maybe about 50-60% of our customers continue to stay with us, some choosing to do it themselves or through others. Meanwhile, the consulting landscape is also undergoing a change, and anticipating these changes, we kept the distribution business and the consulting business separate even before the regulations were passed. Now, even though we’ve started fee-only consulting, we haven’t gone into live plans because even though live plans were introduced in 2013, the feed doesn’t have a available to the consulting community. This only happened in 2016.

So two fundamental changes happened—one on December 31, 2015 and another on January 1, 2016. So first, there’s a Sebi permission clause that says both feed advisory data and live feeds both had to be made available to the RIA, and MFU (MF Utility) began offering live packages on its consulting platform. Then we slowly started to introduce customers and I say slowly, because there were a lot of problems and a lot of missing data, but in 2018 everything was fine. So we decided to move completely into consulting in 2018. We have told all our clients that we will be consulting only and there will be no conventional nor based products. rose. In addition, we have to convince the client that we will advise them on all this and will provide them with a full service, and for this we will charge a fee. So we were able to get more than 90% of our clients into consulting and from that point on, all new clients only went through the consulting and in-person plan. It has scaled well since then.

And then in 2020, the rule came out with a separate set of googlies. For a long time, we wanted to transform into a company. So we set up a private limited company in 2016. At that time, the individual RIA’s net worth requirement was raised from $1 thousand to $5 thousand. And anyway, from a regulatory point of view, the 150-client criterion is in place (sign up as a non-personal advisor for those who manage more than 150 clients). So in 2021 we consolidated our operations.

What was the industry landscape before 2013? What were the problems consumers faced then, and has that changed?

I don’t think there’s been any big change in the way consumers see things. The problems are still the same. People are making money; financial awareness is not high. They still have goals and want to invest their money so they can retire appropriately. The only thing is that the consulting landscape has changed dramatically. So 10-15 years ago, we had to tell some people what financial advice is and why you should do it. Now, the people who come to us know exactly what we are talking about and they also know terms like fiduciary etc. That’s a big change.

How have things changed over time, in terms of the type of people who come to you, their wealth and goals or anything else?

So in the beginning, because I approached people myself, and the people who became my clients were referring some clients as well, all sorts of people came.

We do not discriminate among our customers. But usually, what happens is that the people who come to us now have a certain level of wealth. Broadly speaking, $2-3 crore is the average asset size. People with more assets also come to us. These days we don’t really go and get customers. Mainly, there are people who have searched for us online or have been referred to us by some existing customers.

Is the customer profile getting younger? Do you see many young people from the IT field?

Yes, we have young people coming to us as well. Typically, 70% of our clients will be near 40 and 55 year olds.

What I get from this is that, in the early stages of life, people don’t really focus so much on planning. They are investing wherever they want and they have multiple goals. They’re okay with spending money on vacations, cars, etc. At some point it hits them – I haven’t done anything yet, now I have a family and I also have some loans, because So I have to have a plan. That’s when people really approach us.

How many customers do you have?

Over a period of time, we shrunk our customers. We have consciously called for accepting only clients who are suitable for consulting work. Once upon a time, we used to have many customers that fit into our distribution. From 2013 onwards, since we were only in the consulting business, we reduced from 400 clients to 160.

Aside from not saving enough, what is a common financial mistake you see people making?

The downside of not saving enough is spending. So let’s say someone is earning $2 lakh and their cost is $1.5 lakh, then they are saving $50,000 a month. This $50,000 is a 10 day cost for them. For other people who are making money $80,000 and save $ 40,000 a month, which means their savings are worth a month. We have to look at everything from the point of view of how many days of expenses you can save because ultimately, for retirement, we need to see how many years of expenses you have. The problem is that people don’t save enough or rather spend too much.

What is your proudest moment in customer service?

There are several clients with whom we have made a big impact. I will tell you a case. We had a client who used to work for Idea and after the company merged with Vodafone India, he was not assigned a significant role in the merged entity (Vodafone Idea). The quality of the work was very poor, and he was always asked to work. He was with us 8-10 years at that time. So he wanted to know if he could leave the job. So we looked at the numbers and saw that he could retire. But he is not willing to give up the job because he is not so sure. But at the same time, it is also destroying his own life. After talking to us for two and a half years, he finally submitted the paper. And then, he was very relieved. We’re still managing his portfolio, and he says, “the courage you gave me at the time, that changed my life”.

Any regrets? Any advice given in good faith but in hindsight you feel you should have advised differently?

So 2008 was a very, very difficult time for all of us in the financial services industry. It was a scary time for everyone and someone really said that Sensex would go to zero.

So at the time, three of our clients were very adamant about withdrawing equity. So they turn to liquid funds. The problem is that the market has been stable for a while and then it starts to move up. So we looked back and wondered if this was a dead cat bounce. The market situation at that time was not stable at all and could go down further without anyone knowing in advance. So we kept waiting and some of these customers came back long after that. So the customers who just stayed did much better in the 3-4 years since 2008 than these three customers. While the customers are panicking, I think we are panicking too. Also, they are a bit self-centered so in hindsight we should have done the same for these customers.

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

One pain point we all feel is that we have to write the same gatekeeper test over and over again. This is unprecedented in India in any profession and unmatched anywhere in the world. If they want us to take a bridge course in a few days or they want us to watch a video and even take a test afterwards, I agree with that. But we didn’t gain anything by having that advisor pass the same gatekeeper exam. I have been financial planning for 18 years, now don’t ask me what financial planning is. This is not mandatory. You should check me out for something new. And if you want to tighten up the continuing professional education (CPE) criteria, tighten it up a little bit and let all the education providers know what that metric is and let them rate the CPE based on that. on those criteria. It’s a business continuity risk from our perspective, and for the rest of my team, it’s been a headache.