NJ India Invest’s Anand Varadarajan on the Future of India’s Wealth Management Market
Anand Varadarajan is Head of Global and Alternative Investments for NJ India Invest, a leading Surat-headquartered Indian wealth management firm that began life in 1994. He has been in this role since late 2016, leveraging his global financial services professional expertise, built up over the past two decades. As a previous winner of the prestigious award “40 Under 40” amongst investment professionals in India, he is well respected for his industry and investment insights. He promotes a vision of digitised wealth management, and an asset allocation, portfolio diversification model of investing that focuses not on returns, but on risk mitigation. Returns, he says, are there, history shows that clearly, but investors must focus on their needs, the investment horizons and on the discipline to avoid emotion. Hubbis caught up with Anand recently during the lockdown, to learn more of his vision of portfolio diversification for India’s growing ranks of wealthy and super-rich private clients.
NJ India Invest is one of the leading distributors of financial products and services in India. Established in 1994, NJ has more than 25 years of experience and is today a leading independent wealth management firm offering an array of products and investment services, including mutual funds, bonds, real estate, as well as financial training & education. The firm offers trading as a Member with the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), as well as electronic depository as a participant of CDSL.
“We believe the difference between success and failure is often not dictated by knowledge or expertise but by its actual application and perseverance,” says Anand. “When it comes to successful wealth creation for customers, it is something that we believe in and put into practice as a defining mission. We offer a 360 comprehensive business platform with unmatched IT solutions, empowering the mutual fund distributors to set the best practice standards and deliver real value to their customers.”
Anand has been with NJ for three and a half years, having built his experience around the world including the US and India. He has a proven track record and hands-on experience of working with brands like GE Capital, HSBC, BNP Paribas, DHFL and NJ Group.
A disciplined approach
As the Head of Global and Alternative Asset Management at NJ, he focuses on ‘rules based’ and ‘Asset allocation-based’ investment model manufactured by NJ Portfolio Management Services (PMS) aiming to bring state of the art products to the reach to India’s investors. His experience and the strong technology platform and product offering of NJ make a very strong combination for providing the most reliable platform and partner for clients to invest in India.
Anand focuses on his core theme for the discussion, namely the crowded market in India for the HNW and UHNW space. “Typically,” he reports, “this space involves a lot of product selling and product pushing, generally heavily or exclusively equity-oriented, with some structured products. But what NJ has done is to emphasise diversification, so we offer portfolio management and segregated accounts as a service, providing baskets of mutual funds, baskets of stocks and baskets of exchange-traded funds. That is rare in India today, and provides a very comprehensive solution across these three different asset classes.”
A dynamic approach
He explains that for investors who are smart and who understand market volatility and risk, the firm provides a dynamic asset allocation model where NJ creates a combination of equity and debt assets.
“This is something which is first of its kind in the Indian market, and we have for the last three years implemented it into the stocks and ETF portfolios as well,” he reports. “This to me from an distributor perspective and an investor perspective is a sort of win-win situation, allowing the distributor to efficiently manage his investors’ portfolios and the investor securing a robust risk-adjusted return on his portfolio at a fairly reasonable entry and ongoing cost.”
He explains that a typical Indian investor with upwards of the equivalent of USD150,000 to invest would not go only into one specific asset class, he would likely invest some in mutual funds, some in stocks, some in bonds, and a part in ETFs.
“The problem they then have is that they have to then deal with different parties for each of these asset classes,” he explains.
“Most wealth management outfits in India are providing a single-window solution,” he adds, “but there is no comprehensive solution by which, through a single account and a single advisory platform they can access mutual funds, stocks, and ETFs, but that is exactly what we have been building here at NJ. We provide a one-stop solution to all these needs in what we consider a unified platform to offer products, solutions, and advice services under one roof.”
NJ, he reports, also stresses the importance of risk assessment and risk mitigation. “We aim to work with clients to build an asset allocation model and then baskets which suit their risk appetite and investment time horizon,” he elucidates. “And most importantly, we can do this at a cost that is appealing relative to our competitors in the marketplace, with a pricing-based model based on an AUM-linked fee structure that our clients see as reasonable and transparent.”
Focus on risks as well as returns
He explains that another key difference is that NJ PMS is not an active manager, as most of the firm’s competitors are today. “The competition generally comprises advisors who make active decisions to say that these are the stocks, funds, ETFs and so forth that they will buy, with an active-oriented approach. However, if tomorrow the portfolio manager or advisor changes job, the fund management style can change, the quality of advice could change.”
At NJ PMS, however, since 2010, the firm has offered a quantitative or rules-based investment approach for portfolio construction, and the advisors are responsible only to manage the emotions of the investor and relationships on the ground. “This is a major and valuable differentiator for us,” he reports.
Beating the lockdown blues
Anand explains that NJ began home working immediately, back from March 20, and reports that the teams were relatively well prepared, being a technology-focused organisation. “Even in terms of our wealth business, which is our portfolio management, we are one of the only players in India who open and activate accounts online, while for the rest of our competitors in the industry it is still physical paperwork. That is why we have been able to keep our heads above water, and so far, business seems to be pretty much on track as expected.”
Anand reports that pre-Covid-19, NJ was managing slightly over USD10.5 billion of assets with a strong online component.
“The whole mission of the company is to move towards what we call as e-wealth, to go paperless and go digital, that is the mission that we have been running for the past decade nearly, and that has been very successful. So, naturally, that positioning has really helped us get through this pandemic thus far, while the industry, in general, had been stuck with paper transactions, and then during the pandemic suddenly trying to find ways to develop an online transaction mechanism.”
But for NJ’s clients, Anand explains, if clients want to sell and redeem his or her money, they can click a button and then the money is rapidly in the bank accounts. “Or if they want to redesign asset allocation, they can also do that online,” he explains. “And that is why while most of the industry has been suffering through this crisis, struggling to execute documentation because they remained stuck in the physical world, we have been able to forge ahead. Of course, everyone is now trying to work rapidly towards digital, but we are well ahead of the game, and we definitely see more technology emerging in the months ahead, as the online platform and capabilities will completely take over from the conventional modes.”
Into the future
Anand offers his insights into the Indian wealth management market of the future. “India is, of course, an emerging market,” he comments, “and we are still seeing the tendency for distributors to talk to investors about returns, which is fine in really good times, but which often need revising in volatile conditions. We prefer, however, not to focus on returns, but on goals.”
He elaborates on this, remarking that markets are definitely going to deliver returns over time, as has been the case for the past several decades in India and more than 100 years in the developed markets. “But the key,” he explains, “for wealth manager is to mitigate risk, to manage investor emotions efficiently, and safeguard and build the client relationship over a long term. To do so, we focus on the financial goals and not a product selling oriented approach, and I think that is where the industry is heading here over the next five to 10 years, and beyond.”
He also observes that India’s middle and upper-middle classes and affluent strata will become more predominant, and as people earn more form their businesses, they will invest more, and the risk mitigation methodology will help provide them with focus and discipline and more security. “Focusing on their financial goals and providing dynamic asset allocation, and rules-based investment approach, eliminating or diminishing the emotional element of investing, these are key elements that we will increasingly see in the Indian investment space in the years to come,” he concludes.
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