While there cannot be a foolproof solution for advisors to hold back their clients from going direct, we enlist some possible areas where advisors can work which could help them deal with clients who might want to go direct.
- Instead of clients getting to know about direct plans from media or their friends, you apprise them about it first. This will establish you as being honest and clients will not think that you were hiding something from them.
- If possible, prepare a presentation regarding this and send it to your clients. List out the issues, e.g. tell your clients about the operational issues they might encounter if they go direct.
- Invest time in getting to know your client by spending adequate time with each client. This might be a tall order; if you have many clients, start with your most valuable clients first.
- The term ‘service’ has many connotations. You need to clearly define your value-add – both in terms of operational support and higher end research and advice.
- Identify what has helped you in your practice so far and what has not. This will help you get to adopt the right mantras all the time.
While the fears of the implications of direct plans abound, IFAs are hopeful of tiding over the situation. “I have clients from banking and financial sector who are aware about direct plans and still want to invest through me. One needs to be upfront about direct plans with clients and outline the difficulties they’ll face if they go direct. AMCs don’t have the bandwidth to cater to even HNI clients who are widely speculated to opt for direct plans. HNIs can’t hire a person to take care of their investments. Direct plans could also lead to pass backs,” says Vinayak Sapre of VVS Ventures.
Some are of the view that clients would eventually return to them for advice after going direct. “As of now we can only tell them about the services we offer which they would otherwise not get if they go direct. Indians have a penchant for discounts, so some clients might shift but they could eventually come back to us if anything goes wrong. AMCs don’t have their branch offices in all the cities and clients will have to deal with each AMC individually. If clients wish to leave we can’t entertain them,” says a Mumbai based adviser.
Earlier, investors had the benefit of saving entry load charge if they had invested directly with the fund house which is not present now. It remains to be seen how many investors would skip advisors to save fifty basis points cost in an equity fund.
Also see How can advisers overcome the challenge of direct plans? – I
