IFAs are becoming the rainmakers for industry, especially in the SIP market. In fact, IFAs are the best at acquiring more SIPs and ensuring that investors stick to the plan.
A Karvy report reveals that new registrations of SIPs stand at 31.32 lakhs with 55% of the SIPs coming from national and regional distributors, 24% from IFAs, 15% from banks and 6% through direct channels.
The report further revealed that the contribution of the advisory channel in live SIPs was 34% from NDs and RDs, 43% from IFAs, while banks and direct channels contributed to 17% and 6% respectively.
If we analyze closely, IFAs command a much higher share, as much as 80% 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 over 20,000 sub-brokers who sell mutual funds.
The report says, “Majority of the fresh registrations and share in live SIPs are distributor driven, clearly indicating the fact that distributors, due to their widespread network, are able to mobilize more investors into mutual funds.”
In fact, the report says that investors coming through IFA route stay put for long term. “Investors mobilised by IFAs in the past have stayed invested for a long duration in the funds, as opposed to other channels,” said the report.
Commenting on the dominance of the advisory channel in bringing in SIPs Akshay Gupta, CEO IndiaBulls AMC says, “The strength of the advisory channel stems from their business model. In fact, study of assets under management done by various industry bodies shows that there is less churning in IFA assets as opposed to other channels.”
Radhika Gupta, CEO, Edelweiss Asset Management feels that IFAs as a channel depend on customer satisfaction and customer experience to grow their business, “IFAs ideally deal with many retail clients, with a spattering of HNIs, and SIPs helps them give their clients a good customer experience with small amounts of investment,” she says.
According to rough estimates, the industry currently has over 1.25 crore live SIPs. This means IFAs alone service 1 crore SIPs, which shows that they have contributed in helping retail investors participate in markets through the SIP route in a big way.
