Abhishake Mathur, Head Investment Advisory Services, ICICI Securities

Abhishake Mathur, Head Investment Advisory Services, ICICI Securities

  Jinsy Mathew  
  • October 5, 2015  
  • |  
  • UPDATED   17:35 IST

ICICI Securities recently launched a Robo advisory platform - Track & Act. The platform chooses the best possible investment option for a customer from over 2.5 million simulations that are generated using algorithms, fully customised as per ones investment goals. Speaking about the same, Abhishake Mathur, Head Investment Advisory Services at ICICI Securities in conversation with Jinsy Mathew shares his view on the importance of financial planning and why retirement planning is gaining prominence.

How do you define a sound financial plan?

A sound financial plan is nothing but matching ones assets and liabilities. Assets comprise all your investments and liabilities are your financial goals. A successful plan is the one which ensures that you have the required assets at the required time to meet a goal and that's why asset allocation is very important. Classifying goals into critical and discretionary helps one make a sharper plan. However, one must understand that making a financial plan is not enough. It is even more important to review it regularly and stick with the plan. The whole purpose of the planning is to come off personal biases and invest rationally.

What are the key factors on which the success of ones financial future depends?

 There are three factors - target asset allocation, a target savings rate and a target portfolio. So, as a part of financial planning process, before deciding on the allocation, some of the basics questions asked are regarding the person's financial goal, expected time frame in which these goals need to be achieved, what is his/her savings ability among others details. Understanding these aspects is important as every goal may have a different investment path.

How different is the recently launched Robo advisory platform - Track & Act- from traditional ways?

Track & Act aims at constantly monitoring ones investment and making the best use of the available corpus. This platform not only advises about investing but also takes care of withdrawals as and when required. By design, the system prompts any action that may be required from the customer's end which may be in the form of when to book profits if the equity, debt proportion gets distorted, solely on the basis of customer's financial plan. Inacse if there is any clarification required with the system generated option, an expert is just a call away.

What is the kind of percent fluctuation that will trigger the buy or sell advice in equities on this platform?

We have a corridor limit system, which is, incase there a 5-7% fluctuation, it really doesn't matter in the long term perspective. A warning to take an action is issued only if a certain threshold is surpassed, which is all portfolio specific. A sell is initiated depending on target asset allocation philosophy which helps you to book profits at peaks and enter the markets when there is a slump.

Do you see people accepting the mechanised form of financial planning?

There may be some initial reluctance, but once a person uses the product and understands the virtues, I am sure there will be demand for this offering. Here technology aids one to make rationale choices, which have certain logic to it. It's akin to the changes seen in the banking system - it's all online, ATM etc, hardly anyone visits a bank branch now.

With the latest round of rate cut, the fixed deposit rates are headed lower. This is bad news for senior citizens who depend on FDs for their regular income. What is your take?

As economy progresses, your sovereign rating goes up which means that the overall interest rate structure does on a downward trajectory. This is a worrying condition for retirees. We tend to think that atleast an 8% is a given for FDs which will soon change. Therefore we have to change the attitude towards equities which provide the much needed growth option.

Is it ever too late to invest into equities?

Let's suppose a retired person has a balance of roughly 5 crores. Of that amount, the whole amount won't be required right away. Even if he were to put away 1 crore into equities, that's the portion which will provide the growth element. What's important to consider is that if one is planning till 75 yrs, what is you live until 80 yrs? There is a risk of running out of assets. At such a time, the returns generated off equities will take care of that unplanned expenditure.  That's why it is very essential to have equities as a part of ones portfolio.

What's the most frequently asked question by your clients when it comes to financial planning?

It's often thought that where to invest is the most commonly asked question, but from what I have observed over the years its - In case of any emergency where should one withdraw from? Should be from short term funds or equity? And answering that question is where expertise is required. 

And how would you answer that?

There is no set answer. It's necessary to look into the short term and long term investments and the goals attached to each of those savings. In most of the situations when it comes to redemptions, we look at the long term investments as there will be tax implications which come in on withdrawing from short term investments.

What is the maximum allocation to gold in a typical portfolio?

Not more than 5-10% of the portfolio. Gold has its own advantage but doesn't give the return that is expected of an investment instrument. This makes it not a very feasible investment option.

How should one look at retirement planning?

Its human tendency to not think of retirement planning and that's the first error that's needs correction. It is more of a process rather a journey. There is a clich├ęd situation that post retirement one should invest only in debt market instruments, which is a flawed idea. Urge of being independent even at the time of retirement and enhanced consumerism are some of the reasons why it has become very important to plan for retirement if one wants to maintain a certain lifestyle.

Is there an ideal age when one should start to plan retirement?

The easiest way to put it would be - start as early as possible. But till the age of 30, it is seen that there is hardly any saving. In the meantime, there is a metal barrier towards saving even Rs 500 each month, as the perception is that it won't make much of a difference, as retirement is eons away. 

Its time to acknowledge that retiring at the age of 58 is a bad proposition at a time when life expectancy is increasing by the year thanks to the medical advancement. Hence, retirement planning is paramount rather than an activity done at leisure. We advise our customers that even an Rs 500 saved on a regular basis would do well to ones long term plans. The idea is save first, spend later.