After the entry load ban, some distributors turned their focus to HNIs in order to sustain their revenues. However, most IFAs continued to serve retail investors and the results are visible. The MF industry today gets about Rs. 3,800 crore average monthly inflows through SIPs, up from Rs. 1500-2000 crore a few years back. As a result, the SIP inflows are beginning to help markets counterbalance FII outflow.
Abhay took up a job as a production manager in a private company after completing his engineering. He later joined as a probationary officer at State Bank of India and rose to the rank of branch manager. Having gained adequate experience in banking and finance, credit appraisal and monitoring, computer programming’ over seven years, Abhay resigned from the bank's secure job and launched himself as a techno-financial management consultant and was highly successful in this role. As an investor, Abhay became familiar with mutual funds and began investing in MFs. He was impressed with the performance of his investments. Moreover, a lot of his erstwhile clientele and banking colleagues sought his advice regarding their personal finances. Sensing an opportunity in investment advisory, he expanded the sphere of his counselling services and floated his own firm ‘Thousand Lights’ in 1996.
When asked to share what has worked for him in converting prospects to clients, Abhay cited two points,
· Moving clients from recurring deposits to SIP: Abhay explains the virtues of SIPs to risk-averse investors who invest in recurring deposits. To drive his point across, he uses tools and charts which showcase the returns which equity SIPs would fetch vis-à-vis recurring deposits.
· Awareness programs: Abhay believes in acquiring clients by empowering investors. According to him, one of the ways of making an investor education program successful is by having a homogenous group of people who share the same background or age group. He conducts his investor awareness programs in corporates, government offices, educational institutions and factories. In these programs, he underlines the importance of saving for children’s higher education, retirement planning and wealth creation. Abhay shows how MFs are best placed vis-à-vis other financial products to achieve these goals.
Interestingly, Abhay invites his existing clients in these programs who share their experience of investing in MFs with the audience. His clients show how Abhay’s guidance and advise has helped them achieve their goals.
Why retail works
Thanks to his extensive experience in banking, Abhay has developed a good understanding of retail investors. Sharing the reason behind his retail focus, he says, “Retail investors remain with you for a long time”. Here are some facts which validate his claim. According to AMFI data, of the Rs. 2.15 lakh crore equity AUM which remained invested beyond two years as on September 2016, 66% or Rs. 1.43 lakh crore was held by retail investors. He uses technology to build scale and volume which helps him manage costs better. Also, retail investors require a lot of human interface. Thus, Abhay makes sure that his clients get the best service through his eight-member team.
Abhay says that client servicing is the backbone of advisory business which not only helps retain clients but also results in generation of higher referrals. His eight-member team ensures that they contact at least four clients each day. While technology plays its part in customer service, Abhay believes that meeting clients personally or talking to them on phone is a better way of keeping in touch. He tries to meet his clients at least once in three months and if that’s not possible he talks to them on phone. Even on special occasions like birthdays he never fails to wish them personally by a phone call.
For fund selection, Abhay first filters the top performing funds over a five-year period. The top performing funds are further short-listed on the basis of having a true to label portfolio and being consistent in outperforming the benchmark and displaying steady AUM growth. Finally, he analyses the track record of the fund manager and sees if the fund house has a process driven approach to fund management. He practices ‘the owner of this restaurant eats here’ policy. So after shortlisting funds, he invests his own money in schemes which he plans to recommend.
Abhay says that while the distribution landscape is facing headwinds, there is a lot of potential in this business. According to him, the key to cash in on this opportunity is to upgrade skills, invest in technology and have a long term focus in business. Another mantra is remaining in contact with clients personally. “Meeting clients is very essential as personal touch strengthens relationships. It cannot be substituted by technology,” believes Abhay. His unflinching effort of serving retail clients has helped him build Rs. 100 crore AUM across 800 clients in a span of 20 years.