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MF News ‘Commissions will fall further but your earnings will rise’

‘Commissions will fall further but your earnings will rise’

Be your client's money doctor, says Ashutosh Bishnoi.
Shreeta Rege Mar 12, 2019

Ashutosh Bishnoi, MD & CEO Mahindra MF took the bull by its horns when he promised advisors that ‘Commissions will fall further but your earnings will rise.’ He backed up his promise with actionable ideas for advisors to grow their business.

Before sharing the solutions, he outlined three key challenges: 1) Business practices, which worked before are no longer effective. 2) There is a potential conflict of interest in trail model; advisors may not churn even if the scheme does not perform. 3) Servicing retail clients is becoming cost prohibitive for smaller advisors.

Bishnoi believes that growing business in such a scenario requires a recalibration of business strategy. He gave three actionable tips that can help you grow business in an all trail era.

Be their money doctor

Sharing findings from an independent report, Bishnoi revealed that the number of households earning Rs. 2 lakh and above monthly would grow to 1.6 crore and households having monthly income between Rs. 1 lakh and Rs.2 lakh would grow to 5 crore by 2025. “A growing number of these individuals would need financial advice to manage their money. However, these individuals will not just invest in mutual funds. Their portfolio will have a mix of gold, insurance, bank FDs, loans and mutual funds. If you want to be their money doctor you need knowledge of other financial products too,” he said.

Bishnoi encouraged advisors to expand their offerings and said that instead of selling just mutual funds, advisors should offer clients a holistic financial solution based on their needs. “While you may not distribute gold, you should advise your clients if it is the right time to buy, sell or hold gold as it forms a major part of client’s portfolio,” he said.

Niche

Bishnoi recommended advisors to look at customer specialization to grow business. “As different categories of customers have distinct needs, advisors should decide to service a particular client segment such as retirees v/s non-retirees, men v/s women, rural v/s urban, earning v/s non-earners,” he said.

Bishnoi said that advisors could identify their niche by looking at their existing client base. It is possible that most of your clients are salaried individuals or small business owners. Whatever it is, a focused approach would give you more clients and help you become more referable. 

Institutionalize your business

Bishnoi asked advisors to give their business a distinct brand to make it more relevant to customers.

He asked advisors to institutionalize their business by joining a known network, starting their own network, creating a group of IFAs or consolidating their business. He particularly mentioned business consolidation that is starting a private limited company along with a few fellow advisors as a good alternative for business succession.

He closed the presentation by reminding advisors that re-inventing their business is the need of the hour.

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30 Comments
Mohit · 1 week ago
Bishnoi sir forgot
As per sebi IFA is a distributor hence cannot be advisor
Pulkit · 1 week ago
Yes
RAGHUVEER · 1 week ago
As suggested by Mr.Bishnoy a group of persons can form Private ltd co by contribution capital. Then you can be both advisor as will as distributor. Ealier SEBI Guideline said, the Net worth of the company to be 25 lakh . Now they are reducing the networth criteria to Rs.10 lakh. Any body who want the adivice we will facilitate for merger of individual aum and maitaining the individual data secrecy etc. We are coming up with the softwear in this regard.
Reply
Sanjay Jotwani · 1 week ago
There will be no new IFAs. There will be decrease in no of mutual fund distributors. As cost of servicing is more than income. It will be very difficult for everyone ie IFA, ND and AMC to make profit
Dhiren Shah · 1 week ago
There might not be many new IFA's coming in but there will be many many online platforms selling direct mutual funds. That is a given.
Reply
Devender TOLANI · 1 week ago
Bishnoi sir plz check this "aur bhi gum hain duniya main kewal mutual fund bechney key siwa after sale service itna time aur money consume karti hey is industry main ki bhaisaab ghar per roti nahin pahunchegi" reducing commission is not the solution .if u reduce commission more then mf will also get hurt
Arun Sharma · 1 week ago
No offences, but the gentleman needs to brush up his own ideas; instead of offering hollow advice to people probably many times wiser than himself. Basic hypothesis, probably he didn't read in the school. Earnings is derivative of commission income. If the underlying is tanking the derivative cannot rise.

Very poor of industry and people who seem to be trying to drive it. The seem to be offering solutions which are absolutely poorly thought of.

What has TER to do with the historical trail??? Your scheme expenses are still in the range of 1.75% to 2%. But historical trail reduced from .50% to .35%. How is that justified???

SEBI asked for rationalization, by what yardstick you find this rationalization????

Rahul · 1 week ago
Friends, nothing will happen of we all keep chatting over this platform. The combined voice should be raised that should be listened by the authorities and the finance minister. I am just wondering how the bigotry thoughts of the regulators working to destroy the backbone of this industry. They are wanting to have a European model in India,,,,, India where bullokcarts, cars, bicycle and rickshaw all are driven on the same road. Brothers make the regulators understand that a 220 volt motor will not run by providing only 20 volts....
Deepak · 1 week ago
Sir..It is your job only to convince to IFA to work in peanut commission even AMC hardly bother whether a Individual can survive with this kind of Payouts......
Dilip Shenoy · 1 week ago
Completely agree with Mr. Bishnoi.
T P VINOD · 1 week ago
You can criticize the priminister and even argue against any supreme Court judgement if you find any flow in it. But this SEBI is different.. Some mutual funds and AMFI has created an impression amoung the IFA community that these people are just like God's and always right and nobody can go against their ruling. Quite funny.They want to just fool the Ifa's.

Vishal · 1 week ago
People like Fund house CEOs not having any distribution background are commenting on the future of “distribution”.
Request to Cafemutual team is that please involve existing established IFAs on such matters & share their wisdom on the future of distribution rather than people in the manufacturing chain who try to Impose their views through platforms like Cafemutual & eventually through AMFI on this.

Please don’t treat manufacturers as God’s as most of them aren’t able to beat their benchmarks. Meaning they are themselves not good at their jobs of manufacturing & beating benchmarks & are commenting on distribution.
Kaushik · 1 week ago
If TER is reduced, commission is reduced,then even salary can be reduced
Vardhan · 1 week ago
Appeal to “Competition Commission of India (https://www.cci.gov.in) to book AMFI & AMCs for acting as a Cartel & running a malicious campaign against distributors.
Shashi · 1 week ago
Right
Kunal · 1 week ago
Good Idea
Reply
Monil Daru · 1 week ago
Sebi never worked in favour of IFAs. Now its very tough for IFAs to servive. Because of online pltaforms like paytm & et money, & also due to direct plan..
Advertise of Etmoney clearly said that investors can get 1% extra returns because of No IFA Commision.
Isnt is misguiding to investors?? Noone pay IFA 1% commision now..Than why doesnt stop these types od advertise?
Angha · 1 week ago
Govt should abolish LTCGT n DDT on equity schemes and all financial product commissions should be rationalised. As of now commission on MF n insurance is not justified.
Prashant · 1 week ago
Who are you to give the judgment on how much is justified? Who needs your certificate?
Reply
Manash Paul · 1 week ago
I thought that nuclear war would start & every one will die committing sins, conspiracy, intrigues & know that their stature stands nowhere. Those who are suffering will be relieved & those who make people suffer will not be willing to leave coz they are alive by sucking blood of innocent but their craving for life would bring too much pain.
Nalin Kapoor · 1 week ago
Now a days Salary is considred as hard earned money & once right, on other hand Agent commission is considerd as a Kherat, out of which most person want its share. Self employed Agents are left with no choice & disrespect being self employed.
Vishal Rastogi · 1 week ago
It clearly sounds from AMC side that How worried they are ?... with falling participation of distributors in selling their product without paying a respectful remuneration... & challenge rises on sustaining !
I recent time(2014 - 17) they had inadvertently increase their expenses by numerous of small branches & has become hard to carry them... !
Vishal Rastogi · 1 week ago
Now they r teaching other way of business in fear !
Murari · 1 week ago
When the writing is clear on the wall , why beating around the bush. Many CEOs come out with sermons which is rather irritating . In some other article Mr Sabarwal of Tatas says - upgrade technology. Now Mr. Bishnoi says something that he himself does not believe. Sitting in the comfort of posh offices they dole out advises. I can come out with better advises which are more catchy and inspiring. They do not have the nerve to confront SEBI , but keep talking sheer gibberish. If technology is going to solve the problem , why the national distributors are cribbing. Many are giving up on MF verticals. This is from horse's mouth. They say it is no more workable for them . Mr. Akshay Kumar comes in the TV every day for ET and tells - Go direct and do not give any money to intermediaries. They are trying to encash when IFAs are leaving. It is pathetic. This is democracy. Even our respected PM is questioned . What is SEBI ? They can't kill a legitimate business like this. Look at UK . Theresa May wanted to quit Brexit. But the businessmen gathered raised public opinion and defeated the bill to exit EU. That is called democracy. In our country only bureaucrats , politicians and business houses can survive. I would request AMC heads not to sermonize if they can't help. We know our business better than you. If IFAs leave , you better go and service all the rural , urban and metro clients one to one. May God bless you all.
Shriyush · 1 week ago
Sirji, Fund performance ka kay karee ??
Prashant · 1 week ago
Haha....let us see him reducing his salary and increase his earnings. Also SEBI officials also should reduce their salaries because the salaries are not justified if they don't improve the services provided by MFs in terms of Operations (filthiest currently) and Performance(filthy currently) but they will cut our brokerage and give the extra margins to them. Shame shame shame
Prashant · 1 week ago
Haha....let us see him reducing his salary and increase his earnings. Also SEBI officials also should reduce their salaries because the salaries are not justified if they don't improve the services provided by MFs in terms of Operations (filthiest currently) and Performance(filthy currently) but they will cut our brokerage and give the extra margins to them. Shame shame shame
Rajesh Hattangady · 1 week ago
Without dwelving into the TER & trail debate, playing the devil's advocate, one has to agree to the fact, the way businesses are conducted, has definitely changed. One has to be on our toes and THiiNK innovatively to justify our presence, off course with constant educational upgrading.
One has to completely agree with the author, when he says one has to find a niche to cater to. Examples are aplenty and all around us. Eg: Maruti Arena & Maruti Nexa etc
Let's take what is relevant to us and our profession and strengthen ourselves
Prashant · 1 week ago
You are weak. Accept everything that is given to you and are surely afraid of standdling on your feet and fight for your right. It is because of people like you we are demeaned and our livelihood taken away.
Reply
Rajesh · 1 week ago
How funny to note that CEO of an AMC managing a total of 3755 cr of AUM out of which 3009 cr is liquid AUM is speaking for future of the entire industry. Better he should focus on the survival of its own company first. Nobody should take his views seriously.
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