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Could you summarise the year 2023 in the form of business lessons? What are the three business lessons it taught every MFD/RIA?
First – A broad trend (started prior to 2023 and will continue beyond 2023) is that margins (total expense ratio and consequent commission) are going to be under pressure. They may remain the same, and if they change, they would become marginally lower, but not higher. However, there is no need to fret as the scope is huge. Go for volume and new client acquisition. Ask for referrals, do social media marketing – it is free, all you have to do is invest your time.
Second – SIPs are better than lump sum. In lump sum, people look at returns, market level at the time of investment and current market levels. They think of profit booking as market hits all-time high. In SIPs also there are cancellations, but they are usually linked to a financial objective, hence it is easier to guide clients to stay invested for long-term objectives.
Third – Regulations may remain the same and if they change, they are going to become tighter. The suggested implication of these is that the MFD business model will be preferred over the RIA model. People with knowledge, infrastructure, net-worth etc would rather become MFDs than RIAs. At the lower end of the pyramid, smaller MFDs (full-time MFDs with this as the means of livelihood) will have to gather critical mass. Business merger among MFDs to share costs/infrastructure would thus be fruitful.
What are the key trends that MFDs/RIAs should watch out for in 2024?
Markets can be volatile and client handholding will be important. Here is where you score over direct plan (not relevant for RIAs) and robo-advisors.
Also, client/prospect awareness through digital media is going to increase. However, this would include both, ‘useful information’ and ‘noise’. While, information leads to better awareness, noise leads to distorted opinions.
Next, SIP as a concept will gain more ground. Even people who are not clear about mutual funds, will hear of SIP as a concept. You should catch on this and position yourself on Google search through SEO (Search Engine Optimization).
What are the three must-have business skills for MFDs/RIAs in the coming year? And why?
First – Knowledge. It sounds like a cliche, but with increasing awareness among people, you as a professional have to be one step ahead.
Second – Awareness. In the digital age, clients/prospects will possess awareness, but to help them distinguish between useful information and noise, you yourself should be aware of details available online.
Third – Correct positioning. In the age of free data/information, position yourself as a professional by highlighting your proposition.
What are the top two business opportunities (for example, retirement planning, millennials, etc) that MFDs/RIAs should tap in the new year? And how can they do that?
In the current digital era, geographic positioning is not a limitation. Look at expanding your business through referrals and online marketing.
Along with tier 3 and tier 4 locations, focus on untapped pockets in metro cities. Simply ask acquaintances and clients for such referrals. After all, the economy and people’s incomes are growing. You have to tap it
