Big money prefers it small. And perhaps simple too. Time was when the wellheeled slept well at night with the knowledge that their money managers at the private banks with the Wall Street marques were taking good care of their hard-earned chips. Then came the sub-prime crisis, Bear Stearns lost the plot, Merrill Lynch lost its way, Lehman lost it all, and the likes of Citi, JP Morgan and Bank of America—the big global names in wealth management—quivered on shaky ground. Commercial and investment banking will never be the same again.
Boutique vs banks
Custodians of wealth
“Banks run the advisory business as a revenue-generating unit rather than as a custodian of a client’s wealth; most boutique firms operate like the latter,” says Dinesh Khemlani, one of the mainstays of Comsol Financial Solutions Pvt Ltd. (Comsol, in case you’re curious, stands for Complete Solutions.) Khemlani knows what he’s talking about. Comsol was flagged off in 2006 by his wife Neha, a Standard Chartered veteran of 17 years. Khemlani, who has done stints with ABN Amro and Societe Generale, came on board in 2007. Comsol has about 160-170 clients and assets under advice in the region of Rs 500 crore.
Madhu Menon, who operates out of Ahmedabad along with partner Prakash Notani, set up OxyZen Financial Services in 2006 because he saw a huge gap in advisory services at the middle to low end in the high net worth segment. Menon, who has worked with Kotak Mahindra and ICICI Bank, points out that the banks typically focus on high net worth individuals (HNIs) with a minimum net worth of Rs 1 crore (and which can go up to Rs 25 crore). But there aren’t too many that offer specialised and focussed services in the Rs 1 croreand-below-category. Such investors resort to brokers or chartered accountants, who are unable to give personalised service.To be sure, the opportunity is huge as the demand for professional investment advice peaks. And once an ex-banker kicks off his own operations, it isn’t difficult to attract others from the banking pack.
Khemlani, for instance, has roped in two more top-notch professionals— Ravindra Joglekar and Kaikhushru Dinshaw—who have a combined experience of close to 40 years in foreign banks. “You can err on the side of profit, but you cannot err on the side of capital,” quips Khemlani. Then there’s Touchbase Capital Pvt Ltd, which has been started by more than half a dozen professionals, who are all co-promoters, directors and relationship managers, all rolled in one.
These firms are capable of offering virtually every product or service (except a current account) that a bank does. The advantage of the boutique firms is that wealth management is their core area of focus. Banks, on the other hand, have a number of silos, right from investment banking to private banking.
“Given the large number of players across categories, many of whom have their own proprietary products, the customer is confronted with innumerable options and finds it difficult to select the most appropriate product and partner suitable for his needs,” says Raj Mahadev, Managing Director, Touchbase Capital.
Looking for the best
Today, a client doesn’t discriminate between a bank and a boutique private financial firm, say many advisors. “He is looking for the best. In fact, that’s a given. You won’t survive in this business if you don’t give the best,” says Soni. Advisors like him point to the advantages of the boutiques. Advantage #1: In a bank, the head of the business would be an old hand at wealth management, but the relationship managers/advisors down the line aren’t too experienced. This compromises the quality of their advice and service, point out the boutique camp. “Banks are good at garnering deposits. Investing is not their cup of tea,” says a banker-turned-advisor.
Whilst the wealthier retail investor is the target of most of these boutiques, firms like OxyZen are attempting to target enterprises as well—big ones and the small & medium variety. The goal is to target the owner of the enterprise as well as its employees. This strategy has helped Menon attract clients— over 2,000 of them—and manage assets in excess of Rs 180 crore.
Touchbase, too, is targeting clients at both the enterprise level and at the entrepreneur level. “We believe the needs of the company and individual need to be addressed by one person who best understands the enterprise and the entrepreneur,” says Anand Gupta, Director, Touchbase Capital. Coming from an entrepreneur at a thriving enterprise, it’s difficult not to agree.