Today, it is tough for an advisor to serve clients without proper technology support. Providing effective advisory services with diverse products at clients' ease has become very important.
The industry needs to look into the challenges faced by the IFAs in upgrading their advisory services. During my interaction with IFAs in different parts of the country, I discovered some common issues they were facing:
- Dependency on 1 or 2 products leading to a high business risk
- HNI client attrition risk
- More and more informed investors
- Prohibitive technology costs
- Inability to attract skilled manpower
- Compliance/ regulatory due diligence
- Limited in-house research capabilities
- High-cost client servicing
It is high time IFAs increase their product offerings. Dependency on just 1 or 2 products is kind of a suicidal approach. Once advisors increase the number of product offerings, the client’s portfolio will also benefit as this will bring scope for more diversification.
Secondly, banks are attracting HNIs with wide offerings of products and services including LAS, LAP, LRS and credit facility. To keep up with the wide range of products out there, IFAs should also increase product basket for HNIs, even if it be at a high cost.
Meanwhile, electronic and print media are playing a positive role in making investors aware of various investment products. But this leads to more stress for advisors, as we have reached a stage where investors expect advisors to provide more products than they already know.
Moreover, there are training centres online and offline that teaches how to learn and grow the advisory business each day. These centres are highly beneficial for advisors wanting to update themselves on the technology change and evolving investor approach. But I have observed that due to the high entry fees for such training sessions, most IFAs hesitate to register.
In this modern world, many things are being handled by robust technology support like back-office, client conversation tracking, asset allocation, risk profiling, financial planning, online transactions, communication, etc. Thus, technology is a boon to IFAs wanting to expand their services in different locations.
Meanwhile, to provide solutions to some of the issues faced by IFAs, I think the industry should come up with different business models that would help them sustain in the long term. An advisory business needs to attract more investors to choose this as a career option.
Moreover, the industry could also create a platform for advisors where they could get all advisory business-related tools on marginal costs which could later help them compete with national distributors and banks.
The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.
