Personal Finance

You should save 30% of your income: Head of Edelweiss Personal Wealth Advisory

Bavadharini KS | Updated on August 11, 2019 Published on August 11, 2019

Rahul Jain, Head of Personal Wealth Advisory, Edelweiss Wealth Management   -  DEBASISH BHADURI

SIPs and RDs are effective in building retirement corpus: Rahul Jain, Head of Personal Wealth Advisory


Many investors are increasingly depending on wealth managers to manage their finances and invest in various financial products to park their hard-earned money. Rahul Jain, Head of Personal Wealth Advisory, Edelweiss Wealth Management, explains the process wealth managers adopt while managing clients’ funds. Excerpts:

For a person looking to invest for the future, what kind of a thumb rule do you follow for asset allocation?

At Edelweiss, in general, we say that 100 minus your age should be your equity part of your portfolio. But, if you are a mid- to low-risk taker, say, at the age of 30, your equity portfolio can be 50 per cent instead of 70 per cent. In that case, instead of SIP (systemic investment plan) in mutual fund equities, we tell our clients to invest in a recurring deposit with banks or NCDs (non-convertible debentures) or some other debt mutual funds.

How user-friendly are your robo advisory services?

We are trying to make a simple digital platform for customers to execute their transactions. The more customisation I do, the complicated it becomes. This is because the investor is looking for easy solutions to invest in. So, if you are a medium-risk taker with a long-term horizon, say, at 35 , you would be at 60-70 per cent equity. Same way, it will change if you are a low-risk taker. This is the customisation we offer — plain and easy to understand for an investor. At present, robo advisory advises mainly on mutual funds with asset allocation between debt and equity.

If an investor approaches you for guidance on building a corpus, what would be your advice?

If you want to invest ₹5 crore, we run a risk assessment on you. Based on that, we would recommend that you put 50 per cent in equity and the rest in debt. In equity portfolio, we could suggest that you invest in products such as AIFs (alternative investment funds), as well. In addition, there are two styles of managing equity portfolios — active and passive.

Active is where there is an advisory team and the client is involved in the process of asset allocation. On the other hand, passive equity would be managed by a fund manager. But when it comes to fund recommendations, we have an investment advisory team which screens funds based on past AUMs (assets under management), their size, the track record of the fund managers, and the weightage of funds and stocks.

In your experience, do you think Indians adequately understand how to plan their finances for retirement?

To Indians, I think it doesn’t come automatically. Those in the 30s feel they are too young to think about it. If you look at the whole SIP/RD model, it is a brilliant method to build your retirement corpus. It is simple — as your income goes up, your amount of savings/investment should go up. So we believe, effectively, 30 per cent of your income should be savings — in FDs, MFs and equity. This should help you build a portfolio and meet your retirement needs when the time comes. There is a lot of work that needs to be done.

When interest rates go down, it has its implications on retirement planning as well. How do we handle this?

I think, going ahead, interest rates will decline. This is because, inflation is under control, which will obviously lead interest rate down. Also, if the economy size keeps growing and you achieve economies of scale, the chances of you controlling inflation-led items such as food prices become possible in the long run.

So each year, your income will reduce and your expenses will increase even after lower rates. You have to adjust your corpus to what you think is the best savings. So, our 30 per cent formula might not work, and you may have to move to a 40 per cent formula. Or, your asset allocation has to tilt more towards equity or you have to start early.

Published on August 11, 2019
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