In a two-part interview with Cafemutual, Rajesh Krishnamoorthy, Managing Director, iFAST Financial removes some of the misconceptions associated with platforms and asserts that platforms add tremendous value to IFAs.
What kind of support and
capability do you provide IFAs?
We
help the IFAs all the way through - from assisting the IFA in getting his
client’s KYC done to powerful tools that enable meaningful engagement with
clients to execution of transactions.
On
boarding a client, we set the client on the platform. This is a onetime paper
work that the IFA has to do for a client. Post that, he can take the client
through a risk profiling exercise, gather information about the client needs,
create an investment proposal, share the asset allocation model and also assign
mutual funds for the asset allocation. If the client wants more information,
the IFA can easily simulate multiple portfolios and also back test these
portfolios right in front of the client.
Once
the investment proposal is accepted by the client, the transactions can be
executed at the click of a few buttons! iFAST is the only platform in the
country to have integrated with multiple payment gateways. What this means is
that an advise from an IFA can be executed by the client from any bank account
from a choice of 47 banks so long as the account belongs to the client.
Imagine, an advisor from Howrah can advise a client sitting in Mumbai and the
whole transaction will flow through without a single piece of paper! Besides, the
IFA can provide all his clients free online access to a consolidated view of
his portfolio across 40 AMCs. The information in these portfolios is updated on
a daily basis with the latest available NAV and no back office work needs to be
done by an advisor.
What is the revenue sharing
model with them?
We
follow a revenue sharing model and not a fixed price model. We generally share
about 80% of all upfront payments and have a tiered sharing on trail
commissions. It is also important to note that as a platform, we empower the
IFA to charge one time or recurring advisory fees to their clients, collect it
for them by properly billing the clients every quarter. The advisory fees are
fully credited to the IFA’s account.
Many IFAs are wary of
becoming a sub-broker…
It
is all in the mind! It is a win win when IFAs use platforms. A platform is an
enabler - in its true sense. And so long as this is understood by the IFA, I do
not think the “sub-broker” tag remains an issue. Everything that faces a client
is branded / communicated with the identity of the IFA. We have white labeled
web pages for the IFAs as well. I keep sharing this very often with IFAs – as a
platform, we are not here to deal with your clients. We are here to deal with
you and make your client interactions faster, smoother and scalable! We are
here to enhance your service delivery, give you more productive time for your
practice, allow you to transcend geographical limitations and therefore ensure
that your clients are better serviced, their portfolios better monitored and
actions on portfolios or strategies that you have for these portfolios are
executed faster.
Tell us something about your
software. How is it useful for your advisors?
First
of all, the software is only a part of the platform solution. We call it the
Advisor Matrix. It functions like a portable office for the IFA. He can
synchronise his client investment and holding information, and also fund
information to his laptop and move around freely. He can simulate portfolios on
the fly. If he has a complicated portfolio rebalancing to do, he can use the
handy portfolio rebalancing tool and finish the task in a few minutes. I have
done some such rebalancing myself. Without a tool, it can take a few days of
work for an IFA. Time is money!
Let
me take another practical situation. Many IFAs who have signed up with us have
about 50 clients with sizeable
portfolios. Given the current gyrations in the market, it is but natural that
there will be multiple triggers of entry or exit for a portfolio – all aligned
to what the client’s needs were. Imagine these clients sitting on cash funds
waiting for an opportunity to enter – what if the IFA had to ensure that in the
next 1 hour, all these clients should be getting into their equity allocation?
Using Advisor Matrix, the IFA can actually ensure that every client of his
receives this advice to switch within the stipulated time. He can synchronise
these trades using a data card or wifi connection and his clients will
immediately receive an sms alert and an email. If the clients approve this advice,
the transactions are executed.
We
worked on a very innovative switch – we call it the inter fund switch. IFAs
using our platform today can transact across AMCs. You could redeem from fund
house A and buy in fund house B. Our systems allow our IFAs to seamlessly
transact across AMCs. Imaging doing this on paper – you would have to run with
a redemption form, wait for the credit in the bank account, ask the client to
cut a cheque and fill up the investment form in parallel! I said earlier, time
is money!
We
also provide them training and research inputs to use these tools effectively.
Further,
every transaction is recorded and IFAs have to key in a reason for executing
any transaction which is cleared by the client. So in case of any difference of opinion with the client or if there is a regulatory review of the client dealings, IFAs are in better control because every transaction is recorded. Our platform is built keeping in mind the future regulatory
requirements which can come in.
What happens if an IFA quits
his business? In case of death, will his nominee continue to get a trail from
iFAST?
Yes,
as per the current regulations IFA’s nominee will continue to get the trail
commission even if the nominee is not an ARN holder. These commissions will be
paid only for the business done prior to the death of the IFA. So, for example,
if there is an SIP, subsequent installments of an SIP will not fetch the
nominee any upfront or trail commissions. But all existing assets that earn
trail, will continue to be paid to the nominee.
If
the IFA quits his business, we can either transfer his assets to another buyer
or migrate his clients back to the distributor of his choice.
Do you foresee any
competition from MF Utility platform?
I
don’t think that the MF Utility from AMFI is aimed at competing with
distribution and advisory models. Platform as a word has been very widely used
in different contexts. From a pure consolidation and transaction processing
perspective, there could be overlaps. However, I do not see that as a competing
offering. Let us wait for the final shape of MF Utility before we delve on it
further.
How will SEBI’s concept paper, if implemented, affect your business?
SEBI’s concept paper is aimed at bringing a structure to the advisory business. For a platform that empowers advisors, it will serve as a useful framework in creating workflows, documentation processes, compliance checks and related service delivery.
Apart from mutual funds,
which other products can be bought through your platform? Do you plan to
facilitate more products going ahead?
As of now only mutual funds can be bought online through our platform. Like I mentioned before, as we move forward, we would keep in mind the growing needs of the clients and their advisors and create solutions accordingly.
How many IFAs are working
with you?
Close to a thousand advisors have signed up for the platform services so far.
