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  • MF News The future of distribution business

    The future of distribution business

    Nishant Patnaik, Associate Editor, Cafemutual talks about the way forward for MFDs and shared with us the 5 mantras to create a future proof distribution model.
    Karishma Gagwani Oct 8, 2021

    Individual MFDs, national distributors, banks, RIAs (Registered Investment Advisors) and direct platforms all form a part of the financial ecosystem. Certainly, competition has increased over the. years but competition also makes MFDs competitive.

    In distribution business, it is imperative for MFDs to create a sustainable business model and remain constantly updated. Goutam Karmakar, CFP, who is the MD & CEO of training institute - Skilledge Digi Gurukul Academy, organised a seminar and reiterated the importance of constant learning.  

    Goutam said, “The current environment is dynamic and highly competitive. MFDs procure RIA certification to gain a deeper understanding of the financial industry. However, post completion of the course, many MFDs remain confused about the way forward and are unsure if they should opt for RIA license.”

    In this context, Nishant Patnaik, Associate Editor, Cafemutual explained to the participants about the future of distribution business and shared with them the 5 mantras for creating a future-proof business model.

    Future business models in the distribution industry:

    In future, there will be only two business models in the distribution business – pure MFDs and non-individual RIAs. Deciding upon the business model is a function of investor-type that MFDs want to cater to.

    • Retail clients

    Procuring RIA license has certain pre-requisite requirements, for example, a certain level of tangible net worth is mandatory. This model typically results in a higher cost of compliance. Thus, MFDs focusing on retail clients are advised to continue as individual distributors instead of opting for RIA license.

    • HNI clients

    MFDs wanting to cater to HNIs could opt for the non-individual license. However, they can set up a cost-effective model by tying up with national distributors, other RIAs and MFDs.

    The five mantras:

    • Offer value added services

    Investors seek comfort in dealing with a single advisor for all their financial needs. Further, he said that every financial product is an opportunity for MFDs to explore. MFDs must strive to create a basket of products that can meet varying investor needs. Also, they should include other solutions like tax planning and estate planning through strategic tie-ups.

    • Professional set-up 

    MFDs must have complete control over their business and should focus on offering solutions rather than products.

    Having an office address, a team and a mentor are a few tips here. Given the existence of multiple other players in the market, a professional set-up brings MFDs to the same space which is otherwise mainly dominated by bigger players.

    • Business succession

    MFDs must communicate their succession plans to their clients from the very first day. Ideally, MFDs must involve their family members in the business. However, in case their family is not keen to join, they can plan their succession strategically with other like-minded and trustworthy distributors or employees.

    • Make investing experience seamless 

    With the advent of technology, client expectations have increased further. They seek prompt replies and quicker services. MFDs should leverage technology and create a seamless investing experience. Apart from online transactions, the focus must be on offering easy solutions like single click account summaries, easy to consume content, referrals messages allowing clients to refer an MFD (like other mobile apps) and so on.

    • Staying in touch with clients  

    Newsletters, articles and social media engagement can be time consuming and it is difficult to evaluate if such an engagement yield results. Hence, MFDs should simply stick to physical meetings and phone calls to stay in touch with clients.

    People value personal interaction. MFDs can create deep and meaningful bonds with their clients simply by talking to them once every month. This creates a base of loyal and satisfied clients, which in turn attracts more referrals.

    Have a query or a doubt?
    Need a clarification or more information on an issue?
    Cafemutual welcomes all mutual fund and insurance related questions. So write in to us at newsdesk@cafemutual.com

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    Disclaimer: Cafemutual is an industry platform of mutual fund professionals. Our visitors are requested to maintain the decorum of the platform when expressing their thoughts and commenting on articles. Viewers are advised to refrain from making defamatory allegations against individuals. Those making abusive language or defamatory allegations will be blocked from accessing the web site.
    10 Comments
    Anup Goswami · 3 years ago `
    Very nice and good for us MFD...thanks for sharing, Pls keep writing usual articles like this for MFD.
    Bhupendra Kumar Srivastava · 3 years ago `
    Nice article Nishant, You keep a mirror to MFDs.
    ASHOKKUMAR PATEL · 3 years ago `
    nice article. .keep writing many more information
    Rabindranath Laha · 3 years ago `
    Fantastic article with lot of thought process meaning very useful for the MFD community
    DEBRAJ SENGUPTA · 3 years ago `
    It is very relevant in present scenario when Mutual fund industry is undergoing many changes from Risk categorization to Swing pricing etc. Retail and other investors[ HNIs with multiple distributors/advisors excluded] are not at all aware of the consequences of these sweeping changes and hence have to heavily depend on MFDs and Financial Advisors. So adequate knowledge is key. Each MFD should consider this business as their own and not just an avenue to earn professional income. This profession is much beyond that. Crowding in meetings of AMCs to kill time and some refreshments does not help their cause. They should be ready to invest in themselves - mainly continuous education, subscribing to various professional sites, also investing in good CRM and transaction software rather than solely dependent on AMC, RTA websites etc. Every business that grows ploughs back the profits into their business and once they scale up avail Bank and other finances.
    sudhir laturkar · 3 years ago `
    very informative & insightful article
    S.S.Chauhan · 3 years ago `
    Sir, best national mf distributor like NJ, prudent, angel broking etc. Pls advise me, Thank you sirji
    Chandra · 3 years ago `
    Nice and very informative article. Will appreciate for sharing information in respect of various recognised courses for MFD for getting better business and growth in career in mutual fund industry.
    Thanks and appreciate your information.
    S MURALI · 3 years ago `
    Happy that his views coincides
    Somashekar · 3 years ago `
    Nishanth very good article upon where the industry is moving ahead.also you have given clarity on who can continue as MFD and way to tackle HNI clients.
    Very rarely this kind un biased articles are posted.thanks.
    Somashekar
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