Monday, May 6, 2019

OUR QUESTION TO SEBI WHO WILL PAY ADVISORY FEES WHEN ITS FREE



In one side the TER is coming down and simultaneously the brokerage is also coming down. How will I run my family?  In continuation to my previous article on Mutual Fund Distributors are on the Verge of Death it is being found that the Push of change of industry towards advisory does not have much to pay or earn for the distribution fraternity. The industry wants to move towards financial advisory and charge fee from the client. But when multiple free advice is available why the client will pay fee to me.

Now  did any one bothers to ask the client that does he really want a fee-paying financial advisor? It’s not about the quality of advice being given by the advisor but the willingness of the client to pay the fee.  This is the mother of the issue of the new changing industry.

The Mutual Fund Advisory business is a big hurdle in India. The mindset of the investor is the big hurdle. Financial advice or rather a tip is required by every client but when it comes to paying for the same the number of count of people seeking the same come down. Many financial advisors will take great effort to  get proper financial planning designed for their clients but when it comes to paying the fee the client may pay you for the 1st year some charges but may not turn up in the 2nd year.

The freebased advice is the biggest hurdle and lack of proper minimum guarantee of the advisory fee is the biggest factor where the financial advisory is not being taken up seriously by the client. The Indian client mindset is that a Broker remains a broker and why I should pay him a fee when he earns a commission.

Direct schemes have changed the landscape of investors investing. But the advice of the financial advisor in developing a proper asset allocation and financial planning are few of the key things required for wealth creation.

There is no proper online or any other way where the client can be charged after the 1st year. Leaving execution, giving only advice and getting documented the same down not give proper shape to the financial advisory.

The financial distribution industry is facing a bigger threat from the AMC segment which is clearly indicating that it is not bothered from where the money comes to them-Direct or through a distributor. The recent case of “NIL EXIT LOAD” by an AMC for shifting of Investments from Regular to Direct schemes provokes investors that you don’t need any financial advisor.  The best scheme names are available in the public domain and hence long term wealth can be created by investing within those freely available scheme names.

 If the equity market gets double from today then, obviously the best performing funds as on date will perform in the long term as well. Well, there are a number of schemes which have given stupendous return over the past 15 to 20 years.  

The 2nd most important question is what does a retail client will pay the advisory fee or HNI. Why a retail client who has a portfolio of Rs 10 lacs pay a fee to you. Well there are many clients who have an investment portfolio of less than Rs10 lacs. What a financial advisor will charge these clients.

Online direct scheme facility is already there and hence why I need an advisor. Well, the truth is that everyone is not my client. Now those who used to be my client under the retail ticket size, are no longer clients under the financial advisory model.

How I will run my family?

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