The pandemic changed the dynamics of the global economies and the way of doing businesses. It accelerated the process of digitalisation and pushed everyone through the journey of transition. As optimists say, ‘Every cloud has a silver lining’, the pandemic made way for new realities and new possibilities. Sunil Subramaniam, MD, Sundaram MF addressed the audiences at Cafemutual Ideas Fest 2021 on preparing for these realities and possibilities.
Sunil rightly pointed out that the year gone was difficult and challenging but it did show a new light and a new path forward. He shared his learning from the pandemic and what does it mean for businesses.
- Developing contra thinking
A poor show of the markets in March last year led to several portfolio changes in the following months. Eventually, the markets bounced back demonstrating their resilience. A market correction is typically viewed as a decline of certain industries which leads to hasty decisions. This taught that there must be an element of contra thinking in the thought process. Contra thinking indicates refraining from pretending to know the future and also avoiding sticking to only a few investment avenues. It is important to allocate some share to every asset class.
- Accepting the rise of passives
There has been an increase in the launch of ETFs and index funds. This is a new reality where retail investors are actively looking at passives. While passives limit the scope of revenue for MFDs, distributors today must consider passive investments in the interest of their clients. Further, recent data reveals that out of 465 equity funds that have completed one year, 74% did not beat the benchmark and the average return was 300 basis points less than the Sensex (Data as on February 2021). Hence, passives are also important from the perspective of the fund management industry.
- Integrating schemes of various sizes
Trail brokerage is a proportion of the asset management fees. If a fund underperforms and the TER comes down, the trail brokerage comes down too. Though the brokerage is a function of the size of the scheme, the scheme’s size does not correlate with its performance. It becomes imperative to blend across various sizes of schemes. Identifying asset managers and diversifying across various managers is another new reality and new possibility.
- Digital transformation
MFDs must take advantage of the digital transformation forced by the pandemic and the lockdown. Marketing as well execution of transactions digitally saves time that can be productively used towards acquiring new clients. Many new investors have opened Demat account for direct stock trading and represent a potential pool of clients for MFDs to tap. Technology can help further the penetration of mutual funds and an expansion of the customer base.
- Creating quality client relationship
Relationships are a true test of time and it is imperative to nurture them.Clients may not go for the best bargain as long as they share a comfortable relation. MFDs must also be digitally active and be constantly available for their clients. Further, the performance of the current client’s wallet can subsequently aid in procuring a larger share of funds for management.They must collaborate with various experts and become a financial supermarket. This makes way to go beyond financial products where MFDs can help their clients with estate and legacy planning. Additionally, MFDs must also work towards using technology to generate one account statement for the entire client holdings across all asset baskets.
Sunil’s session was highly informative and engaging. The insights shared are bound to gear the MFD community in identifying and capitalising on the opportunities associated with new realities.
You can watch Sunil’s talk by clicking here.
