The mutual fund distribution space has five major distribution channels - individual MFDs, national distributors, banks, RIAs (Registered Investment Advisors) and direct platforms. The increasing number of participants elevates the competition in the mutual fund distribution industry and hints at the need of revamping current business practices.
In the latest episode of ‘Lessons from the Masters’, in conversation with KS Rao, Head - Investor Education & Distribution Development, Aditya Birla Sun Life MF, Dhruv Mehta, Chairman, Sapient Wealth and Foundation of Independent Financial Advisors (FIFA) shared with us some useful tips for creating a future-ready business.
Here are the five key insights from the session.
Collaborative learning
MFD/IFA Associations give a platform to share and learn collaboratively by pooling knowledge and diverse skills. Further, collective brainstorming promotes innovative thinking and leverages the cumulative experiences of fellow MFDs. This creates a multiplier effect which helps MFDs upskill and grow their business at a faster pace.
Strategic tie-ups
MFDs can strategically tie up with other like-minded peers having similar value systems. Enter into tie ups only if the wavelengths match and see if there could be a trustworthy collaboration. Talking about the legal structure, Dhruv suggested considering the formation of an LLP to benefit from the synergies created from such tie-ups.
Business model
MFDs are usually concerned about the business model they should adopt i.e. commission-based or fee-based. To this, Dhruv recommends striving towards creating a corporate set-up to incorporate both models. This will give clients the ability to choose an advisor’s service based on their needs. Clients feel more comfortable when they have the power to choose.
Creating a competitive edge
With the advancement of technology, clients can avail multiple services with minimum human intervention. Thus, it can be said that digitalisation is a factor of consolidation and a destructor of intermediation. In this regard, MFDs/IFAs must be far-sighted and identify those areas which can be digitalised. This will help in modifying the existing business practices and staying ahead of the curve.
Standing apart from other direct platforms
The convenience that direct platforms offer has no match for the advice and guidance that MFDs/IFAs offer. Their ability to customise solutions for clients gives them a competitive edge over such platforms. Further, MFDs/IFAs can give a personal touch to every transaction through regular engagement.
Dhruv’s session rightly highlighted the power of collaboration and far-sightedness to future-proof business practices.
To know every bit of what Dhruv explained, you can watch the video here.
