In this second and concluding part of the interview, Neeraj and Jignesh take us through the technology which powers their business, training, life after entry load ban and more.
Some IFAs fear that they will lose their brand identity if they become a sub-broker. What are your views?
This is a misplaced fear. We neither wish nor believe that we can replace the sub-broker / Partner in the advisory business. The Partner's brand identity & relationship with the client is secure. We strongly support our Partners to establish their own brand identity by providing with many Partner-branded marketing solutions. The Partner-client relationship is in fact further strengthened with the kind of services that Partners can offer with NJ and which enables them to compete against bigger players in the industry. Partners also benefit in customer acquisition by leveraging their enhanced product-basket and services. We firmly believe our Partner’s success is our success.
Can IFAs only work with you under your payrolls and not as sub-broker?
No. IFAs can only work as sub-brokers and presently there is no pay-roll structure.
How has your business impacted after the entry load ban?
The smaller IFAs in the industry have been impacted on the revenues. Attracting new talent is also relatively difficult now. But, there are also Partners in NJ who have successfully evolved their business practice and embraced change. There are Partners who have already started or are in process of charging advisory/financial planning fees from customers. We also encourage our Partners to take advantage of our online trading platform in mutual funds to reduce costs, increase reach to clients and even charge clients.
The industry was thinking of banning upfront commission. How would it impact your business?
The mutual fund industry, especially the IFA community, has been facing challenges in the face of evolving business environment. It is a process that every industry has to go through over time and we should do our best to adapt to such changes. We encourage progress. However, we believe that the average Indian customer and the advisor both have not yet evolved enough to adapt to these changes. There has to be adequate remuneration for advisors for them to survive, reach to clients and offer unbiased, product neutral advice and services. In a large country like India, customer awareness & product access must be on top of the agenda.
Business impact on banning upfront commission would be especially felt by the new and small advisors relying on new customer acquisition and business to generate revenues. Retaining and attracting new talent to the industry will be a big challenge, as we are already witnessing. Many advisors will also find it easy and profitable to move towards other products. Charging fees from the clients is entirely up to the Partners and we do have many Partners who charge fees for the advisory, financial planning and other premium services provided by them.
What kind of products do you offer? What kind of client mix do you have?
Mutual funds have traditionally been our primary product. In addition to that we also have corporate fixed deposits/NCDs, government bonds, PMS, including our own PMS and real estate properties. The clients are predominantly retail in nature investing for long-term wealth creation.
Financial planning is becoming the need of the hour. The regulator is also pushing for advisory model. Are you providing financial planning service to your clients?
We strongly promote the idea of undertaking proper financial planning for clients in our Partners community. We also have developed an online financial planning desk wherein Partners can freely create and document financial plans for their clients. NJ Gurukul is one of the leading education Partners with FPSB India to provide training for CFP certification. We are also in process of offering suitable training for CPFA by NISM.
We are seeing more and more Partners moving towards such services as are able to create an edge over their peers by offering financial planning and premium advisory services.
Take us through the technology behind running your behemoth platform…
We have an in-house technology arm - Finlogic Technologies with over 250 employees catering to technology needs of the entire NJ Group. In the absence of any quality solution in industry that matched our expectations, we had to develop all our systems from scratch. Today we have over 40 of such well integrated proprietary solutions covering all business functions. We are using some of the best practices & latest technologies in programming, testing, database, security & infrastructure management. The technology empowers us to record & process nearly 100,000 transactions on an average day which are then fed into various other projects. The robustness and internal controls of our in-house systems ensures that we enjoy very high levels of accuracy and efficiency in all our operations.
What is your employee strength?
We have over 1,000 employees.
What are your future plans?
We are focussed and very optimistic in the future of the industry. We are in process of enhancing our product basket and we remain engaged in refining our value proposition in the business.
Would you plan for an IPO?
There are no current plans on same.
Read the first part of the interview here: Many manufacturers did not take us seriously initially: Neeraj Choksi and Jignesh Desai