The year 2020 has been quite an eventful for MF distribution business. From segregation between distributors and advisors to change in nomenclature, the MF distribution community has seen many changes last year.
As 2020 comes to an end, let us look at some trends that are likely to emerge in 2021 in the mutual fund distribution business:
Asset allocation to gain traction
Thanks to heightened volatility in equity market and underperformance of equity funds, many distributors have understood the importance of asset allocation in investment portfolio. Mumbai MFD Sadashiv Arvind Phene said, “Year 2021 will be challenging for MFDs as the current market rally leaves very little room for lump sum investment in equity funds. However, time has come to look at fixed income funds and focus on asset allocation to give stability to clients’ investment portfolio.”
Digital adoption
MFDs have been going all digital in aspects of business be it transaction or client communication. Babu Krishnamurthy, President, IFA Galaxy believes that use of technology will increase in 2021. “Gone are the days when distributors used to deposit application forms physically and meet clients periodically. In 2021, digital distribution model will take shape with client engagement taking place through video conferencing platforms like Zoom. Further, MFDs will focus on providing digital investing experience to clients with their apps, website and so on,” said Babu.
No. of RIAs to go up
As SEBI segregates advisory and distribution activities, more number of MFDs will opt to become RIAs. Suresh Sadagopan, Ladder7 Financial Advisories, Mumbai says that demand for RIA model will increase with SEBI’s new norms, which restricts MFDs from offering financial planning. On the other hand, as SEBI has allowed client level segregation, RIA can now handle both advisory and distribution clients simultaneously, making it more lucrative for MFDs.
Diversified product offerings
MFDs have started offering other financial products like AIFs, NCDs, corporate FDs, structured products and so on. Vinod Jain of Jain Investments feels that many MFDs have started offering other financial products to diversify their offerings. This trend will become more widespread in the years to come.
Rising popularity of direct plan
With digital KYC and rising awareness about mutual funds, distributors expect direct plan to become popular among more number of investors.
Jaipur MFD Ashish Modani, Founder, SLA Financial Solutions believes that direct plan will become competition to distributors in the coming time. “Now, many retail investors have started entering the MF industry through direct plan. Ease of investment through apps like Zerodha, ET Money and Paytm Money has played a major role in this. In addition, these apps allow a monthly SIP of as low as Rs 100. Hence, distributors should face competition from direct plan hands on by offering value added services,” he said.
