These days the most common ice breaker used by AMC relationship managers with IFAs has shifted from ‘Sir, kya lagata hai market?’ to ‘Sir, are you a distributor or advisor?’ or ‘Sir, you should become advisor’. Clearly, the ‘advisor vs. distributor’ topic has emerged to be the new conversation point.
The fact is one will have to become advisor sooner than later; at least that’s the signal regulator is giving because of which the industry is going through a transition. For this transition to happen, there is a need for change among all the stake holders i.e. investors, intermediaries and manufacturers.
Investors need to change their approach towards the intermediary in terms of remuneration i.e. they need to understand that advisor plays a very important role and to seek unbiased advice from him/her, they should compensate the advisor. This is clearly a daunting task and will take years.
Before that, the intermediaries need to bring in value addition to the table which traditionally has not been a part of their menu. It can be academic qualifications viz certification courses, trainings, technology, ease of transacting so on and so forth. Most mutual fund observers including me believe that though the organized section i.e. national distributors have already started working towards it, the IFA is struggling to implement the changes. The mindset seems to be – ‘I have Rs 200 crore of AUM so why do I need to change? Moreover, the new changes involve additional cost and resources and learning new things. There is no advantage. What has worked for me so far will work in the future too.’
The third section which is very strong and can play a crucial role is the AMC. The AMC sales guys frequently advise the distributor to become an advisor; that means AMCs also want more advisors. If so, is there any serious attempt from AMCs to bring in change? The answer is ‘YES’ in a few cases. A few large AMCs are spending serious money to enhance the knowledge of these intermediaries but sessions are held in groups of 50-60 and hence have a limited reach. Some of them have strengthened the content on their website in advisor section. However on the ground I think there is still a big gap - the sales guy still talks about six months performance and still tries to sell dividend!
If AMCs want more advisors on the street, even AMCs will have to change the style of functioning on the ground. Other than doing fund managers call/meeting there is a bigger need on the ground because there are 44 AMC and hundreds of fund managers. I think the intermediaries across the board need training on psychology, economics, technology and soft skills. Discussing case studies is one area which is missing in the training sessions.
To conclude both intermediaries and AMCs need to bring in necessary changes in their style of functioning to produce better quality advisors to investors because the ‘change is unavoidable’.
Vinayak Sapre runs Insights - An Advisors Coaching Firm .
The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.