You have changed the name from DHFL Pramerica to PGIM India Mutual Fund. How do you plan to improve your brand recognition?
Our parent company PGIM is one of the largest asset managers in the world. The group has the experience of managing $1.2 trillion across 37 countries with 140 years of legacy. This essentially indicates we can bring the global insights that make sense to Indian investors. Only a few AMCs in India can do that.
We also believe that the Indian MF industry would gradually shift its focus from product driven sales to solution-oriented approach. We have increased our focus on solution-oriented sales and in fact, we have been offering SIPs having insurance coverage. We have launched two other solutions that dynamically allocate assets based on market valuation and also a age based ( 100 - age ), asset allocation.
So far, we held a reputation of leaning towards fixed income products. However, we have increased our focus on equities as well. We will ensure that our asset allocation is broadly in line with the industry industry’s asset allocation between equity and debt assets.
Moreover, some of our fixed income products have gone through the current crisis in debt funds. We need to repair our reputation on that front as well.
In your opinion, how can distributors grow their business in an all trail era?
There are 79,000 IFAs, who have completed their KYD as of June 2019. Of this, almost 38000 have an AUM of less than Rs.1 crore and 21000 IFAs have AUM between Rs.1 crore and 10 crore.
Although MF penetration is low and there is scope for increasing it, we must recognise that distributors at the bottom of the pyramid are likely to feel the stress of recent regulations. This could mean they would migrate to some other profession and their cummulative AUM worth Rs. 1 lakh crore might need another advisor. This means there is an opportunity for other IFAs to grow business, as people will not stop looking for financial services and solutions.
Amid such challenging times, what could be the success formulas for advisors?
Diversify business: Distributors should look at including other financial products. They should offer a complete gamut of services to an investor and diversify their revenue streams.
Focus on niche: Most advisors cater to all set of clients be it millennials, women or retired. business or service class etc. I think IFAs should focus on niche marketing and create expertise in a particular client segment/s to grow business. This would increase their efficiency and help them compete. They should try and build their business model to predominantly serve one or two clear client segments.
Seminar marketing: Advisors should continue to acquire new clients through seminar marketing. This is one of best methods to acquire new clients, grow faster and project your expertise.
Invest in technology: Investors expect a certain degree of service, which is only possible through technology such as access to investment portfolio, online transaction facility and instant redemption facility. This should largely be to help reduce operational time and cost other than helping engage clients meaningfully.
Retirement as a goal: I would recommend advisors to stress on retirement as a goal for investors and build a strong retirement practice.. One, an investor cannot get a loan for this goal anywhere in the world. Further, from an advisor’s perspective, retirement is one goal where the corpus would remain for long-term.This means revenues would remain far more sustainable AUM built on all other goals will get redeemed at a point in time. .
Take feedback from clients: Ask clients to fill up a feedback form at regular intervals. These forms can also mention if the client require services on any other financial product. As a result, it could open new source of income for you.
Since there is a sense of dissatisfaction among IFA community due to the recent turn of events, what can be done to keep IFA community motivated?
IFA associations have done a great job to keep their community motivated. It makes more sense if veteran IFAs are talking to fellow IFAs rather than AMCs telling them how to stay motivated. As an AMC, we will be happy to support such events. What AMCs can do is conduct value addition sessions on latest technologies and industry best practices to educate IFAs.
What are the three key trends emerging in the mutual fund industry?
Globally, expenses of investing is coming under focus, especially in matured markets where it is very tough to beat benchmarks, due to which there is a shift towards passive funds. Our markets have a long way to go to reach that level of maturity and till then active funds will continue to dominate. Plus, we need a strong enabling environment and system for RIAs to thrive too for this trend to get stronger. If the regulator can allow for extinguishing units to deduct fees (with a cap), it could be a solution. The practice of extinguishing units for deducting charges already exists in the Indian Insurance Industry.
Second, the world is ageing. Therefore, retirement solutions are going to become more and more popular. Not just for the old but increasingly for the young too. Being prepared for it will give Indian IFAs a good starting advantage. You can probably count IFAs who are specialised retirement advisors on your fingers here in India. More than 50% of their existing AUM earmarked to retirement goals should qualify as a retirement advisor according to me. Markets abroad have a thriving community of Retirement advisors. As an AMC we are helping to build this community through our Retirement Readiness Certification conducted by CIEL.
Third trend is the consolidation among advisors and manufacturers. This is already happening in India and the trend will accelerate.
