What Maheshwari learned from managing other people’s money

Meet Renu Maheshwari, who started out as a financial coach and business consultant, then co-founded Finscholarz Wealth Managers with her husband in 2012 to provide investment management and planning services Financial planning only charges.

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Maheshwari says that money means different things to different people. “Financial planning is not just about suggesting products that customers should buy. It is the ability to understand different aspects of an individual’s life, advise them on the fluctuating stock markets and steer them in the right direction. It’s a complex business—one that becomes more difficult when clients act under the influence of greed and fear,” she says.

Maheshwari, the financial manager of about 120 families, has more than A.U.A $130 crore, sharing her own journey as an RIA over a decade, in this special series to celebrate a decade of Sebi regulations for RIA (mint spoke to mentors who have completed or are almost a decade in the profession).

Edited excerpt from an interview.

Describe your career before you became an RIA?

I’ve always worked in finance after completing my MBA in 1988, and after a few years in corporate finance, I quit to raise my son. I returned to the workforce with more certifications and hands-on experience as a coach, trainer, and consultant. After doing CFP, I switched to personal finance and started financial planning.

Around 2012, it was rumored that Sebi was about to introduce new regulations providing space for fiduciary advisors. With RIA regulations at stake, I co-founded Finscholarz with my husband, Jagdish Maheshwari (an IITian who created the company’s IT infrastructure), to promote its planning services. Financial planning and investment management services charge only and also become the first personal RIA in Tamil Nadu.

What has changed in the financial consulting landscape over the past decade?

Prior to the 2013 RIA regulations, there was no distinction between advisors and distributors.

Before that, when people walked in, we had to explain to them what we did and why we charged them. Now that they’re armed with that information, that’s a big difference. I remember earlier people told me that nobody in India pays for financial advice. They have been proven wrong.

Another big difference—for which I will credit the regulator—is that the market is now safer. Investors now know that market-based investments are a way to create wealth for themselves and for the next generation. This is a remarkable change that has occurred in the past decade. Moreover, more and more women are aware of the need to invest and take responsibility for their finances, so they do not hesitate to seek professional help for this.

What have you learned from managing other people’s money?

Money means different things to different people. In personal finance, emotions are tied to everything we do. For example, someone said “I don’t want to sell this piece of jewelry because it belongs to my grandfather; not this house as my grandmother left it to my father and he never wanted to sell it; this is my first investment; or this LIC policy as a gift from my father.” This makes financial planning more complicated because finance works on numbers, but one’s behavior is subjective and will never be dominated by numbers.

Customers may not be able to tell us exactly what they want. However, as an advisor, we need to understand their need and then address it.

Who is your first customer?

One of our first customers was a young couple. The wife is contemplating a second turning point in her career and needs expert advice. We looked at current and future income and expenses, assets and liabilities, family circumstances and future aspirations, and analyzed their behaviour.

This exercise reveals that she may take a second break, but the couple will have to cut back on spending. However, they were not ready to lower their standard of living, so they decided not to have a second child. They are currently living a financially secure life and are on their way to becoming financially independent.

Can you tell us about your first year of internship?

Our first year of practice is all about innovation, ideas, struggle and hard work. Public opinion in the industry surrounding trusteeship is full of skepticism and hesitation. We talked to clients about direct investments and the need to have professionals work on their side. Initially we were fortunate to have a few great clients. They talk about us to their friends and bring in more customers for us. All of our clients come through referrals only. Since then, our customers have grown at a minimum CAGR of 33%. I am sure that will be the case for most of the advisors in India because people need advisors.

How to be a financial advisor for women?

You come from a different generation than me. So obviously, your experience of gender bias will be very different from mine. And do I find it difficult? Sometimes true. A lot of potential clients walk into the office thinking that Jagdish (my partner and software engineer) will talk to them. My husband and I will sit next to each other and some industry reps will direct the conversation towards him.

Such biases were already there. But over the years, it has changed a lot. I think my life is very different than it was 10-15 years ago. However, on a softer note, my gray hair helps me overcome these biases.

What is the hardest part about being an RIA?

A lot of investors approach us at the top of the market. They see people making a lot of money from the market. They come in with the expectation of making a lot of money in a short period of time. They think an advisor will pull the magic rabbit out of a hat and suddenly make a lot of money for them from somewhere. They are the most difficult customers to deal with and we turn down a few of them.

Does the limit on the number of clients an individual RIA can handle cause you to apply for a corporate license?

It’s not entirely true that people think we can’t scale the RIA model individually because of the limit on the number of clients.

You can only serve a limited number of customers. It’s not just about the regulations but also about the number of clients you can spend time with. I have about 120 families right now. Even if I had two meetings with each family a year, that would be 240 meetings per year. This is something beyond the logistics that we need to do as advisors. Sebi’s limit of 150 clients per individual advisor is reasonable.

We will apply for a corporate license when we have multiple advisors. This process is ongoing and we hope to have qualified advisors on our team soon.

What is the most important reform that RIA rules need?

We believe that RIA regulations in themselves are the biggest reform for investors in India.

The high standards of qualification for RIA licensing will ensure that the quality of domestic advice continues to improve. Currently, an RIA must have a graduate degree in finance, with 5 years of experience in the consulting field, to apply for a license. Applicants must also pass two exams—NISM XA and NISM XB—in order to receive a counseling license. The NISM exams have a good standard and guarantee a decent level of competency. The RIA needs to write both of these tests every three years to renew the license. But doing so is a point of tension, especially for senior advisors. This threatens business continuity for Individual license holders. (If they do not pass the exam, they cannot conduct any business until they pass the exam again.)

Also, different advisors may focus on different areas of practice and may want to spend their energy focusing on other courses and not rewriting the same exam.

Allowing CPD (Continuous Professional Development) points for related courses, professional work and conferences for license renewal is an internationally accepted practice. If Sebi allows this for RIA, it could be the most important reform to ensure ‘easiness of business’.