Mutual Funds are arguably the best financial product in India. However, the fact that Indian MF industry has added 1.97 crore unique customers in more than 25 years indicates that most investors still invest in traditional instruments, which hardly match inflation in terms of returns. This also indicates that mutual fund distributors have a huge opportunity as there is only one IFA for every 16200 people and one CFP for every 10 lakh people.
Currently, there is lot of negativity in the IFA community due to the recent cut in TERs and commission. Many IFAs are concerned about the viability of the mutual fund distribution business. In fact, some of them are considering shifting to alternate products or exploring other businesses to survive. However, it is not fair that our clients should suffer because of reduction in commission. Remember, our clients are our obligation. I strongly believe that we will see a healthy growth in the industry and our AUM will multiply in future if we stay put. I know that due to constant distractions, many IFAs find it difficult to keep their focus intact. However, we should constantly strive on growing our businesses. Just do what we are best at - meet new prospects, run a SIP drive, add value to clients’ life through financial advice and help them achieve their financial goals.
As rightly pointed out by Richard Branson, “Focus on your business strengths and keep its weaknesses away from the competition or public.”
Another area where we should work is creating financial awareness among the masses. Financial coaching is about educating clients on the basics of personal finance and goals. Financial coaching is about empowering clients and helping them make informed choices before buying any financial product.
Talking about opportunities, after 10 years, 30% of our population will be retired. However, most of them do not have a retirement plan in place. We should start focussing on tapping young population and plan their retirement. Become a tech savvy IFAs to cater to young clients and increase your client base to grow business.
Remember more challenges means more opportunities, we just need to identify them. The success mantra for future is simple, think beyond regulations, adopt technology, focus on existing client retention and new client acquisition. “Focus and simplicity...once you get there, you can move mountains.”- Steve Jobs
Other opportunities that industry data reflects
AUM growth: AMFI data shows that the MF industry’s AUM had crossed the milestone of Rs.10 lakh crore for the first time in May 2014 and in a short span of about three years, the AUM size had increased more than two times and crossed Rs.20 lakh crore for the first time in August 2017. The Industry AUM stood at Rs.24.25 lakh crore as on 30th June, 2019.
Folio growth: The total number of accounts (or folios as per mutual fund parlance) as on June 30, 2019 stood at 8.38 crore, while the number of folios under equity, hybrid and solution oriented schemes, wherein the maximum investment is from retail segment stood at 7.56 crore. This is the 61st consecutive month witnessing a rise in the no. of folios.
SIP saga: SIP has been gaining popularity among Indian MF investors, as it helps in rupee cost averaging and inculcates a disciplined investment approach without worrying about market volatility and timing the market. Mutual fund SIPs account stood at 2.74 crore and the total amount collected through SIP during June 2019 was Rs.8,122 crore. The MF industry has added 9.32 lakh SIPs each month on an average during the FY 2019-20, with an average SIP size of about Rs.3,000 per SIP account.
Composition of investors’ holdings: Individual investors primarily hold equity oriented schemes while institutions hold liquid and debt oriented schemes. 69% of individual investor assets are held in equity oriented schemes. 77% of institutions assets are held in liquid/money market schemes and debt oriented schemes.
Growth in assets: The value of assets held by individual investors in mutual funds increased from Rs.12.26 lakh crore in June 2018 to Rs.14.03 lakh crore in June 2019, an absolute increase of 14.38%.
T30 vs. B30 June 2019 B30 assets: 15% of the assets of the mutual fund industry came from B30 locations in June 2019. Assets from B30 locations have increased from Rs.3.88 lakh crore in May 2019 to Rs. 4.00 lakh crore in June 2019. The rate of increase in assets for B30 locations was 3.1%.
Goutam karmakar is the president of Independent Consultants & Advisor Association (ICAA). The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.
