What made you write ‘Mutual Fund Handbook for IFAs’ book?
There was no structured and independent source of information available for budding IFAs on how they should grow their business. Information was available in bits and pieces. Thus, I felt the need to put all things together in a book to help them. This book can be also relevant for established IFAs since it talks about the fundamental aspects of business.
In your observation what are the most common reasons why Indian IFAs get suboptimal earnings from their profession?
Most IFAs don’t look at this business from a long term perspective and they get disappointed and de-motivated after a few years. They don’t invest in their business. They look for immediate commission income (while they want clients to stay invested for long term). Mutual fund is not the main focus for many IFAs, which is why there are not able to build a sizeable AUM.
With drastic and frequent changes in commission structure, how should IFAs plan their business model?
Changes are bound to happen and IFAs need to adapt to the changes. The key question that they need to answer is that whether mutual funds will remain an important part of client’s portfolio after a decade and I am sure it will. Every business takes 3-4 years to establish and start generating returns. Mutual fund distribution business is no different.
What is your advice to distributors on registering with SEBI as RIAs?
The regulation says that distributors need to register if they charge fee and fulfil some other conditions also. While the RIA segment will grow, it has its own challenges in India.
In your book you seem to suggest that IFAs should adopt trail only model. Why do you subscribe to this view?
Trail is a long term model. This business can’t be built on upfront commission. While one should take the benefit of upfront till it is available, IFAs can build a sustainable and robust business model only from trail model. Trail gives the power of compounding to IFAs. They must understand this.
Why do you feel that investing in own business is essential for IFAs? What are the key areas where IFAs should invest to grow business?
To become efficient, IFAs need to invest in their business as and when they can. They should treat this as an investment. Having a work place (owned / rented) and office assistant are two crucial areas where IFAs need to invest.
How should IFAs tackle fear of direct plans? How should they retain their clients?
‘Direct’ is a business risk and I feel direct plans will only get more popular in future. IFAs having institutional clients and HNIs will be impacted more than retail. If IFAs provide excellent advice and good service they will be able to retain clients. There can be some attrition due to direct plans but it is part and parcel of business. We have to deal with it.
How should IFAs increase their wallet share?
Adapting a goal based approach, providing good service and being in regular connect with the client will help IFAs get more business from clients.
