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As an MFD how do you protect your AUM? While many MFDs talk about increasing AUMs, no one discusses about protecting ones’ assets from external forces which are not in our control like market volatility, increasing number of inactive clients, losing assets to direct and so on.
Here are a few simple yet effective tips that can keep your AUM intact:
Focus on idle money
While many MFDs follow asset allocation for their clients, the deployment mostly goes towards equity. There is some bit of exposure to debt but it is not substantial in most cases. However, a handful of distributors have built their assets through ultra short-term funds and liquid funds. These short-term funds can give your AUM downside protection irrespective of interest rate movement.
You may simply discuss with clients about the idle money they have in their bank account to start with. Let’s say your client has Rs.1 crore in current account, which is idle for 6 months; if he invests Rs.1 crore in liquid funds for 6 months, he could easily fetch Rs.2 lakh with just 4% per annum returns. This money can be used to give salary to an office boy or a driver. Many clients appreciate conversations that offers solutions.
Reduce business concentration risk
Many MFDs have asset concentration of 80:20 i.e. 80% assets coming from only 20% clients. MFDs should put constant effort to bring this ratio to 65:35 or at least 70:30.
You may offer multiple solutions, do SIP top ups or so on to increase wallet share from category B and C clients.
Engagement is key
Control the controllable. MFDs should follow a schedule to engage with clients physically or virtually on a day to day basis. Regular meeting opens new business opportunities and keeps the ball rolling.
Marketing is must
Identify clients who have benefited from your recommendation. Get their testimonials and publish it on social media or your website. Also, ask them for referrals to get more business.
Also, spare some time for social media. However, refrain from putting posts which may hurt anyone’s sentiment. For instance, don’t get into sharing political views.
Other things to keep in mind:
- Never stop prospecting. Make a list of inactive clients and keep adding new clients to make up for it
- Diversify your assets. One family should not contribute more than 5-7% of your AUM
- Focus on salaried clients as they can give you stable and long-term business
Vinayak Sapre is a leading financial trainer and mentor. The views expressed in this article are those of the author and do not reflect the views of Cafemutual
