Bharuch based IFA Pratik Shah executed more than 90 transactions in mutual funds when news about Brexit rocked world markets. By sending group messages to his clients to use the correction to invest more, he was able to channelize a good amount of money in mutual funds. “This is a sea change in investor mindset as compared to a few years ago,” observes Pratik.
While investor interest to gain financial knowledge by self-education may have been on the rise, advisors and AMCs have also played a significant role in helping them make informed decisions.
Pratik has been educating his clients in IAPs about how markets function and why investing at market corrections 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. “None my clients panic when the markets correct. In fact, many of them invest when this happens,” adds Pratik. Pratik is not alone. More distributors like him are using IAPs to educate clients. Navsari based IFA Rikhav Desai says that he has observed a massive difference in the behavior of his clients due to his investor awareness drive. “They have become more mature when it comes to investing. They don’t back away from the markets during volatility. In fact, they invest more when markets correct. The second half of FY15 was not good for equities but my clients have put in more money in equity funds,” says Rikhav. He adds that investors have become more resilient to market shocks now.
Another healthy trend observed by IFAs is that investors have become aware about the risk-return trade off. This is evident by the growth in equity inflows. SEBI data shows that equity funds, including balanced funds, have received net inflows of Rs. 93,769 crore in FY15-16, a growth of 16% as compared to net inflows of Rs. 80,856 received in FY14-15. “Investors are now ready to take risk to earn more returns. Overall, as investors are slowly getting matured, this is creating a very healthy environment for both investors and advisors,” observes Sandeep Garodia of Suvridhi Capital Markets.
As more and more retail investors are developing a flavour for equity funds, they are also opening up to the importance of debt funds. This is the result of IFAs like Sandeep who play an important role in championing the cause of debt funds among investors. The growing acceptance of debt funds among retail investors is evident by the growth in assets under management and investor accounts in debt category. For instance, the retail debt (liquid, gilt and debt) AUM has grown from Rs. 8,976 crore in March 2009 to Rs. 52,887 crore in March 2016, shows AMFI data. Similarly, the folios or investor accounts have grown from 27.26 lakh to 74 lakh during the same period.
Consumer preferences are changing rapidly, which is evident by their preference for electronic transactions. The MF industry is also witnessing a similar shift. Take for instance the change in the mode through which AMCs are now getting inflows. The MF industry used to get majority of inflows through cheques. Now, many investors are using NEFT, RTGS and IMPS to invest in mutual funds.
So far, mutual funds have been by and large sold physically. With the emergence of stock exchange platforms for sales of MFs and now with SEBI’s plans to sell mutual funds through e-commerce platforms, the future seems to bring variety of transaction methods with online being yet another option.
To meet up with investors evolving preferences, AMCs are coming with platforms, apps and other facilities like e-KYC to provide the ease and flexibility to invest in mutual funds. Bhadresh Jhaveri, a Vadodara based IFA, says that a majority of his clients are comfortable with technology since they have been dealing in shares. His clients use online platforms provided by NSE and BSE to invest in mutual funds. “Technology will help me build scale and volume,” believes Bhadresh.
To sum up, investors have evolved in terms of their outlook towards market. Not only are they becoming technologically savvy, they are willing to work closely with their advisors to meet their goals.
Have you observed any shift in your clients’ behavior over the last few years? Do share your experience.