The Wealth Wallahs

by Shreyasi Singh

  If Karan’s core competence lies in being able to construct the model and have a macro, top-level view of things, Yatin gets those ideas translated on ground. He operationalises ideas and plans and is often given to micromanaging the execution — although that has had to change as the company has scaled up. He also seems to understand and enjoy the intricacies of how brands are built and perceptions are moulded.

  While all three of their calendars are deliberately and consistently skewed towards client meetings over internal brainstorming sessions, media interviews and external industry events, Yatin is more likely to make time for and devote energies to the brand-building aspects of the business.

  Of the three, he is also the quintessential stock market guy; Sharmistha Chakraborty calls him the “biggest bull” she’s ever met. He can make gut-driven decisions, was comfortable taking big bets and had the stomach to digest the anxieties that bold moves require. His interest in the stock market (he has built for himself a personal investment portfolio that colleagues said was “huge”) has given him a great ability to take risks; a trait Karan confesses he could imbibe a little bit more of.

  As all entrepreneurs and business builders are often wont to do, the IIFL Wealth, founders live and breathe their business — each of them says their social, personal and professional lives have converged into one with their friendships and social ties also coming from within their circle of employees and clients — but Yatin brings a passion to the business that both his co-founders and colleagues said was special.

  Colleagues said that of all the founders, he had undergone the most change, working on deepening his domain expertise, product knowledge as well as picking up leadership traits that weren’t natural to him. A colleague, part of the seven-member team that came in from Kotak right at the beginning, said Yatin had learnt to both delegate more and in complete contrast to his time at Kotak, where he was given to a quick temper and impatience with colleagues, he was today the person most unlikely to lose his cool.

  His role has also changed most frequently over the past eight years. From leading sales for the entire firm in the early years to now leading quality processes, delivery efficiency and management information systems (from a very external role to a more internal operations role), Yatin has been called in to take up different responsibilities. In a sales-focused organisation, where the glory for growth goes to the sales people, these roles demand greater motivation.

  It’s required him to evolve comfortably with change as well as the ability to shed some of the emotional resonance of being a founder. In fact, both Yatin and Amit have had to accept others as peers in a growing organisation. For founders, to get used to being one of the many voices within a leadership structure is a sharp, treacherous learning curve. Their personal growth had to keep pace with the growth of their business. Being able to do so is another recipe for success.

  Because he is based in Singapore, looking after the company’s offshore business, Amit has the most independent role in the company. Having worked abroad for most of his career, he scores over his co-founders in terms of his meticulous attention and adherence to processes. He’s the only person from amongst the three, who, you can be sure, will invariably keep his meeting commitments, for example.

  Amit’s approach to the business is different because he largely works with institutional clients across the developed markets of London, New York and Singapore. More often than not, professionals manage this money. There is little need to cater to the always-on style of functioning that the new rich in India demand from their advisors. Amit pushes the India team to adopt these professional best practices, constantly urging them to refine internal systems.

  As their window to the world, Amit’s insights are also critical for the company’s understanding of how the global markets are evolving. It’s a unique inside out perspective for a senior team member to bring, especially valuable because the India operations — and the leadership team here — is so immersed in the day-to-day and client-to-client interaction that the bigger picture is sometimes easy to miss.

  He also offers an important counterpoint when it comes to risk. More conservative than his co-founders, Amit, says a senior colleague who has worked closely with all three of them, will thrash out the upsides more judiciously. If a calculated risk, for example, had a 10 per cent chance of an upside but that upside could possibly lead to ten times more returns, the probability of Karan and Yatin going in for the odds was much higher than Amit. He would be more comfortable with a 50-per cent chance of win that promised four-times the return instead. In that sense, his contrarian point of view enriched the internal decision making process and boded well for corporate governance.

  In a business where brand reputation is key, and one that has been fuelled by entrepreneurial can-do, having a custodian who constantly factors in a conservative point of view, isn’t just a much-needed advantage: it is possibly the difference between boom and bust.

  Chapter 18

  Client Sutra

  More than anything else, IIFL Wealth’s impressive client acquisition ability stands out. In a business substantially influenced by relationships and customer referrals, acquiring and managing clients is a part-science, part-art formula, and one that has been at the core of the firm’s growth story. The contemporary Indian consumer is a demanding one, driven by a value-for-money mindset, influenced by quality yet deeply motivated by cost. By virtue of what they do, wealth advisors and private bankers work within a universe of Indian consumers who not only share these attributes but, more often than not — owing to their business success and professional stature — are even more discerning.

  Key client relationships have served as milestones for IIFL Wealth. They also offer valuable insights into the philosophies they have worked with to successfully acquire and retain their clients, the mistakes they have made and the lessons they have learnt along the way.

  Many of IIFL Wealth clients are well-regarded entrepreneurs and business owners in their own right, and their relationship with the wealth management firm has, in many cases, been forged from special circumstances coinciding with milestones from their own journeys. Some of those episodes find their way into this chapter, offering a fascinating behind-the-scenes look at how businesses are built, and the partnerships and collaborations successful promoters stitch together to run their enterprises. Often, it illustrates the power of social capital in the inter-connected world of business.

  Going the extra mile

  Anirban Banerjee is IIFL Wealth’s chief people officer. With an MBA in HR from the Xavier Labour Relations Institute (XLRI), Jamshedpur, Banerjee joined IIFL Wealth in June 2008, one of the first twenty employees to do so.

  Twenty-six years old then, Banerjee was moving from ITC, the fast moving consumer goods (FMCG) giant, where he was in the human resource function. At the time, he told me frankly, he had very little understanding of financial services at large, and even less of private banking, but was curious about the idea of building something from the ground. He was convinced to do so by Jiten Surtani and Himadri Chatterjee, senior IIFL Wealth employees now, who were friends of his from University of Delhi.

  Karan added a push by meeting Banerjee more than half a dozen times for conversations that would go on for hours, and which took place mostly at 1:00 a.m. at night in a coffee shop in Mumbai’s Grand Central after the end of a workday. ‘My family wondered why the meetings took place then and whether I was considering joining a BPO,’ Banerjee laughs.

  Karan’s reasons for hiring the young human resource professional was that he wanted somebody from the FMCG industry to head their human resource practice — somebody who was willing to understand the business deeply and was excited about taking bold risks to grow a venture.

  Change was the biggest job perk on offer, Banerjee told me. Although initially unsure, Banerjee decided to join because he says he realised that even if his decision proved to be a misstep, at that stage of his career, it wasn’t going to be a mistake
he couldn’t recover from.

  The promised change was visible from his first day at work. Karan was out for meetings and told Banerjee to go meet an older gentleman sitting in a room in their office. That the gentleman’s name was Dileep was all the background information he provided the young recruit.

  The gentleman, Banerjee later discovered, was Dileep Nath, co-founder of Kanbay International, a Chicago-based IT services firm, which, after it was founded in 1989, had been one of the early beneficiaries of the IT outsourcing boom.

  In July 2004, Kanbay had listed on the NASDAQ, raising $93 million. In October 2006, European technology consulting firm Capgemini acquired Kanbay for $1.25 billion ( 8,360 crore), a much-tracked entrepreneurial success story of the time. Nath had exited the company in 2006 to settle down in San Francisco, after selling his stake in Kanbay.

  Nath, who had been Karan’s client in Kotak Securities for a few years had encouraged the IIFLW founders’ entrepreneurial ambitions; a group of professionals starting out together mirrored his own experiences at Kanbay that he had co-founded along with Raymond Spencer and John Patterson after working with them on a non-profit community development organisation in Maharashtra.

  Nath was IIFL Wealth’s largest client when they started out, deciding to move a small portion of his portfolio to the new firm to help them get started. For Banerjee, the very fact that a fresh recruit like him had been introduced to Nath /–someone critical to the company’s future at that juncture /– made him sit up and take notice.

  ‘It was a sign that things were actually going to be different. I can’t imagine any other bank or consulting firm where this would’ve been possible — being left alone with your largest client,’ Banerjee told me.

  In a foreign bank, a 26-year-old new recruit — even one on track to becoming a relationship manager — would perhaps have spent weeks at the job before being allowed face time with a client.

  The anecdote illustrates the important role key client relationships have played in the company’s journey; beyond the assets they have brought to the book. Client relationships have often marked the beginning or end of different phases of the growth phase.

  Take Nath, for example. He wasn’t just the firm’s largest client when they started out. Over the years, his portfolio has become a repository of learning, almost a test case where strategies and their implementation have been successfully replicated for other clients.

  Nath, who used to run a law firm in Mumbai before co-founding Kanbay, was deeply immersed in managing his portfolio, especially after he decided to move it entirety to IIFLW, merely a year after starting out with a small chunk.

  Sandeep Jethwani, the young relationship manager Karan got to back him up on that account, said restructuring Nath’s portfolio after he moved it to IIFL Wealth was as intensive as prepping for an academic presentation, much beyond creating just a regular reporting document for a client.

  Nath pushed them to think deeply about his tax structure and his asset allocation to help them understand his objectives. He would respond to emails sent to him at 1:30 a.m., sometimes picking up the phone right away to get into a discussion — typical of the “always on” mode several first generation entrepreneurs work in.

  A lot of work was also done around his succession planning — between his sons, Sanjay Nath (who runs early-stage investment firm Blume Ventures) and Sameer Nath, an investment banker based in Singapore. In 2010, Nath had relocated to Singapore, setting off a restructuring exercise that, Jethwani says, forced them to dive even deeper and figure out new taxation regimes and structures for.

  Much as Nath has been critical to IIFL Wealth’s internal development, there are other relationships that have been crucial because they have helped shape external perceptions towards the firm.

  The booster shot

  When Ajay Piramal, chairman of the Piramal Group, sold the domestic formulations business of his flagship company, Piramal Healthcare, in May 2010, it made front-page headlines. The 17,300-crore ($3.7 billion) acquisition by drug major Abbott was the second-largest deal in the Indian pharmaceutical space till then.

  In the middle of 2010, IIFL Wealth was still relatively small with an AUM of not more than 22,000 crore and a total head count of less than hundred. Every private banker and wealth manager in the country was bidding for the Piramal account.

  It is believed that the Piramals met close to thirty nine private bankers. In the end, IIFL Wealth was enlisted as the lead advisor for the family office, with nearly a dozen other private banks making up a consortium. While the prestige of working on the account was huge, it would require the firm to invest a disproportionately large number of resources, time and effort to the account. This was tough since the fee on the portfolio was modest, thanks to the incredibly competitive environment in which it had been won.

  There are some relationships where you don’t care about making money, the founders say. They decided to go ahead and do it because everybody in the industry — every asset manager and banker — was closely tracking the developments.

  The Abbott-Piramal deal had an interesting staggered payment schedule with the Piramals getting 10,000 crore ($1.5 billion) immediately, and the rest in four equal tranches over four years. Post-tax, the corpus — even after the first payment installment — was a formidable nearly 6,000 crore ($900 million) approximately.

  That a relatively new and small firm was given the mandate for one of the biggest acquisition deals by size did not go unnoticed by the industry. It was the point at which, the founders reckon, people started believing that IIFL Wealth wasn’t some fly-by-night operator or a group of enthusiastic upstarts.

  Himadri Chatterjee, one of the six people who moved with the founding trio to IIFL Wealth from Kotak, and who worked closely on bidding for the Piramal deal, says they had to widen the size of the columns in their MIS technology platform to accommodate extra digits after corpus that came in! ‘At that point, we hadn’t crossed the twelve-digit, 100-crore mark,’ Chatterjee recalls.

  Another similarly high-profile relationship that helped the company both attract attention and establish its legitimacy in the early days was the one Yatin Shah built with Mohan Goenka, director, Emami, the Kolkata-headquartered FMCG major.

  In early 2008, just as IIFL Wealth was getting started, Yatin went to Aamby Valley, a weekend destination a few hours from Mumbai for a car rally, with Ashish Kacholia, considered one of India’s most successful stock market investors. Goenka was there too. During the weekend, Yatin and Goenka established an easy rapport, with the Kolkata-based businessman even attending his wedding in Mumbai a few months later. Despite the growing friendship, Goenka kept a professional distance from IIFL Wealth, leaving Yatin wondering why the personal rapport wasn’t converting into a business association.

  From May to October 2008, Emami was involved in a takeover bid of Zandu Pharmaceutical Works — whose flagship brand is the Ayurvedic pain relief formulation Zandu — from the promoter Parikh family. On 3 October, Emami sought shareholder approval to invest 430 crore ($64.5 million) in buying Zandu shares — 18.81 per cent from the Parikh family, and another 20 per cent from the open offer it had floated. To complete this transaction, Emami had put together a plan to fund this through internal resources and external borrowings.

  Yatin was quick to spot the opportunity. The promoters of Emami needed a short-term fund to finance a business expansion. Yatin pitched that IIFL Wealth, through its parent company’s NBFC, should extend that loan. It would demonstrate their ability to be big pinch hitters when called for.

  It was enough to finally push Mohan Goenka into becoming a client. Soon after, Yatin met Goenka’s uncle, RS Agarwal. Today, a large part of the Emami promoters’ family portfolio is managed by IIFL Wealth.

  Goenka says that he appreciated the grounded, down-to-earth working style of the IIFL Wealth team, as well as the fact that relationship managers across the organisation seemed to speak the same language. More importantly, Goenka said thei
r engagement has deepened because, over the past seven years, Emami has taken a conscious call to consolidate its wealth portfolio from ten fund managers to essentially three or four. These include a global bank with expertise in private banking and two Kolkata-based long-term independent financial advisors.

  In a business where reference is key, names like Goenka are truly what the old metaphor “worth their weight in gold” stands for.

  The domino effect

  ‘Scale begets scale, especially in this business. The more references you have, the more business you’re likely to get. If I call up five of my friends and tell them my money is with these guys, they are likely to follow suit,’ says Sandeep Naik, managing director of General Atlantic’s India & Asia-Pacific business.

  It’s a natural bias, he adds. It’s akin to how another key social association works: When one’s children go to a school, people want their friend’s children to attend the same school as well. People tend to market their lawyers, architects and wealth advisors in a similar fashion.

  Naik recalls an incident from the weeks leading up to the GA transaction. He had called on a few of the firm’s clients to get their perspective. In the middle of one such interaction, the IIFL Wealth client he was speaking to received a call from a friend who too was considering signing on with the company. ‘I requested to listen in on the conversation, and this person pitched for them as if it was his own company,’ remembers Naik.

  Most of IIFL Wealth’s clients I met said the firm had been incredibly canny and clever in connecting the dots, and in having friends and trustworthy business associates call them up to give references while mulling signing them on.

  IIFL Wealth relationship managers say that the moment they finish a meeting that seems like it has gone well, they try and identify which of their clients could possibly know the person they are pitching to. These include alumni from the same educational institutions, neighbourhoods they live in, shared board directorships in the same companies and non-profits, common memberships of professional groups such as the Young Presidents’ Organization, Entrepreneurs Organization, or industry-specific committees, to name a few.