To establish a healthy and productive relationship between the fund house and the distributor, it is important to settle a common sharing ratio on commissions across schemes, says Vishal Kapoor, CEO, IDFC MF.
In the first episode of Cafemutual’s Mindful Musings series, Vishal said, “Personally, I believe that distributors should focus on building long term business instead of being tactical i.e. negotiating short term brokerages. One way to do is following a certain sharing formula. Whatever AMCs get from customers can be shared between AMCs and distributors.”
Cafemutual Mindful Musings is a webinar series where industry leaders discuss in detail the nuances of mutual fund distribution business and how to grow in the current scenario. The IDFC CEO talked about how distributors can get the best out of AMCs.
When asked if fund houses are planning to manage clients directly in the future and eliminate the distributors in the process, Vishal said that the fund houses are in no position to serve the investors directly.
“On direct plans, frankly speaking, AMCs are in no position to service investors directly. We all know that an investor's investment portfolio is far more complicated. If I don’t know about 90% of investors’ existing investment portfolio, how can I advise them? I strongly believe that the best person who can add value to investors is distributor/advisor,” Vishal said.
Vishal added that AMCs focus on revenue and cost. Currently, the revenue margin for AMCs in offering direct plans and regular plans is similar. There is no advantage in offering direct plans in terms of revenue.
Vishal said that many distributors ask a fund house what they can offer them. Instead, MFDs can ask themselves what they exactly need to thrive in their business. And after that they should approach the fund house that can fulfil their needs in the best way. For instance, if they feel that they need to acquire more clients through IAPs, they need to go to the fund house that has the competence in it. If the MFD feels that he needs to know how to manage the behavioural biases of clients, he need to go to a fund house that has expertise in it.
Further, Vishal said that instead of powerpoint presentations filled with jargons, distributors should communicate with clients by using simple tools like games, quizzes, games and actionable data. Many fund houses can provide these tools.
Vishal also appealed to all emerging MFDs to focus on capturing a larger share of the client's wallet size. He feels that MFDs can increase their wallet share by bringing their clients money from bank fixed deposits to fixed income products. Vishal noted that some of the top distributors in this country are successful because they have managed to grow their assets in fixed income products.
