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Tarraki Corner ‘Direct plans are the right things to do from clients’ perspective’

‘Direct plans are the right things to do from clients’ perspective’

Suresh Sadagopan shares his experience in shifting from recommending regular plans to direct plans.
Team Cafemutual Nov 11, 2018

Why are you shifting your business to fee only model?

Being advisors, we wanted a conflict-free, client-centric model of engagement with our clients. Fee-only model fits well here. We have shifted into this model as this seemed to be the right thing to do from the client's perspective.

How are you ensuring a smooth transition from regular plans to direct plans?

We offer a migration schedule for the existing portfolio, taking into account exit loads and taxes. Our implementation partners have a month-wise implementation schedule which they carryout for clients. We use MFU for investing in direct plans.

What were the challenges in shifting your clients’ portfolios from regular plans to direct plans? How did you overcome them?

First is the mindset change. We informed clients that we are moving from regular to direct plans and would no longer be offering regular plans. We educate them on the services offered and their benefits. We ran an email campaign and also talked to clients individually. We did not have a problem in convincing them to shift to direct plans. We also informed them that if they did not want to migrate to direct plans, they would have to other IFAs who would offer them regular plans.

What were the key concerns of your clients in shifting from regular plans to direct plans?

Clients were used to investing on one platform. They were worried about redeeming the full portfolio and reinvesting, it felt daunting to them. Also, there would be a change of platform and reporting mechanisms which all added to their concerns. 

How do you ensure that your revenue model remains intact and clients pay you advisory fees periodically?

We offer a range of services to our clients - financial plan, portfolio & plan review, financial consultations, will making services and so on. Hence, there is a tremendous value, which the client will be able to notice in our offerings.  We are billing our clients quarterly and collecting our advisory fees. We have not had any problems in getting fees from our clients due to the value proposition we offer.

Can you take us through your fee model?

We offer a onetime fee initially for the financial plan and an asset under advice model for ongoing engagements, which is optional. If the client wants to only come to get his finances sorted onetime and wants to carry out the recommendations himself, that option is available.

As an advisor, what are the benefits of fee-only model?

RIAs who work on fee based model are SEBI registered advisors and have to meet certain qualification, certification & experience requirements. Apart from that, they need to submit to a higher level of compliance, standards & processes. They will need to go through an audit for process & compliance every year and be prepared for inspection from SEBI's side.  The client can be 100% sure that the advisor is acting only in their best interests. Being a fiduciary and acting in the client's best interests is a major advantage for them. 

Also, they save money when we recommend direct plans in MFs. We also offer direct versions in various products (like PMS, AIF, perpetual bonds, tax-free bonds etc.) which are commission free, by which the client saves money.

 

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10 Comments
Tejal · 4 weeks ago
Collect fees from pocket in India is difficult job initially u may got but later on u absulately lose your business in India even recovery is difficult
Ranjan · 4 weeks ago
It is totally wrong idea to shift business under fee model. Indian Mutual fund investors are not matured enough to understand fee concept. Particularly SEBI has not implemented a rule which entails that Investors who use the assistance of Advisers/distributors must pay fee at a particular rate and rates of fees must be established by SEBI . There should be a particular space in application where investors sign and agree to pay fee and cheque details to be entered and cheque should be in favor of the Mutual fund in which investments is made. Without cheque of fee for the distributor application will not be processed.
Otherwise for investors other way is open i,e Direct plan without assistance from distributors. If SEBI stipulates the percentage of TER then i don't think there is any problem of establishing rate of fees for the distributors. I have observed that many people who said to pay fee for direct plan investment later turned down when asked for fee . For them it is just to know about the schemes from distributors and place their applications in Direct plan
VENKATRAMAN · 4 weeks ago
WE HAVE TO RUN PILLAR TO POST TO COLLECT THE FEE FROM CLIENTS. OUR INVESTORS ARE NOT MATURED ENOUGH TO PAY FEE BASED MODEL. IF THEY GO DOCTORS THEY PAY FEE FOR ONE PERSON AND GET ANOTHER PERSON PRESCRIBED IN SMALL PAPER WITHOUT FEES.
Sudhir Kumar Mishra · 4 weeks ago
In Patna, even people are unable to bear txn charge. people are free lunch.Many platforms are comparing difference between regular and direct plans and the comparison 25 years period. My point is how investors are continuing with mf investment more than 5 years.you lucky one .
PRAVEEN · 4 weeks ago
Cafe mutual trying to convince IFA's by taking fee model....its just waste of time ...its trash.....just come take 1 k SIP in small towns ....we cant explain the difficulty.....After upfront ban the industry may be gud small IFA are sinking their lifes...RIP..to ppl who choose fee model may be works in city
Anish · 4 weeks ago
What you are Saying..people are crying to give xerox money...and they will give us fee...Tujse bada Gadha mene aaj tak nahi dekha in short...
RAVI · 3 weeks ago
REALLY SIR...PPL ARE CRYING TO DO SIP...WHEN BEAR MARKET HOW IT IS POSSIBLE FOR FEE STRUCTURE
Reply
A Kumar · 4 weeks ago
WE ALL KNOW THAT FEE BASED MODEL OR RIA MODEL IS TOTALLY FAILED AND UNSUCCESSFULL...
WHICH IS HARD TO ACCEPT BY THE ORIGINATOR OF THE MODEL.
IS CAFE MUTUAL IS BIASED.....
PERSON SHOULD BE HONEST TOWARDS HIMSELF ATLEAST......

donthula surya prakash · 3 weeks ago
Fee model advisory is not correct in Indian mutual fund industry.
Any one will not come to IFA for investment advise. There are somany insurance advisers in our country for cross selling. They will canvase and they get business, insurance advisor will be benifitted and investor will loose his money with wrong investment.
SEBI and AMFI are distroying the MUTUAL FUND industry and indirectly encouraging insurance industry.
How can servive mutual fund adviser without upfront commission? how can give services to investor.
In our India somany people uneducated in financial planning, IFA's are educating financial planning without taking fees. Somany IFA's will left from MUTUAL FUND industry.
Prabir Sharma · 3 weeks ago
I am a MFD but charging fee to client for my financial planning practice since 2009.
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