The savvy can invest in dairy farming: Rohit Bhuta

Interview with CEO, Religare-Macquarie Private Wealth

Religare-Macquarie Private Wealth has changed its strategy. It has reduced the number of relationship managers and is advising sophisticated clients to get into new asset classes. Rohit Bhuta, CEO, tells Abhijit Lele and Yogini Joglekar the wealth management industry has suffered because focus has been on selling 'products for fees', rather than developing long-term relationships. Edited excerpts:

In India, the number of investment options is limited. What are you doing to expand the investment horizon of clients?
The preferred asset classes have been equities, gold, equity-linked savings schemes, real estate, and, of late, fixed income instruments as well. So, we are trying to get more underlying assets. We are bringing the next generation asset base, such as co-investing in a coal mine or dairy farm in New Zealand with Macquarie. We are asking clients to have such assets in their portfolios. It could be 5-10 per cent of their portfolio.

What is the profile of the investors? What is the tenure?
These asset classes have a long tenure; to value and sell these, one can rely on an investment banker like Macquarie. We introduce these to ultra-sophisticated clients only, not even HNIs (high net worth individuals). For the HNI, I would take the derivative strategy. We are looking at futures, as they work well in a volatile environment, because they bet on global markets and all different assets. Since volatility is going to stay, you need to risk assets accordingly. These have no correlation with equities and fixed income markets.

Since you started the wealth management business in 2008, the industry has passed through hard times. How have things changed?
The industry is ready to re-define itself. The resource pool has always been limited. But now we are finding ourselves in a dire situation, in terms of quality and quantity. Prior to 2008, it was purely advice, and clients didn't want advice. So, an appropriate level of training was not given. Also, attrition was high, as new entrants were giving salary hikes of 20-50 per cent. Earlier, we had a large number of relationship managers, but we have slashed it to 80. Clients don't move anymore.

Now, revenues are down. We need to look at different asset classes that can generate revenues. The need is of soft skills. The skill set hasn’t kept pace with the demands. We invested a lot in training.

What has been the growth in assets under management (AUM)?
We are doing well. In 10 months, AUMs have moved significantly. The magic figure is $1 billion. In 18 months, I will get there. Now, the number is not huge, but we are increasing it on a y-o-y basis. My vision is to achieve enough to become the leader.

Has wealth management changed after the Citibank scam?
A single incident cannot redefine an industry. However, the Citi incident was a wake-up call.

Will something like this happen again?
Absolutely! Derivative trading is an example of a recurrence despite tighter controls.