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MFDs can grow their business in a big way by focusing on onboarding corporate clients through group SIPs.
Let us understand about this concept in details:
What is group SIP or corporate SIP?
Group SIP or corporate SIP is similar to group health or life insurance policies where corporates can do SIPs for their employees.
In other words, group SIP is a convenient way for companies to do SIP for their employees. Under group SIP, employees can authorize their employer to deduct a particular amount per month from their salary to buy units of open-ended mutual fund schemes.
Generally, companies run employee welfare programs by doing group insurance and group SIP to retain their employees.
While a few corporates pay this SIP contribution on their own, the majority of companies deduct from the salary of their employees. Such a deduction depends on the percentage of basic salary and employee grade.
How does group SIP work?
Many corporates deduct a particular amount which is generally i.e. some percentage of basic salary. Generally, the employer collects this money and invests in the chosen scheme on a monthly basis. However, the units are credited to the employee's mutual fund account. Also, in most cases, fund houses credit redemption proceeds to the employee's account directly.
However, this depends on terms and conditions given by the company at the time of entering into a group SIP contract. At times, corporates insist on putting a lock-in period on redemption like 3 years from SIP instalment. A few companies allow early redemption based on certain conditions like children’s education or building a house. Also, companies may also opt not to put any restriction on redemption.
Which fund houses offer group SIP?
Currently, many fund houses offer group insurance like SBI MF, HDFC MF, Nippon India MF, Aditya Birla Sun Life MF, Mirae Asset MF, Franklin Templeton MF and Bajaj Finserv MF.
However, criteria of group SIP differ with companies. For instance, while one fund house can do group SIP for at least 100 employees, another fund house may choose to do group SIP even for 10 employees.
How can it help MFDs?
It opens the door for MFDs to reach out to large business conglomerates, private limited companies, LLP and others. To start with, MFDs can look at reaching out to existing clients who run businesses or through clients who work with corporates.
By doing this, MFDs can not only increase their business substantially, they can upsell and cross sell mutual funds and other products to employees of corporates.
If an MFD finds it difficult to convert a corporate client, many AMCs extend support to MFDs by conducting knowledge sessions for their corporate clients and help you close the deal.
