Leading experts from insurance, asset management and wealth management industry deliberated on the changing landscape of financial distribution in India at CII’s Financial Distribution Summit 2012 held in Mumbai.
Building trust, attracting right talent and scaling up volume remain the key challenges for financial advisors. Speaking at the CII Financial Distribution Summit, Rajiv Bajaj, Vice Chairman & Managing Director, Bajaj Capital said that our country does not have a role model in the financial planning space that aspiring advisors can look up to and hence attracting the right talent remains one of the important challenges for advisory business. He stressed on the need for advisors to scale up volumes at a time when margins have dropped.
SEBI, in its concept paper has outlined two models – execution and advisory for mutual fund distributors to choose from. Most advisors currently operate on dual model where they charge fee from clients and get compensated from AMCs. Rajiv urged advisors to tweak their models and adapt to the changing regulatory environment to race ahead.
Financial awareness
Jaideep Bhattacharya, Managing Director, Baroda Pioneer Mutual Fund pointed out the lack of financial literacy at grassroots level and suggested the need for educating children about the basics of money and financial planning at schools. For advisors, he said that that a majority of business is currently generated through referrals and hence trust plays an important role. For penetrating of products in towns, he said that manufacturers can look at developing an aggregator model by tying up with local authorities in rural towns as AMCs are not able to service a large pool of customers.
UTI MF has adopted such a model where it collects tiny sums from milkmen and farmers in Gujarat, Bihar, Madhya Pradesh and Rajasthan.
Jaideeep said that money collected from rural towns stays invested for more than seven years compared to assets coming from metro which stays for less than a year.
Tailor made regulatory solutions
Hemant Bhargava, Executive Director, Marketing, LIC said Indian regulators should be selective in adopting global practices in India. He said that regulators need to tailor the regulations to suit India and not just import them straightaway. Most of the panelists agreed on the need to curtail mis-selling. However, Hemant contended no company would have been in operation if mis-selling was so much prevalent.
There was a consensus among various panelists that distributors need to be remunerated well to expand business. “The distributor needs to be compensated adequately but equally important is increasing the range of financial products,” said Sriram Taranikanti Executive Director, IRDA.
Platforms
As regulations and business environment undergo change, the role of platforms is likely to play an important role going ahead. Jignesh Desai, Jt. Managing Director of N J India which has 16,000 advisors registered with it said each segment should focus on their specialization. Manufacturers need to design the right products which are true to label and offer consistent risk adjusted return. Advisors need to focus on client education and become life advisors to clients. The platforms in this context act as a facilitator between AMC and advisor. AMCs get a large footprint through one channel (platform) and advisors could focus on business development rather than handling administrative and servicing issues of clients. Platforms like NJ are thriving in overseas markets as well, for instance Fidelity Fund Platform and Cofunds platform in UK, he said.
