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Over the past two decades, MFDs have emerged as key players in the evolution of the mutual funds industry, which has been propelled by technological advancements, shifting investor demands and stringent regulations.
During this period, the MFDs have transitioned from basic intermediaries to comprehensive financial experts. This shift is particularly pronounced in their work with wealthy clients—HNIs and ultra HNIs.
This category of investors includes individuals with a net worth exceeding Rs. 5 crore and seek sophisticated solutions for their complex financial goals.
Here are the major themes in the evolution of wealth management business between MFDs and wealthy clients;
The evolving needs of wealthy clients
With the world becoming more global, the wealthy clients are no longer content with simple capital gains. Their priorities now include wealth creation, preservation, tax efficiency, estate planning and legacy building.
These investors favour diversified portfolios blending traditional assets like equities and bonds with alternative options such as AIFs and structured products
MFDs are adapting to meet these demands
To meet these demands from their wealthy investors, MFDs have evolved significantly. The whole MFD ecosystem includes individual, institutional, corporate, and digital/fintech MFDs with individual and digital players primarily serving affluent clients.
MFDs maintain a strong foothold in mutual funds, managing 45% of India’s Rs. 68 lakh crore AUM, where individual and digital MFDs hold a combined 35% share.
Apart from the mutual funds, MFDs have also expanded into PMS, AIFs, and equity broking while positioning themselves as competitors to traditional wealth management firms.
Interestingly, the top 100 individual MFDs account for 15-20% of total AUM, which underscores their expertise and influence.
Technology has been a game-changer
Technology has been pivotal in the transformation of MFDs. Advanced digital platforms streamline client interactions and operational processes have enabled them to offer cost-effective, scalable solutions.
Moreover, MFDs collaborate with law firms, tax consultants and financial institutions to integrate estate planning, tax optimization, and succession strategies, delivering a holistic advisory experience tailored to wealthy clients’ needs.
A mutually beneficial partnership between MFDs and wealthy clients
The relationship between MFDs and wealthy clients is symbiotic. Clients gain expert, customized advice and access to diverse investment opportunities, all managed by a single trusted advisor.
MFDs, serving this segment, can get higher revenues, long-term client relationships, and opportunities for referrals.
This dynamic relationship fosters a sustainable business model that fuels further growth.
Opportunities and challenges ahead
With increasing economic wealth in Tier 2 and Tier 3 cities, there is a huge untapped growth prospects for MFDs, if they extend beyond metros. B2B partnerships and sub-broker models with wealth management firms can further amplify their reach.
However, challenges include meeting the high expectations of wealthy clients for personalized service and consistent performance, all while adhering to regulatory frameworks like SEBI guidelines.
The way forward
In the coming times, the MFDs are poised to redefine wealth management by deepening client relationships and embracing innovation.
Further they will need to adapt to trends like impact investing. They should also solidify their role as vital partners in wealth creation and preservation for India’s affluent population.
Inderbir Jolly is the CEO-Wealth Management, PL Capital. The views expressed in this article are those of the author and do not reflect the views of Cafemutual.