19 Nov 2013
In the inaugural article of this new column called Straight Talk, Brijesh Dalmia – one of Eastern India’s most successful advisors and a trainer and coach to thousands of advisors across the country – had discussed what it really takes to build a successful retail distribution model (Click Here).
In this article, he takes a step back and squarely addresses an issue that has been playing on the minds of several thousand IFAs (or, should we now say IFDs, as Mr. Ramesh Bhat suggests) who were once active in MF distribution, but are no longer that convinced about the business. The issue is simple : are mutual funds worth distributing? The straight talking Brijesh shares his views on why he believes many IFAs have lost their confidence in this business and what they really need to do to move forward from where they find themselves.
I have met close to 15000 advisors in the last 4 years across the length and breadth of the country. I have met some of the most successful advisors in the industry having hundreds of crores of AUM. I have also met several advisors who are not so big but have understood the power of mutual funds and are focussing big time on it. Unfortunately, I am also meeting a large number of advisors who are still not confident about mutual funds as the main product in their profession and are still relying upon traditional products for their bread and butter.
Incidentally, I also find that most of the noise around commissions, performance and industry is being made by in-active and lesser active advisors in mutual funds. The serious ones are simply busy in increasing their AUM’s and taking responsibility for their actions.
5 reasons why many advisors have given up on mutual funds
As regards the lesser active advisors, I attribute the following reasons for their inability to accept mutual funds as a good tool for clients and their own future security.
Such advisors are losing out themselves. Yes, the industry is also not growing due to lower no. of distributors left in the country. But essentially, these advisors are not realising the power mutual funds can have in their income and future security. Trail is powerful. More powerful than one can imagine. Product wise, mutual funds beat most other instruments. It’s only a matter of time when mutual funds will make a comeback. Those who are active today will benefit out of it ( not those who are not focussing on mutual funds right now ).
A 10 crore AUM gives a trail income of around 5 lacs a year ( taking average of 0.50% pa. ). For earning 5 lacs, one needs to have a renewal premium base of 1 crore in life insurance, or sell 5 crore fresh fixed deposits or post office schemes annually. Not an easy job at all.
3 things you must do now
Those who are not confident about mutual funds I ask them simply to do the following :-
I will be straight in saying that the current revenue in mutual fund is very attractive and pays well for the efforts we do. Mutual fund is today a lifeline for 100’s of advisors in the country. I wish, it becomes the lifeline of 1000’s of advisors.