Livemint, Jul 26, 2017
By Kayezad E. Adajania
The entry—as well exits—of financial advisers and distributors is not new in India. But when Sanctum Wealth Management was launched around April 2016, it was a unique case. Royal Bank of Scotland had put its wealth management arm for sale and the team that used to manage RBS’s wealth management division, led by its chief Shiv Gupta, bought it out. RBS left India and Gupta acquired the license to launch Sanctum. Much of RBS Wealth Management’s staff, assets and clients moved to Sanctum. On 1 April, Sanctum turned one. Mint spoke to Gupta about his move.
What prompted you to start off with an existing set of customers rather than going after a fresh set, which you could perhaps filter to suit your own mindset
The underlying opportunity that presented itself when RBS (Royal Bank of Scotland) decided to sell its international business actually had the characteristics that we thought would work quite well for us. Sanctum’s management had, in reality, grown RBS’s business in the preceding few years when we were over there. We were familiar with its development, our clients, the people and so on.
RBS had invested quite a lot in developing this business in terms of people, processes, products, culture; and being able to acquire this business and transition was, in a sense, preserving value.
Acquiring a ready base of business, with a ready block of talent, gave us a running start, which others take quite a long time to build.
In the manner that we were able to do it—which is to create a new company, acquire fresh licenses, and a whole new operating architecture—it allowed us to change the things that we wanted to change. We were able to get the best of both worlds.
Was it tough to convince the clients of RBS to switch over to Sanctum, given that you’d lose the multinational tag?
Ninety five percent of our clients from RBS moved with us. Obviously, clients found the Sanctum proposition compelling enough.
Having said that, initially there were some thoughts in the clients’ minds. They were anxious as to whether we’d be replicating the systems, processes, governance and everything else that typically comes along with a multinational company.
So, the idea was to show clients a firm that not only brought forth such qualities, but maybe even more, that would comfort their minds. Which is exactly how we approached it.
Our proposition at Sanctum has looked much better than what it was at RBS, both in terms of the breadth of products we were offering them, as also the kind of technology that they were used to dealing with.
At the end of the day this is a people’s business. And when clients saw continuity, particularly at the senior-most levels—this is the same management team that existed before and built up the RBS business—they saw a board of directors that was incredible; and the chairman of the board is the former global chief executive officer of the Coutts Group—so that comes with a certain level of quality that you’d expect from the new firm. Initially, clients wanted to see how this would all come together at Sanctum. Now that they are satisfied, they have started to grow their portfolios with us.
What about your employees? They too lost the ‘multinational’ employer tag and now they work for a home-grown boutique firm. Was retaining them a challenge?
Over 80% of our staff moved along as well. Most of our senior management at RBS has also moved over to Sanctum. They are well-recognized individuals in their own right. Our Delhi centre head or say the head of western region, are well recognized in their circle of clients.
People across functional roles have moved with us. Some of our oldest relationship managers have also come here. These are individuals who directly face the clients.
We did have a little bit of turnover. And that you expect would take place in a transition like this.
It was important for Sanctum to demonstrate the continuity in front of our clients.
Ultimately, as we were positioning Sanctum as a platform that would retain the good part of RBS and change what was required—for instance, the agility and the speed with which decisions ought to be made. That’s quite appealing to employees as well, if they can have those attributes.
In particular, the last 2-3 years after global financial crisis, when the regulatory pendulum swung internationally, the ability to do basic business also became quite hard.
In Sanctum, the customers saw a pure-play and independent but well-governed investment manager that came with the agility and ability to be quick in decision-making, while preserving the quality characteristics.
Tell me some of the things that you could do or establish at Sanctum, which you could not do while at RBS.
Our product range, both in terms of depth and breadth, has expanded quite dramatically after having moved to Sanctum. We didn’t have a portfolio management services proposition at RBS. We do have one here.
At RBS, there were some internal limitations because of which we could not offer portfolio management services there. We offer derivatives here. Again something we could not at RBS.
In terms of identifying new product ideas, whether it is alternate investment, mutual funds, thematic funds, third party portfolio management services strategies, etc—all of which we have in an open architecture here—were a lot harder for us do there.
In multinational firms, if you wish to include (sell) a new idea, you had to go all the way up to get the clearance. And, many a times it wasn’t only the process of going all the way up; it was the basis of selecting what you can and can’t do. Sometimes it’s based on parameters that didn’t have any relevance to the local markets. That was a constraint. Here, we don’t have that constraint.
We have a completely new technology architecture and a digital capability—such as the Sanctum mobile phone app— where clients can access their portfolios. We didn’t have that before. This is very big in our scheme of things.
There was a time when foreign fund houses used to have tie-ups with global distributors and banks because of their global relationships. Did you face that challenge…of losing a fund house just because you are not RBS anymore, but a home-grown boutique firm?
Not at all. We didn’t lose any relationships. Honestly, we are the clients here. It is the fund houses that look for relationships with us. If you just look which way the symmetry of the relationship is, I don’t think that was ever an issue. If anything, going back to what I said earlier, we were able to on-board more fund houses and add more products.
Apart from the staff, senior management and culture; we also moved our relationships with the product manufacturers to Sanctum.
Do you see a demand for structured products from your clientele?
Sometimes there may be a demand from someone who has heard about some product and you end up talking to client and discover that it is actually not appropriate for them.
Other times, we know that there is a product that a client doesn’t know about but it is appropriate for them so we have to talk to them.
Give me some insight into your clients’ profile. Who are they? What do they expect? Can you sell them simple products like a mutual fund or do exotic products excite them?
Our clients are predominantly Indians; roughly 10% are non-resident Indians. We have an overwhelmingly large proportion of entrepreneurs, some are corporate sector professionals. Anyone with assets of Rs.5 crore and above can become our client. though most of our clients have net worth much more than that.
As regards to what products they like, it depends. After we identify their risk profile, we also sit with them and understand how they want their portfolio to be managed, among other things, how frequently they want to be in touch. How frequently do they want to hear about new things and so on.
There is a wide range. Some people are more traditional and say let’s just create portfolio allocation based on risk-reward profile and review it periodically which could be quite long intervals in some cases to others who want to be in the path of information and ideas quite regularly. There are some people who would like to hear about new ideas frequently, like say infrastructure trusts when they came along, or real estate investment trusts when these do come along.
Given that a lot of our clients are entrepreneurs, many of them like to be in the information path because our inputs may help them in their own businesses. They may not necessarily use that to inquire about- or actually buy- a product.
In a bull market, generally investors’ queries are high than in times of subdued markets. We do a lot of counselling.