USP For Retaining Clients

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USP For Retaining Clients
Ganesh Ram - 03 September 2020

In February the capital market regulator Securities and Exchange Board of India (Sebi) allowed investors to invest in Mutual Funds (MFs) through stock exchanges directly from the fund houses without going through distributors, to ensure a level playing field.

This was welcomed by fund houses, which could further lower the transaction expenses and skip paying the distributor’s commission. Even before this announcement, there were other direct channels available to investors.

There is no doubt that investors who opted for Do it Yourself (DIY) mode or direct mode have increased from 5 per cent (12 plus months ago) to 15 per cent of current MF transactions. However, the complimentary metrics for the MF transaction undertaken during the time period is not that encouraging, which is approx 55 per cent of the redemptions is from DIY mode. This clearly shows retail investors panic and start redeeming as they lack proper advisory during crisis.

If you look at the last three months’ market data, which was the best time to start a balanced SIP portfolio, with equity, debt and performance backed sectoral funds. Instead, a majority of the investors, in DIY mode, chose to pause or exit the market and those who started new SIP did only in equity. The SIP book should have grown but unfortunately it stagnated.

Investors should understand that MF is a special vehicle, which is much regulated but has lots of complex underlying data. Like fund houses have CIOs and fund managers monitoring and managing the market or scheme performance, we have advisors who are experts on investment decisions. It is disheartening to see that without adequate knowledge or information; investors choose the schemes based on some reports and information publicly available and end up criticising the MF industry and products. This also results in a panic and impacts the overall growth. Without in-depth knowledge, MF is not an investment product to play with money. Investors should choose proper advisory for their investment decisions which helps in building optimism and also significantly helps in market to stabilise and grow. This is not all for investors. Advisors and distributors should also view their prospective clients and maintain relationships with them. To have a successful client relationship management, each advisor should demonstrate five “C’s” - communication, clientele, clarity, calibration with market dynamics and cognitive with technology. They result in “confident advisor”. Recently, we came across many Independent Financial Advisors (IFAs), using BSE STAR MF, who have done 100, 200, 300 and even 500 SIPs per day in this pandemic. When we spoke with these advisors, we learnt that they have excellent business relationship with their clients and saw this crisis as an opportunity.

Many advisors are concerned about DIY growth but out of 40 per cent being reported, 20 per cent pertaining to corporate and institutional investors and rest 8-10 per cent are UHNI/HNI. That leaves retail DIY at only 10 per cent.


DIY Investors Have Five Disconnects

  • Their decisions are based on half-cooked information/data, publicly available
  • They expect double digit returns within a short span of time
  • They expect to earn additional one or two per cent returns from DIY against advisory mode
  • They undertake MF transactions as it is extremely convenient to do with many apps that have mushroomed
  • They do not monitor fund performance and time for entry/ exit, which an advisor is qualified to do


Best Decision Has Four Data Sets

  • Investor’s goal, risk appetite, return expected
  • Picking up the competent advisor who has rich experience and connect 
  • Performance of funds and other important fund/ AMC-related data
  • Diversification of investment portfolio

I spoke to one advisor from Chennai who has chalked out a plan for his clients by depicting how expenses have reduced for them during the current lockdown and how they can choose to invest the money saved from reduced expenses into MFs. The advisor has chosen his top 25 per cent clients and has been communicating with them. Advisors should consider platforms, which provide value addition, reducing time, cost and improve efficiency. This is one of the Unique Selling Proposition (USP) to choose and retain clients. A confident advisor makes a huge difference to investors and the MF industry, which the industry is in need for.


The author is Business Head-Mutual Funds at BSE.

The views expressed are personal

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