The Hindu Business Line : ‘Alternative assets should not exceed 10-15% of portfolio’

Alternative investment classes suit those who are aggressive and are willing to take more risk. You also need a longer time-frame because these investments take a long time to pay off. There is also lack of historical data to indicate what returns will be generated.

MR RAJESH SALUJA, CEO AND MANAGING PARTNER, ASK WEALTH ADVISORS

Aarati Krishnan

The ASK group, one of the largest firms offering portfolio management services in India, has recently launched comprehensive financial planning services through its arm — ASK Wealth Advisors. ASK Wealth Advisors seeks to offer customised financial plans to individuals after a thorough analysis of their goals and risk profile. The services span not only traditional investment avenues such as equities and debt, but also new asset classes such as real-estate, art and structured products. Here, the CEO and Managing Partner of the firm, Mr Rajesh Saluja, talks about the factors that one should consider while constructing a financial plan and investing in alternate assets such as art and real estate.

What factors do you consider while suggesting an asset allocation pattern to an investor? Would you go by the thumb rule which says that a younger investor should have more in equity?

There is a scientific way to decide on asset allocation. If an investor is young, but has an 80 per cent equity allocation and wants to fund his children’s education needs in, say, two years, he may need a higher debt allocation. It is a combination of factors including an investor’s goals, risk appetite and time-frame.

You talked of alternative asset classes such as art and gold. What are the circumstances under which you would recommend these to investors?

We think that alternative investment classes are by nature more risky. If you take art, for example, advisory is not strictly an alternate investment; we treat that more as a service. But an art fund, which directly invests in art, or a commodity fund, would be an alternate investment. Typically, these suit people who are more aggressive investors and are willing to take more risk. You also need a longer time-frame because most alternate investments take a long time to pay off. There is also a lack of historical data to indicate what returns will be generated.

When investing in art, what return expectations should an investor have?

They can deliver good returns based on the amount invested, the market conitions at the time of the sale. In art, when you buy a Rs 1000-crore worth of paintings, you may not find buyers if you want to sell them at one go. Indian art has delivered very good returns if you identified the good artists and invested in them. If this continues, an art fund can do as well as equities. Typically, in equities you have more information than in the case of art and more scope for research. That is where the risk comes in.

What are the avenues to invest in real estate? What are the return expectations?

In real estate, we have end-to-end solutions and offer what the client wants. One category is venture capital funds that invest in real estate. These offer both rental yields as well as appreciation.

We offer advice on the choice of funds. We also offer services on direct purchases of real estate. Typically, a real estate buyer would have to approach several brokers to buy and may not have accurate information. We have a service where we scan the market for good real-estate investments and offer solutions to customers looking to buy real estate. We do the due diligence necessary before this. We have options for people looking for rental yields, capital appreciation and actual occupation. We also offer loan products such as lease rental discounting, home loans, and so on, for which we have tie-ups.

So would you recommend that people who already have debt and equity, should be the ones looking at alternative assets?

Yes. I would also recommend that not more than 10-15 per cent of the portfolio should be in such assets.

Typically, are clients willing to pay a fee for financial advice, given that there is so much free advice available?

We have been surprised by the number of customers who have signed up with us, who are willing to pay an advisory fee. If people see value in what we bring in, they are willing to pay. Our financial plan for, instance, is a comprehensive one and clearly shows the amount of effort put in to offer customised solutions to clients.

There is a growing number of independent financial advisors in the field. What distinguishes ASK from them?

We have the ability to do not only financial planning, but also to back it up with actual products and solutions. The other aspect is that when customers pay a fee they know they can expect good service. You value it more when you pay a fee. If we don’t deliver, we will lose clients. We charge a fee because we bring in value and deliver what we promise.

Usually, financial advisors offer advice alone and to implement this you have to go to different distributors, who may not be driven solely by the client’s interests. By providing an end-to-end solution, we offer value because we run the business ethically and objectively. We don’t push expensive or sub-optimal products.

You have plans to expand your network by empanelling business partners in various locations. How do you ensure that your ethical and quality standards are implemented by your partners?

We will have only exclusive tie-ups and provide the partners with all the resources, technology, training and infrastructure necessary to service clients.

We aren’t looking at distributors, who work on commissions. The financial plans will be centrally made by professional advisors who sit at one location and are not influenced by any bias or relationships.

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