Tarakki Champions-4x growth in 5 years by Priya Sunder

Peak Alpha demonstrates all the virtues that Tarakki Champions stands for: well-balanced yet rapid growth on all key business parameters, with an uncompromising commitment to high quality delivery of advice and service. From a MF AuM of around Rs.80 crs in March 2012, the firm has grown rapidly, year after year, and is set to close March 2017 in excess of Rs,350 crores – a very commendable 4x growth in 5 years – and all of it by focusing on the mass affluent segment. Shyam takes us through the delicate balancing act that he and Priya have been executing to ensure that the business model remains in equilibrium even during high growth phases such as what PeakAlpha has witnessed in recent years. Here’s PeakAlpha’s Tarakki story, in Shyam’s words.

PeakAlpha Investment Services was the proud winner of Tarakki Champion – IFA South Metros in 2016. This award recognizes IFA practices that have built a sustainable and scalable business model, based on four parameters, namely, AuM growth, Customer growth, SIP count growth and SIP value growth. I am delighted to share some thoughts on PeakAlpha’s journey that resulted in winning this prestigious award.

“Will I have too much life at the end of my money? Or will I have too much money at the end of my life?” These are the key questions that the financial planning process seeks to answer. PeakAlpha decided, at its inception in 2005, to focus on assisting customers who were seeking the answer to these questions. We defined our target segment as those families with annual income of between Rs.30 lakhs and Rs.150 lakhs. Focusing on this customer segment helped us as our industry navigated through many changes that put pressure on revenues and margins. Our upper middle-class (or mass-affluent) customers, typically value and quality conscious, were willing to pay for good service and ethical advice.

While PeakAlpha has over 3000 customers, its core customer base consists of over 1000 families for whom we provide financial planning services. These families work on renewable annual contracts, which entitles them to four quarterly sessions. Many of these customers have stayed with us for many years, some for over ten years.

By focusing on this customer segment, we find that the revenue per customer is adequate to provide high quality service and yet remain profitable. At the same time, the revenue generated is not so high that the customer finds the rupee value of commissions and charges offensive.

We feel that we can continue to focus on this customer segment. Although there has been a good uptick in new customers entering the mutual fund fold, we are only scratching the surface in terms of the addressable market. Recent market events have also made the need for advice very clear.

Of the four criteria for determining the Tarakki champion, two of them involve systematic investments. With good reason, because a business built around systematic investmentsis both stable and sustainable. At the same time, it serves the customer very well. Most customers receive their income every month. After expenses, they generate an investable surplus every month as well. Monthly systematic investments align themselves very nicely to this cash flow pattern, apart from rupee cost averaging.

One of the things I like the most about our industry is that we don’t start each new financial year with zero revenues. Our hard work over the past many years contributes meaningfully and gets us off to a good start. Similarly, effort invested in procuring an SIP continues to generate revenues well into the future. Therefore, even though our business has been buffeted by huge regulatory swings, the impact of these swings is dampened by a good SIP book.

An oft-repeated advice to an aspiring batsman is not to lose your shape when batting. I would use a similar analogy for the advisory business as well, be careful not to lose your shape. I have learned that there are three balances that are healthy for our business, and I am vigilant to ensure we don’t lose our shape when it comes to these balances.

The first is the balance between revenue producers and support staff. With too many producers, the risk of deteriorating customer experience is very real. Errors in transaction processing, delays in responding to customer queries or support needs, and other similar issues have a much greater likelihood with an overwhelmed support team. With too few producers, of course, the load of revenues and profitability falls heavily on a few team members, which can create unnecessary stress on the business itself. We have found a healthy balance to be one where the sales team payroll is half the overall costs of the company.

The second is the balance between hunters and prospects. As salespeople grow and mature in the organization, their role usually migrates from hunters to farmers. Senior members of the sales team focus on taking good care of their existing customer base, which they have nurtured over the years, thereby becoming farmers. When new members are added to the sales team, they need to build their own customer base, thereby becoming hunters. Our marketing activities generate prospects whose likelihood of conversion diminishes rapidly with the passage of time. If you have too few hunters, then conversion suffers. If there are too many hunters with inadequate prospect pipelines, that creates stress on the hunters as well.

The third is the balance in terms of new initiatives. Stephen Covey explains this beautifully in terms of the P-PC balance, or production – production capacity balance. The number of new initiatives an organization starts must be just right. If there are too few initiatives, the organization runs a big risk of getting left behind on key industry trends, whether they be regulatory compliance, technology adoption or marketing strategies. Yet, too many initiatives can create organizational fatigue, leaving many incomplete efforts and staff overload.

All the parameters of the Tarakki awards are growth-related. PeakAlpha has been fortunate in that it has been able to sustain a reasonably good growth pace. Our original customer acquisition strategy of conducting educational workshops at companies has been ably supplemented by women-oriented sessions and customer referrals.

Growth is very important as it provides leadership and managerial opportunities to our colleagues. It also strengthens us financially, thus enabling us to invest in the future, both in terms of hiring talent and adding infrastructure. Therefore, we have always set ambitious growth targets for ourselves and strive very hard to achieve them.

However, growth must not come at the expense of the customer experience. Looking after our existing customers, whose support has brought us to where we are today, will be critical going forward. We are therefore calibrating our growth aspirations this year to ensure that we also build a strong platform now. We look to this platform to enable and sustain our future growth. This platform has dimensions of technology, processes, talented colleagues and infrastructure.

At its heart, however, is a mindset that places our customer first.