How a Lucknow jeweller streamlined his cluttered portfolio of 27 MFs, 9 policies

Over 40% of his annual expenses went into paying the premium for the nine insurance plans, another 40% towards mutual funds, and the remainder for household expenses.

Coming from a traditional Lucknow-based business family, the major focus for Kesarwani, 39, had always been the core jewellery business.

“Once I joined the family business, I continued with our traditional way of investing via fixed deposits, insurance policies and mutual funds. Our family worked with two mutual fund distributors and my father knew an insurance agent via whom we invested in insurance policies,” he said.

And then, things changed. Kesarwani said there was always a niggling doubt about his investment portfolio.

Enter Sahaj Money, a registered investment advisory firm founded by Abhishek Kumar. Kesarwani’s financial portfolio took on a new direction. He surrendered half of his insurance policies and is now invested directly in only four mutual fund schemes.

“I am an engineer by education and jeweller by profession. I knew something was amiss in the way our family invested. Around covid-19, I channeled my energy into understanding the investment world. I happened to watch a video by M Pattabiraman of Freefincal, in which he talked about fee-only financial planners. I checked out the suggested website and eventually chose Sahaj Money for my financial advice,” said Kesarwani.

Kesarwani and his wife Sneha (36) have eight-year-old twin sons and a one-year-old daughter.

Direct versus regular MFs

Kesarwani was fine with the commission that the mutual fund distributors earned from his investments. However, it felt odd when they pitched new funds every now and then. Once he discovered fixed-fee advisory, the idea appealed to him.

“I could see how this model would not have any conflict of interest between me and my advisor since he would not be earning commission via products he advises me,” he said.

Kumar of Sahaj Money did some calculations.

“He told me I could save about 25% in commissions over a 30-year period if I invested in direct plans of the same mutual fund schemes. I redeemed all my investments and moved it to four direct mutual fund schemes, as suggested by Abhishek,” said Kesarwani.

He now invests in an overnight fund and a liquid fund for short-term goals.

“As per the family’s risk appetite, I suggested they maintain 50-50% allocation in debt and equity. The suggested funds for long-term goals included the Nifty 50 Index Fund, a flexicap fund and a gilt fund,” said Kumar.

Kesarwani invested in the mutual funds via the Groww app, but he is concerned about the security aspect. He will now switch to MF Central, a platform developed by Computer Age Management Services Private Ltd and KFin Technologies Private Ltd to facilitate uniform services across mutual funds in India.

They did not want to disclose the quantum of their mutual fund investment.

Insurance and other investments

Kesarwani’s portfolio was previously heavily tilted towards savings-linked insurance plans.

“Abhishek explained to me why having these many policies was a bad idea. Since half of the policies are getting matured in a year or two, we will continue it till maturity. We will be surrendering the rest. One thing is sure – we will not be buying endowment policies anymore,” said Kesarwani.

He also did not have a term insurance plan earlier. Keeping in view the family’s financial goals and income, Kumar suggested coverage of ₹9.5 crore ( ₹7.5 crore for the husband and ₹2 crore for the wife). The combined annual premium would amount to about ₹90,000. The family is yet to buy the term policies.

The couple already had the Reassure family floater health insurance plan from Niva Bupa. Kumar suggested they buy a super top-up plan of ₹50 lakh with ₹15 lakh deductible and a personal accident and critical illness cover.

The Kesarwanis are invested in real estate, too. He holds some gold, public provident funds in his name and those of his wife and three children, and five National Savings Certificates (NSCs). He is redeeming the NSCs and deploying those funds in mutual funds. The real estate, PPF and gold investments will continue.

Identifying financial goals

Kesarwani had an understanding of his family’s future needs such as the education and weddings of his children. However, he had no idea how much to save for them. The same was the case with his own retirement goal.

Kumar helped him estimate the cost of educating his three children and their weddings and how much to set aside to build his retirement funds.

“Considering 85 years as the life expectancy of my wife, the retirement corpus has been calculated for us,” he said.

Apart from refining his investment portfolio, Kesarwani also learnt the importance of consulting registered financial advisors such as Kumar. Kesarwani paid only ₹15,000 to get his financial plan made.

“I have not met Kumar in person. I don’t think it is needed. The online journey was smooth. The data-gathering sheet too was helpful for us. We took our time in filling it up. We did it together, which made us have a good idea of where we stand and where we have to reach in due course,” he said.

Reviewing his investments will cost him ₹5,000.

“I’ll be getting my financial plan reviewed every year because income, expenses and goals keep changing. Revisiting our financial allocation will help us be at peace with our changing financial situation,” he said.

The online fixed-fee advisory model is helping registered investment advisors reach out to places beyond metro cities where financial literacy is growing. Considering that there are only about 900 such advisors in the country, there is a need for more of them.

The Securities and Exchange Board of India issued a consultation paper on Review of Regulatory Framework for Investment Advisers and Research Analysts in August 2024. The final guidelines are awaited.