Sunday, May 12, 2019

Mutual Fund Distributor Many Suggestion ...But None Works Easier




This month the brokerage came much less as compared to my previous months. Around 20% to 25% decline, I witnessed in my trail income.  Well I am speaking about the trail AUM income on historical AUM. AMC is not bothered about us. They have reduced the brokerage more compared to the reduction in TER. The sharing ratio from the AMC has come down significantly for distributors. The biggest problem is for those clients where I have to pay a certain part of the trail for the high ticket size business which I pool. If I don’t pay clients then they will drive their AUM towards Direct Schemes. The competition in buying a business is too high and too challenging. 

The challenge is significantly high for a newcomer to this industry. In the last 5 years, many people from AMC left the job and started their own shop. Well, the lucrative nature of the industry made them earn more compared to their jobs and also as the trail show was good building the AUM an enjoying the fruits for the long term.   The current falling brokerage on Historical AUM turns out to be a nightmare for IFA.

Falling earning raises the biggest question about my Fixed Cost burden which is to be managed every month despite any size of AUM I have. Someone is required to service the clients and other miscellaneous cost related to the office.  

Someone suggested that to have new products in my kitty like Insurance and Fixed Deposit. Well, I have set up this business and we all know that after months of effort the 1st deal gets to happen.  Getting into new products and selling them takes time. Further, all IFA will be joining the same segment of selling insurance and the challenge will be the same in buying a business. Every client knows about the earning of an Insurance selling agent and hence buying business comes into play.  All clients are mainly covered by dozens of life insurance products by LIC hence where do I stand.

 Retaining the existing clients and earning out of them is tough with falling margins. This is the place of stagnation of my business. Understanding equity and selling the same through Mutual Fund was easier and well-educated work.   Clients will invest but servicing the same through online alone is not sufficient. Many or rather most of the clients want me to visit them. How do I manage that cost? Now please don’t tell me to do skype calling and video calling. Indian mindset of investor is that and IFAN might have many names but at the end, he is an Agent.

On the other day someone senior from the Financial Distribution industry advised focussing on HNI client segment. But HNI clients are not so easily available and even if they are few HNI clients the biggest challenge with them is to “Retain” them under the threat of Direct Schemes availability.   

Someone further told be set up an office in B-30 zone and focus on client acquisition. Well, suddenly how I can shift and procure clients in B-30. Getting a channel to penetrate for a Midsize IFA or a small size IFA is a herculean task. Having a local presence is one of the important requirements of growing business in any area. B-30 and T-30 are just definitions by the regulator but the reality is that one needs to have a huge backup of the network to build this business. For a large size IFA the challenge will be fixed cost burden to set and then generate revenue from those location.

HNI client’s community moves together. When one HNI adopts new things the same is being spread as wildfire across other HNI. Hence that segment of the business is a challenge.

Insurance is a new subject domain and hence adopting the same and understanding the products, claims related issues and how to convince clients to buy becomes a major challenge. Insurance is a commitment for the long term.

Investor procurement support from the AMC has dried down. Getting new clients is a difficult task. Well for me one client is new but for the Regulator, he is an old client.  The new of set rules have created new problem for making clients.

 Earlier their used to be marketing support form AMC but now suddenly these things have changed where no support is being given. The whole cost of marketing has now come upon the shoulders of the IFA.

This month trail brokerage reflected that I need to cut down the cost but my biggest worry is that how do I survive in the long term?

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