Entrepreneurs from our industry have been better off than other industries however it is becoming challenging by the day.
Thanks to the trail income from mutual funds, most of our fellow entrepreneurs were used to predictable income on a monthly basis however, due to a downward revision in scheme expenses, monthly earning of many of the MF Distributors/IFDs has been adversely impacted.
To compensate, the distributors have to look at acquiring additional AUM on a continual basis. With every single basis point drop, there has to be a corresponding build-up of AUM to counter balance. Let’s have a look at the following table to understand the scenario better.
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Increase in AUM required to go back to same trail earning |
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Weighted Average Trail on Existing AUM |
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Reduction in average trail rate (p.a.) |
0.50% |
0.75% |
1.00% |
1.25% |
|
0.050% |
11% |
7% |
5% |
4% |
|
0.075% |
18% |
11% |
8% |
6% |
|
0.100% |
25% |
15% |
11% |
9% |
|
0.125% |
33% |
20% |
14% |
11% |
|
0.150% |
43% |
25% |
18% |
14% |
|
0.175% |
54% |
30% |
21% |
16% |
|
0.200% |
67% |
36% |
25% |
19% |
(Above table is considering that even new assets are acquired in the same proportion of Debt: Equity: Money Market, as it was before the trail reduction. Also, applicable taxes have not been considered while calculating.)
As it indicates clearly, reaching the same level of income from trail requires acquiring additional assets at a much faster pace.
JM Financial Services is working closely with its distributor partners to help them sustain and grow their business through effective planning. Read on, to understand this better.
Multi-product
As one of the largest distributor of third party products, we understand that choice of products offered to the clients, should be extensive. Offering only a product or two, not only limits the chances of interaction with the client, it also reduces the possibility of getting a higher wallet share.
Multiple product offerings from competing players increase the risk of losing the client to other advisors / distributors. Distributor partners of JM Financial Services enjoy wide range of products to be offered to the clients, which include portfolio management services (PMS), non-convertible debentures (NCDs), corporate fixed deposits, secondary bonds, market linked debentures, loan against securities, IPOs, etc. in addition to mutual funds. Click here to read about our bouquet of products.
Cost efficiency
Reduction in scheme expenses and increase in operating costs are slowing down the business growth for many of the independent distributors.
Distributors associated with JM Financial Services enjoy the convenience of state-of-the-art core back office systems coupled with dedicated operational assistance ensure smooth functioning of the daily business of our IFD at no additional cost.
Brokerage reconciliation and timely payments
At JM Financial services, we ensure timely settlement payouts usually on fixed dates every month much like salaried employees. Any queries, complaints, or issues of reconciliations with the issuer companies, are taken up by the central teams of JM Financial Services The distributors partners are kept free from such hassles enabling them to invest quality time in their business.
Upfront revenue opportunities
It is good to have continuity of consistent income through mutual fund trail. However, during the AUM rebuilding phase, it is essential to have income replacement strategy, without compromising on the suitability of products offered to the investors. Check out our next issue, to understand the alternate options available to our distributors.
To be continued…
JM Financial Services Ltd (JMFS) is the dedicated financial services arm of the JM Financial Group offering comprehensive investment management services to retail, institutions, banks, corporates, ultra-high net-worth individuals and Family offices. As pioneers in primary market distribution drawing its strength from widespread network of over 25,000 independent financial distributors (IFDs).
Backed by strong investment banking franchise, we offer Capital market products suitable for retail and mass affluent investor category. These offerings provide rich and varied offerings to our IFDs enabling them to create and execute financial plans for their investors IFDs empanel with us as primary market distributors to offer the wide range of products of JMFS to their end clients. These investment products include mutual funds, IPOs, company FDs, bonds and alternative investments.
To know more, visit https://www.jmfinancialservices.in
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