I AM NOT AN AGENT-NOR MUTUAL FUND SALES BUT AN INVESTMENT ADVISOR

A mutual fund or Investment advisor and platform for offering direct schemes have gone towards two different roads. We are talking about Investment advisor and not a particular product advisor like Mutual fund advisor. Yes, this is what needs to be communicated but understood or wrongly presented.

 In-country like India where even for doing Corporate Fixed Deposit the client demand for a pass back, in that place advisory for investments is a distant dream.  The fatal story of the Investment advisory profession is that today we have few 1000 who are in the real practice and that is also half-hearted since the revenue is not so much. Now please don’t start on with the names of Top 10 Investments advisor since they cannot manage Corer of Investors of India.  True advisor market is struggling and it has from both end and more from the client angle. But recently the new App-based blindfolded half-hearted models have created another mess. In this article, I have shared how the profession of Investments advisor is facing the hardships and why the numbers are low who are doing real-time practices.

Investment advisory and platform for execution are two different things. This article will throw light on the same and will highlight why and how the Investment advisor profession is getting diluted and its meaning is being tweaked.

Clients behaviour pattern is unique and the loyalty factor is price and freebies dependent.   The one plus one free concept has changed the loyalty and value proposition in many places. Most of the client prefers to do financial planning or investment decision of their own. Banks are the most trusted partner despite reading hearing about miss-selling of products where insurance is being sold as Fixed Deposit.

Investors don’t want to open up all the decision related to wealth, savings, income and their goals easily. They just want a small tip for making quick gains. Yes, that tip market is the advisory market which the clients have finally taken.

It has been found that when an investment advisor after spending hundreds of hours organizes financial advisory or planning meeting the conversion rate out of 100 participants is just 10%.  Yes, this 10% number takes a significant amount to get finally pay a fee to the financial planner. Well out of 1000 advisor only a few is able to run the show 100% dedicated fee income form, clients.  It might be easy to teach 20 students but hard to become one of the 20 and follow your own teaching.

The problem is in the design of the profession of investor advisor. Earlier it used to be called as agents, then the same name got changed into Mutual Fund Sales Person and then Mutual fund Advisor and now Investment advisor. With every name change, the quality and qualification for the profession have changed but the dignity level of the same for the client angle is same –The Agent.

Many of you may not agree with me but those who have the guts to accept the same will agree silently. The conversion of an agent to an investment advisor is a huge quantum jump but the client still is under the impression that we are the same Agent who will come to the client place, fill-up the form and spend hours giving sermons and then once the cheque is given the same agent will be searched on google as he will not be coming anymore to the client unless 6 months or a year. This is the impression of an investment advisor.

Now coming to the Direct Platforms and the Advisory market. Most of the so-called today’s platforms who are offering the direct platform is just execution platforms –route to collect database and use the same later on from the Private equity investor who has invested in those platforms.

Financial planning has been curtailed too few questions avoiding the detailed framework and then a sudden Pop up come up explaining  the asset allocation of one client. How they calculate the asset allocation based on a few questions is tricky one which the sales representative or customer care department hardly knows. The illiteracy part for deriving the risk profile properly has been hidden under a few questions under the disguise of Technology.  Then the pop up comes for investing in direct schemes and certain scheme names come up without explaining the logic for the same scheme selection coming up.

The whole concept of Investment advisory means proper financial planning and then comes the execution. But in the market, I find only execution platforms in the forms of APPs and few advisors as per SEBI records of an investment advisor. The numbers speak why professionals are reluctant to come and join the advisor practice in real-time.  Most of the advisor who is in the practising field has come up with Book Publication and another type of brand creation form where they get a regular flow of income since the client market asks for payback rather giving paycheck. This is the current truth about Investment Advisor. All clients don't pay or agree to pay a certain fee.

Now when a client who understands less gets these APPs and invest and later when those investments turn worst then the client and it investment dream is totally shattered for the next 3 years( as per my calculation).  Investment advisory cannot be done just through platforms offering products. Those platforms can be replaced with a higher level of platforms and hence the game of Private Equity behind these platforms will be never-ending. The real concept of investment advisory where proper questionnaire-based financial planning and risk profiling followed with investment review is taken into account is getting diluted.

So coming to the conclusion –the investment advisory market is still to be developed in India where the client agrees to pay a fee. The day when Fee-based advisory profession grows then we can say that Indian clients mindset has changed from the Agent concept. The industry currently is divided into platforms and platforms. The competition of the Indian Investment advisory is between Apps and platforms and not for the real benefit which is dependent on a few  Investment advisories practising the profession.