Mutual fund distributors and advisors should be way ahead of their clients when it comes to knowledge on various financial subjects to command their confidence and trust, said G Pradeepkumar, CEO, Union MF.
In the second episode of Cafemutual Mindful Musings series, Pradeep said that MFDs are in the business of knowledge. Therefore, MFDs have to invest in themselves so that they are well equipped to talk about all financial products/ markets and not restrict themselves only to equities or position themselves as someone who can pick good performing funds. In fact, Pradeep feels that MFDs have to develop a deeper understanding on debt funds – beyond the functioning of interest rates.
As MFDs increase their product offering from equity and diversify it to fixed income products, it will ensure less volatility in the clients’ portfolio, less ups and downs in their own earnings and give them an opportunity to take a higher wallet share of clients. In other words, this is a crucial risk mitigation strategy for MFDs that will help them grow a sustainable business that can grow in all market conditions.
Pradeep said that the role of a mutual fund distributor or advisor has come a long way over the last few years. Earlier, they were known as agents as they represented fund houses but now they serve the clients i.e. investors directly. This means, MFDs now need to constantly engage with their investors. MFDs can no more be talking to their clients only when they have to sell anything. Instead, MFDs are expected now to meet their clients on regular basis to review the portfolios of clients, check if the clients are on track to achieve their goals and make necessary changes in portfolio.
Further, Pradeep is of the view that to build a sustainable business it is important to learn whom you should not keep as clients. Pradeep feels that if a client demands an absolute return from an advisor, they should say no to him in the first place. Such investors who do not follow goal based planning and chase short-term absolute returns are likely to bring undue volatility and instability to the business. And MFDs will find it difficult to build an all-weather sustainable business with these clients, feels Pradeep.
Further, Pradeep said that MFDs should collaborate with other distributors and advisors to benefit from economies of scale. This way they will be able to offer holistic financial solutions and also ensure business continuity.
On the recent market dynamics, Pradeep said that the equity markets are not overvalued at this point. In fact, he feels that there are enough good stocks available at a discount at this point. On debt funds, he is of the view that there will be more interest rate cuts going ahead which will allow debt schemes to offer good returns.
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.
