Be it travel, shopping or booking online movie tickets, an increasing number of people are discovering the convenience of buying through a click. However, can buying a mutual fund online be compared with buying a movie ticket? One may opt to go for a movie after getting feedback from their friends or colleagues but it is unlikely that they would take such a decision when it comes to investing. An individual’s decision of going to a movie may depend on the actor, script, director, etc. but buying mutual fund cannot be driven by such an instinct. Just the way individual preferences differ, client’s needs and risk appetite varies and this is where an expert advice is most needed.
Ever since SEBI mandated AMCs to introduce from January 1 a direct share class model for ‘do it yourself’ investors, fund advisers are worried over the implications of losing their clients. While one can’t completely play down the possibility of some investors migrating to direct plans, IFAs on their part need to be adequately prepared to tackle this challenge head-on. It is important for fund advisers to be prepared for an action plan if they face questions from their clients about going direct.
So how can distributors overcome the direct hurdle?
Needless to say that distributors need to clearly showcase the benefits of investing through them vis-à-vis going direct.
“It’s a question of what value are you bringing to your clients. IFAs need to provide them services which they would otherwise not get if they go direct. The benefit should be equal to more than the cost that clients incur by investing through IFAs. IFAs who deal in multiple products will have an advantage because while they’ll be able to go direct for MFs they’ll be still dependent on advisors. Everybody has information on fingertips but the execution is difficult. Right now, everyone is focusing on cost but if investors make a wrong investment, they will have to consult someone,” says Lovaii Navlakhi, Founder & CEO, International Money Matters.
Gaurav Mashruwalla of A Cutting Edge (ACE) says “IFAs need not worry if they are adding value to their clients. If you have done things which were always in the interest of clients, then they’ll stay with you. Fund houses cannot render the kind of services advisers offer.”
Industry estimates suggest that roughly 11% investors (including retail and institutional) come directly to the fund house.
“The shift would depend on the level of influence distributors have on their clients. Today, IFAs still lose AUM to other distributors if investors find that their service is not up to the mark, says a sales head of a private sector AMC.
To be continued...
