"We Always Keep Our Clients At The Centre Of Our Business Model"

Rajesh Saluja, CEO and Managing Partner of ASK Wealth Advisors speaks to Aniruddha Bose, editorial consultant BW Businessworld about the changing face of Wealth Management, his company's business model and where one's money should be right now.

Please tell us a little bit about the ASK Wealth Advisors.
ASK Wealth Advisors (ASK WA) is an independent Wealth Advisory & Family-office firm offering wealth management, preservation and wealth transfer services to the Ultra High-networth client segment in India . Founded in 2007, it is part of the ASK Group which manages close to $4 BN of Assets under Advisory. We are headquartered in Mumbai, with offices in 8 cities and client coverage across 15 cities in India, and abroad like Middle-East, Africa, Singapore, London and Hong Kong.

How do you see the clauses in the recent SEBI IA regulations consultation paper influencing the next phase of the wealth management business in India?
The writing on the wall is clear - SEBI wants the industry to move completely to a comprehensive Investment Advisory model, run by experienced professionals, in a regulated format - thus minimising the instances of mis-selling, and rationalising costs of investing in the process. Although this has already been happening at the top, what has not evolved very successfully yet is an agreed advisory fee between the Advisor and the Investor substituting the distribution commission, but in the long run, the former will start taking precedence over the latter, thus creating pressure of performance on the advisors as a healthy practise. The real challenge is how this shapes how investment products have thus far been sold to the smaller investors spread across the vastness of the country - as there are clear challenges to 80,000 MF distributors (compared to 500 RIAs today) complying with the above in spirit/practise.

Going forward, do you see the wealth management business migrating to a largely fiduciary model, away from the current product-centric model? If that's the case, do you see a challenge in mobilizing large ticket fee incomes as a percentage of assets?
Surely - and like I said above, this has already been happening at the top. But yes, it will take long for investors to look at advisory fee as independent from distribution related costs underlying in products they invest into - that means the propensity to just pay for 'advise' is not very high right now - clients are more keen to look at the whole 'package' really. Thus what will possibly evolve in India is a model of being able to demonstrate strong advisory capability (thus fiduciary model), as well as capability to offer rationalised product costs to the investors through better platforms, or lower negotiated product fees. Large wealth advisors increasingly enhancing their asset management capabilities to start exercising stronger control on cost rationalisation as a likely substitute for subsidised advisory fee is a case in point towards this trend.

Wealth Management runs on open architecture, with very little scope for differentiation on products. In such a scenario, how does ASK WA differentiate itself from the competition?
ASK Group has 33 years of experience in capital markets & research and boasts of an investment committee that has over 100 years of experience in managing clients money in equities, fixed income , real estate and private equity. Hence quality of advise based on this experience and expertise is a key differentiator. Secondly, we have been one of the earliest adopters of fee based advise . We always keep our clients at the centre of our business model and believe in earning their trust through our advice and maintain it over time by always putting their needs first. Having a long-term and disciplined approach to investments, we have stayed away from fads, leveraged products, futures & options, and commodities enabling us to adhere to this principle. Our clients also have exclusive access to proprietary investment ideas in Equities, Fixed Income, Real Estate and Private Equity. Clients are offered fee-based advisory services on the back of strong research, eliminating potential conflict of interests.

Traditionally, wealth management has run largely as an 'intrapreneurial' business, with seasoned RM's owning their client bases almost entirely. In such a scenario, how do you deal with the problem of client attrition when your RM's leave the organization?
ASKWA is an owner-manager driven firm with key members being stake-holders in the business itself, which has ensured continuity of relationships and constant interaction with our clients. This has meant our attrition levels are probably the lowest in the industry. Additionally, we have build a strong institution of merit, offering a deep rooted, research and advisory capability driven wealth advise to our clients - and thus, most of our relationships are relationships with ASK as an institution, rather than only RM centric relationship. Even for an experienced relationship manager, the identification of his/her success with clients today is being able to offer a largely 'institutionalised' approach to advice - hence being a win-win situation for the client, the RM, and the institution.

Equities are not cheap, Debt markets have already had a good run, interest rates are already down 175 bps, and Real Estate continues to be in a slump with massive stockpiles of unsold inventory. Where should HNI's deploy their money over the next 2-3 years?
With inflation likely to be within RBI's comfort zone (5%) and government continuing on the path of fiscal consolidation, scope for further reduction in interest rates exist, but not as sharp as witnessed over the last few years, making debt markets less attractive than equities as an asset class. With the Real estate regulator bill to be implemented soon, regulation in real estate would tighten making it better to wait it out and be very selective with respect to real estate. Expectations of further improvement in economic growth (GDP growth moving closer to 8%) and recovery in corporate earnings (double digit growth after 3yrs of single digit growth), would make equities the most attractive asset class over a 2 to 3 year time horizon.

What's your take on Real Estate in the NCR region? With over 4 years of unsold inventory remaining, should investors wait a while longer for an equilibrium to be reached before committing funds to this asset class?
NCR's residential real estate has largely been an investor driven market. Sales have declined sharply post peaking in 2011 as investors have shied away due to weak macros leading to the build up of unsold inventory. Excessive supply and weak demand has led to a fall in prices in the last 2 years. While job creation will drive end user demand, we believe investor demand will take some time to recover as expectation on price growth is subdued.