Retail business is a generic term used in our industry to highlight the fact that the distributor’s clientele is essentially individuals. So if we were to begin our discussion with this definition then it is crucial that the distributor focuses on High Net Worth (HNI), Mass affluent (MA) or Emerging affluent (EA). In terms of business potential, an HNI would have a surplus of Rs. 25 lakh to invest while an emerging affluent would start with very small investments (maybe as low as Rs. 1,000 SIP).
The retail distribution model is ever evolving with the change in the regulatory environment and industry dynamics. This process of gradual evolution is largely impacted by external forces such as technological, regulatory, economic and demographic changes. Some of the forces could be disruptive in nature and at times could call for better understanding of the forces and a look at how the stakeholders should adopt these challenges with a multi-pronged strategy to increase investing community participants. The speed of this change is accelerating and hence distribution network has to be nimble footed to provide a winning combination to end investor.
Our retail distribution network has been fragmented a bit and that is so because of pocketed growth in certain markets & certain segments. We witness "Advice Gap”, overlap between products and technological gap in client servicing. We already are in a transitional phase and it will take a while for us to move from sales oriented to fiduciary framework to guide the industry to the next level. Retail advisers and distributors will need to fill this gap by:
1. Enhancing advice models - Retail partners may go beyond certain segments. The new categories of investors are emerging, especially in B15 centres and they need guidance to step in to wealth creation routes. The low end mass market requires substantial hand holding to experience the fruits of investment tree.
2. Creating client interface tools - This aspect is gathering pace and distributors can come out with customized/integrated solutions to weed out operational efficiency. For example, portfolio measurement methodologies combined with flexible client reporting and analytical insight can really match up to customer expectations. There could be a tool to look at compliance management, scenario simulation, portfolio rebalancing and other workflow automation. We can really use tools to drive day-to-day behaviour and processes.
3. Low cost model – It is crucial to create a low cost model or bare bone business model targeted at cost conscious investors. Leveraging technology and/or platforms are an absolute must in today’s day and age. The margins would drop and building volumes would be crucial. Fixed income products coupled with technology could serve as an ideal tool to build the core business for the IFA.
4. Maintaining a customer centric sales functionality - A strong customer centric culture is what industry can wish for. Here, distribution arm can play a vital role in inculcating and establishing this as new paradigm. Maintaining an active dialogue, acting on feedback, fostering a culture that keeps customer at centre can really redefine the future. We can think of designing business processes that recognize different customer needs and working towards seamless delivery during the investment life cycle of the investor.
5. Enhanced use of technology and value add service - The new generations of investors largely look forward to digital mode of transactions. The way social media influences investment behaviour, it is critical for our distribution arm to embrace technology at every touch point. High touch personalization and customized solution can bring in new customers much faster than through contemporary mode. A digital strategy built around enhanced used of technology can fit well into ever changing environment.
We believe retail fund distribution is undegoing a structural change. Opportunities are plentiful and distributors need to provide a comprehensive solution catalogue in alignment with the needs of customers. A customer centric approach, technology enabled service capability, a health mix of customer types and a diversified product range is the way to achieve success for the new age IFA.
Suraj Kaeley is President – Sales & Marketing at UTI Mutual Fund.
The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.