Globally, independent financial advisors (IFAs) will see an 18% increase in their client base, according to the recently published 2019 EY Global Wealth Management Research Report.
EY found that clients broadly use services of five different types of wealth management providers – banks, online trading platforms, fintech platforms, direct to manufactures and IFAs, as often a single service provider cannot fulfil all their financial needs.
The report found that IFAs and fintech firms like robo advisors would witness the fastest growth over the next three years. While the report predicted that IFAs will see 18% rise in their client base i.e. from market share of 40% to 47%, robo advisors would also see 18% growth in its client base with market share of 45%. However, the report pointed out that ticket size through robo advisors would be smaller.
Other traditional wealth advisory channels like commercial banks, asset management firms, online trading platforms and private banks despite having high market share currently may not see growth in their client base.
The report attributes this growing affinity towards IFAs to handholding by IFAs. Unlike large brokerages, which have fixed fee structures and offerings, IFAs can offer customised solutions to their clients, said the report.
Over 2,000 investors across 26 countries have particpiated in the EY's survey.
We spoke to a few IFAs to understand how they stand out compared to other distribution channels.
Bharat Bagla, Bees Network, Kolkata feels that the personal touch provided by financial advisors differentiates them from the other channels. Unlike banks where RMs can switch jobs, clients enjoy a long-term association with their advisors. This also helps IFAs understand their clients better and offer customised services to their clients.
Goa IFA Hari Kamat feels that IFAs have edge over other distribution channels as they are accountable for their advice. Also, in India, financial advisors have helped investors understand nitty-gritty of various financial products such as insurance, mutual funds, said Kamat.
Mumbai IFA, Azeem Jagani, Composite Investment Services feels that advisors do not work to achieve sales target. “We do not have sales target and bias for a fund house. We recommend schemes based on their performance and the client’s risk appetite.”
