Just as SIPs offer investors a simple and disciplined way to accumulate wealth, it is also helping advisors grow their assets under advisory (AUA).
An increasing number of advisors have realised this and are advocating SIPs to grow their business.
Alagappan Thenappan, a Chennai based IFA, has a unique success mantra called ‘five SIPs a day.’ Whether it is a Sunday or a festival he works 24x7 to achieve his target. His passion for mutual fund distribution makes him travel long distance even for SIPs of Rs 500. He believes that his bag is his office and client’s desk is his work place. His unflinching zeal has helped him build a SIP book of over 2,000.
Vinod Jain of Jain Investments who has 7,000 SIPs feels that every distributor should approach their clients to invest through SIPs. “SIPs have been extremely effective for me to grow my company’s AUA. Most of my clients are in the middle income group and hesitate to invest lump sum in market linked products. Out of the top 10 clients, 9 clients are investing through SIPs.”
Another Navi Mumbai based IFA who has 9,000 SIPs says, “I cater to around 2,500 families who have adopted SIP route. Most of them are working class families. For new clients, we generally advise them to invest through SIP and not lump sum. For every advisor, the key to increase AUA is recommending clients to invest through SIPs.”
D Muthukrishnan of Wise Wealth Advisors who gets SIP inflows of Rs.1.25 crore per month says, “SIP has helped me grow my AUA. I cater to 175 families and every member of the family is investing through SIPs.”
Muthu has generated a lot of leads by blogging. “I blog regularly. This has helped me interact more easily with prospects which ultimately helped increase my client base.”
So how do you go about selecting a fund for SIP? Muthu says that he identifies a scheme from a good fund house that has been a consistent performer over the past five years. “Don't forget to review the performance of the scheme regularly,” he cautions.
In order to build a sustainable SIP book, Vinayak Sapre of IFA Insights says that advisors should link SIPs with goals. “It is uncertain whether markets would sustain their past performance. Advisors should choose a path which is not dependent on markets. Clients who were market sensitive and didn’t continue or redeemed their SIPs, lost the opportunity and so did the advisors.”
“To avoid such a situation, each SIP should be mapped to a particular goal and in every review meeting the emphasis should be on achieving the goal rather than discussing the market movement, which is not in your control,” advises Vinayak.
The SIP route can work wonders for advisors to grow their assets. For instance, assuming you have SIP book of Rs. 1 crore per month with an average SIP tenure of three years in an equity fund, your AUA would grow to Rs. 36 crore after three years.
The increasing focus on SIPs is evident by the fact that IFAs today channelize half of industry’s SIPs. In fact, IFAs command 46% market share of the industry SIP count as on September 2015. The other channels like national distributors and banks account for 37% and 17% market share respectively. This data was presented by Himashu Vyapak, Deputy CEO, Reliance Mutual Fund at the IFA Galaxy event held in Chennai in October.
If we analyse closely, IFAs command a much higher share, as much as 83% of the SIP market, if we club NDs with IFAs. This is because national distributors like NJ India and Prudent appoint sub-brokers or IFAs who channelize majority of their business. For instance, Surat based NJ India, the largest ND, has 20,000 sub-brokers who sell mutual funds.
According to rough estimates, the industry currently has 80 lakh live SIPs. This means IFAs alone service 36 lakh SIPs, which shows that they have contributed in helping retail investors participate in markets through the SIP route in a big way.
