Advisors say that though there is still some resistance from investors to pay fee, slowly and steadily clients are realizing the value which advisors bring to the table.
According
to Franklin Templeton Mutual Fund’s 2014 survey of over 11,000 investors across
22 countries, three fourth or 72 percent of investors say they are willing to
pay fees to their distributor/IFA for their services.
In
India, the issue of collecting fees from investors has been a matter of debate
ever since SEBI abolished entry loads. The regulator has asked distributors to
collect a separate cheque from investors for rendering their services. While
some distributors have convinced their clients to pay fees, others have met
with limited success. We spoke to some advisors to get the ground reality.
An
increasing number of IFAs are moving towards fee based financial planning. “We
moved to fee based planning in 2007. It took eight months to get our first client
who was willing to pay fee. Today, all our clients pay fee. We only onboard
clients who are willing to enroll for financial planning. Investors are willing
to pay if they see any value add in your services. We never ask if they are
willing to pay fee. We only enroll those clients who are willing to pay,” says
Yogendra Joshi of Moneybolism.
Hasan
Wangde, a Navi Mumbai based IFA feels that the IFA community needs to invest in
changing its perception among investors from ‘agents’ to ‘financial planners’.
“Investors have not been used to paying fee for investing in mutual funds. It
will take some time for investors in India to cultivate this habit. Even
distributors have been relying on commissions from AMCs and suddenly shifting
to fee based model poses a challenge. Distributors have to invest in gaining
the same level of trust which a doctor or any other professional commands,”
says Hasan.
Rajesh
Cheddha of Finance Factory says that clients have to see value in advisors
services. “We keep an acquaintance meeting before onboarding a client. We ask
them to fill in a questionnaire which helps us evaluate their life goals. We
take them through our process and what they can expect from us. As financial
literacy increases people will start demanding higher level of services from
advisors. Majority of investors resist fee but it’s only a matter of time
before it gains widespread acceptance.”
Kavitha Menon, a SEBI registered Investment Advisor says that distributors need to change their mindset about charging fee. “Clients are more than willing to pay fee. Advisers have to become clients friends and coach. It’s not just about helping them transact. Apart from helping them choose the right product, one needs to provide ancillary services to take care of all their goals.”
Another interesting finding the survey has revealed that investment professionals are the top influence on whether to invest in mutual funds, followed by print publications and TV. This implies that advisors enjoy a high level of trust among investors.
Other key findings of the survey:
- A large majority of investors in India (82%) think the India stock market will rise in 2014, with nearly half believing it will rise significantly.
- Investors in India think the best equity opportunities in 2014 and over the next 10 years will be in India, with Asia in second place.
- In terms of fixed income, investors think India offers the best fixed income returns in 2014 and over the next 10 years, with Asia second and the U.S. and Canada third.
- Investors in India think property, precious metals and stocks will be the three top-performing asset classes in 2014 and over the next 10 years.
- Despite widespread confidence that the stock market in India will rise, almost two-thirds of the investors plan to adopt a more conservative investment strategy in 2014.
- Almost all investors in India (97%) are very optimistic or optimistic about reaching their financial goals. Optimism is higher in India than in any other market. This remains unchanged from 2013.
- Almost one-half of Indian investors say beating the market when it’s up is the most important investment goal.
- Indian investors are looking to add or increase investments in real estate, equities in India as well as precious metals to their portfolio.
- The primary influences on when investors decide to sell mutual funds are to book profits, achieving the investment goal and market volatility.
- A large majority of investors in India (92%) are aware of the benefits of systematic investing and just over half have invested through this route; one-third are aware but have not invested this way
The survey was conducted across Africa, Asia Pacific, the America and Europe to learn how investors are reacting to market events and how recent developments have affected their outlook for the future.
Click here to download the survey.
