The MF advisory business is like a vessel with a leak. Advisors have to keep adding new clients as existing clients may redeem to meet their goals. Thus, to maintain existing assets under advisory (AUA) and keep growing it to increase revenues, it is important to add new clients.
In the recent past, education has gained immense importance to empower prospective investors. While AMCs have been mandated to invest two basis point of their AUM to educate investors, distributors are also taking an active role in educating their clients. The trend is catching on among many distributors.
Gujarat based IFA Pratik Shah who took over the reins from his father’s advisory practice in 2004 has been conducting Investor Awareness Programs (IAP) since the last 2-3 years. He got the idea of conducting IAPs when AMCs started holding investor meets in his area. “I attended one of the investor meets of an AMC. This session was very useful for investors. Since then I have been doing IAPs on my own,” says Pratik.
While doing IAPs to acquire clients may sound like a cake walk, it is not easy to get the required attendance. So how does Pratik make sure that his clients attend his events? “I keep the agenda fresh and interesting so that clients find it useful for them. Clients don’t understand SWP, STP and other jargon. So I create a new product using these tools to suit their goals,” says Pratik.
Pratik uses word of mouth to bring together audiences for IAPs. He makes a WhatsApp group of clients residing in a particular area and shares the event agenda with them. As far as content is concerned, apart from educating clients by comparing various products and their benefits, he invites his existing clients to share their investing experience with the audience. “I invite clients who have been investing for the last 8-10 years with me. They narrate how their investments have grown over the years and this gives the audience some social proof. It is like a testimonial for me,” says Pratik.
The strike rate is usually 15-20%, which means that 20% of the people who attend his IAPs give him some
business. The business comes from both his existing and new clients who attend IAPs.
The best thing about IAPs according to Pratik is that prospects get better understanding of matters related to finance and in future may not get misled by product promotions.
Another approach which has worked for him is making investors invest when markets correct. He has been educating his clients in IAPs about how markets function and why investing at dips is beneficial for them. Every time there is a 500-800 points dip in Sensex, he sends out text messages to his clients reminding them that they need to invest today. “None my clients panic when the markets correct. In fact, many of them invest when this happens. I even accept Rs. 1,000 lump sum investment and make sure it is invested on the day of market correction,” says Pratik.
Pratik’s strategy to acquire new clients is validated by studies in foreign markets. A study called ‘Financial Professionals and the Future of Thought Leadership and Social Media’ conducted by Financial Planning Association (FPA) and LinkedIn reveals that successful advisors communicate in social gatherings and IAPs to acquire new clients. The study shows that high growth advisors in USA follow a certain communication strategy and are more likely to communicate frequently through both offline and online channels with prospective clients. These advisors use social gatherings and conduct educational events to acquire clients. Almost 57% of successful advisors prefer social events to acquire new clients while 49% and 41% send newsletters and conduct investor awareness programs respectively to grow their business.
Pratik says that putting client interest first and giving them the best service has helped him acquire new clients at a faster rate. “I always treat investor’s money as my own and put myself in their shoes. Besides, delivering the same level of service to all types of clients is important. You can’t discriminate. How much money a client invests is not important. You never know when a small client can become big client,” says Pratik. Pratik also takes client feedback very seriously which helps him hone his skills further.
Pratik believes that winning investors trust is a key driving force for his business. “I believe that if every investor is satisfied by my service, knowledge and never has any sort of doubt on my intentions I think that will be the biggest driver for my business. They will refer me to their friends and family and word-of-mouth marketing is more convincing than any other marketing,” says Pratik.
With a fast growing base of over mutual fund 2500 clients, he manages an AUA in excess of Rs. 27 crore in mutual funds. His SIP Book stands at Rs. 60 lakh today, and he is confident about taking that number to Rs.1 crore in 2016. To ensure that his clients have a seamless experience, he has plans to scale up infrastructure and expand his team. He is also in the process of developing his in-house software to better manage his client database and produce business MIS.
Pratik is very optimistic for his journey ahead. A believer in simplicity, doing the simple things right and consistently has helped him grow and take his business to great heights.
