A fee-only advisor’s letter to his clients

Published: June 30, 2023 at 6:00 am

We recently ran an anonymous survey for clients of fee-only advisors who are part of Freefincal’s curated list and fee-only India – 964 clients have participated.

Swapnil Kendhe is one of the most sought-after advisors on our list. One hundred fifteen of his clients participated in the list, and 97% had the most wonderful things to say about his integrity, forthright nature and clarity of understanding, which is incredible.

Swapnil wrote a letter to his client responding to the feedback. It is reproduced below with his permission. It is his first step forward to make the feedback 100% positive – an impossible task to satisfy everyone, but I am glad he does not want to rest on his laurels and continuously improve.

About the author: Swapnil is a SEBI Registered Investment Advisor and part of my fee-only financial planners’ list. You can learn more about him and his service via his website, Vivektaru. His story: Becoming a competent & capable financial advisor: My journey so far.

As a regular contributor here, he is a familiar name to regular readers. His approach to risk and returns are similar to mine, and I love the fact that he continually pushes himself  to become better, as you see from his articles:

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Dear All, Thanks for taking the time to provide your feedback in the Freefincal adviser
survey. 115 of you provided your valuable feedback. Good feedback works like a
tonic for advisers like me, while not-so-good feedback gives an opportunity to
improve the offering.

Freefincal had done a similar survey before covid and the feedback for me was
not as good as the feedback I got this time. I made a few changes in the way I
work after the last Freefincal survey. I will try to do the same this time.
The feedback was anonymous, and I cannot know which client said what. I have
tried to address a few concerns below.

Every advisory model has some limitations. Here are a few limitations of
my model.

A. I work on the advice-only model, therefore the responsibility for the execution
of the action plan needs to be taken by the client. I prefer to work with DIY
investors who can handle the execution part themselves.

B. There are a fixed number of client sessions I can do in a year. Any additional
offering like half-yearly/quarterly reviews or client calls to check the execution of
the action plan would reduce the number of clients I can handle. I will have to
increase my fee to earn the same revenue that I earn today. This increase in fee
would make my service unaffordable for a section of my clients.

The indexing approach I follow works only when you keep costs low. I don’t want
to increase my fee to offer an additional service that I know won’t add significant
value to the clients’ portfolios.

Monthly or quarterly review calls, assistance in the execution, etc. work only in
the percentage of AUA model where you can have 50 clients and still earn in
crores; not in the fixed fee model I work on.

C. Since I work alone and have no intention to have an employee which would
increase my cost of business and fee, it is not possible for me to follow up with
individual clients. For the engagement to work best, I as an adviser, and you as a
client, must work together on the financial plan.

D. I used to send reminders for renewal or annual reviews, but after SEBI put
restrictions on the number of clients of individual RIAs, I stopped sending
reminders. I need to keep slots free for clients who have a strong actual or
emotional need for renewal. I try to make my clients capable of managing their
money on their own so that there is no need to engage an adviser on an ongoing

E. 150 client limit and heavy compliance requirement for RIAs make it impossible
for me to offer one-off consultations charged on a per call basis, and to cater to
DIY investors who might occasionally need my input.

F. While working with NRI clients, all advisers face the same issue: they don’t
fully understand the products available in the country of residence of the client
and the applicable taxation. The adviser can google as much as he can, but he
can never understand it well enough. NRI Clients must therefore do some study
and research of their own and let the adviser know about the products available
and the taxation. Adviser and client can then work together and try to arrive at
an action plan.

I avoid working with NRI clients because a part of the advice often falls outside
my circle of competence. But many times I accept the engagement because I
know that other advisers don’t understand it any better and there are not many
ethical advisers in India.

Every advisor has biases of his own. Here are some of my biases

A. I am a firm believer in the defensive or passive approach of investing for
investors who lack knowledge or time required to do successful enterprising
investing. At times I do come across as someone whose beliefs are not open for
challenge or discussion.

B. I don’t trust the fund management industry. I am aware that there will always
be funds that would do better than the index portfolio. I trust indexing more
because I have not come across any reliable method or tool to find winning funds
of the future in advance today. I prefer the investment style that eliminates the
risk of underperformance rather than taking the risk of underperformance for a
small probability of superior return.

C. I don’t trust third-party apps and websites like Kuvera, Grow, etc. because I
do not understand their revenue model. I would always prefer the first-party apps and websites even though the user interface and, in rare cases, service is not as good.

D. I detest micromanagement of the portfolio and spending too much time on
financial planning calculations by taking different sets of assumptions. All I care
about is to check what we can achieve with our current assets and savings
potential if there aren’t lucky outcomes. What return we will get has no bearing
on the assumptions that we take.

E. I love the unified portfolio approach. Some clients want more clarity about the
withdrawals from the unified portfolio for different goals. I will write an article on
this when I get time.

I tend not to operate at my best when I have a higher volume of business. When
I have a higher volume of business, the conversations with clients sometimes get
transactional without emotional connection or depth. I also have a tendency to
get easily bored with repetitive work. I am aware of this problem and consciously
trying to keep the volume of work lower than the volume where I start hating the
work of a financial planner.

2023 has been difficult for me because of my wife’s cancer (she is fine now) and
my kid only being 2 years old when it all started. I was not in the best frame of
mind while working on a few financial plans. I apologize to clients to whom I
came across as a little arrogant.

Thanks for trusting me as your financial adviser. I will continue to try to improve
as an adviser.

Yours truly,
Swapnil Kendhe
June 06, 2023

Do join me in wishing Swapnil peace, happiness and prosperity on the personal and professional fronts.

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About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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