MFDs are the backbone of the mutual fund industry. The saying is absolutely true. Data shows that MFDs generate much higher volumes compared to RIAs and direct channels.
But despite being the crucial element of the mutual fund industry, the realised profit of MFDs is extremely low.
To address this issue, we need to first understand the reasons behind it. And this article is an attempt to do so.
The problem, I believe, takes root at the very start of the MFD journey. When a MFD starts his career, his only source of guidance are AMC salespersons. Due to this set up, what happens over time is that we ourselves become salespersons of the AMCs.
Rather than prioritising our own interests and ensuring best services for our clients, our aim gets fixated on driving the AUM of AMCs. The winner in such a scenario is only the AMCs.
Why is it a problem?
The focus on AUM takes away our attention from client base. We end up serving all of them equally irrespective of their requirements and the revenue they bring in for us.
By following this model, we carry the risk of losing our top clients. In any business, 80% of the revenue comes from 20% customers and it is this customer base that should get highest attention. But when we treat everyone equally, the bigger clients find themselves at a disadvantage.
Recently, I found an image that depicts the situation perfectly. Called 'Sales Funnel', the concept shows that while we focus on acquiring more and more clients and driving the AUM, the better chunk of our clients find their way out through the bottom of the funnel.
The idea behind sharing this concept is to bring our attention towards better serving our valuable clients to keep the client base intact. There's no point blaming other MFDs, banks, direct investment platforms and NDs for the loss of clients.
What is your view on the matter? Please let me know in the comment section below.
MFD Prabir Sharma hails from Sambalpur, Odisha. The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.
