This post has appeared in the India Markets Observer 2018, an online publication that brings together experts who discuss these challenges in the fund industry and investing insights and various perspectives.
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The mutual fund industry is growing at a record pace and so is the competition. Robo advisers and e-wallets are reinventing the distribution wheel. Amidst all this, the regulator is keen on segregating ‘advice’ and ‘distribution’. Himanshu Vyapak shares his insights on what lies ahead for financial advisers.
Currently, around 35% of transactions in mutual funds are being executed online. Do you foresee the day when transactions to become completely paperless?
Most of the existing transactions by early mutual fund investors have already transited. However, the opportunity lies in the next pie of new consumers who reside in the real Bharat.
With mobile phone penetration increasing, smart phones now being available as low as $35, along with the internet penetration touching 500 million across cities, this segment has already started evangelizing the digital adoption.
Around 1.2 billion people becoming completely paperless is no more a white elephant. How quickly Digital India ecosystem sets up in such location will decide the time.
Many robo-advisory platforms and e-wallets are expected to offer direct plans to investors. Do you see this trend posing a competition for mutual fund distributors?
Bringing in the right advice to end consumers will only help in developing the mutual fund eco system. This in turn would mean more evolved customers and thus a need for a higher evolution of the distributor knowledge pool.
Research Online and Purchase Offline (Read Phygitally) has been a trend in India. This country still banks heavily on assisted selling - e-service and e-seva. Thus, I firmly believe that robos and humans will come together to bring in the best solution to the consumer. While algorithms will pin point the right choices, it is the human advisory which will assist the consumer to select between the feather and the quill.
How agile are you? How articulate and paperless can you be? What strata of consumer you are dealing with will always provide for enough space for both to co-exist and compete.
The average age of a financial adviser in the U.S. is 50 years. What is your reading of this trend in India? Many advisers do not have a formal succession plan in place. How can they plan their business succession?
The financial advisory business in India is in a booming phase. The average age of our distributors is around 48 years. Financial advisers without a succession plan for their practices put not only their own retirement at risk but also the well-being of their clients. One medium of succession planning would involve institutionalizing the business and creating a formal mechanism of succession. Also, as the industry grows further, consolidation and acquisition will lead to automatic continuity planning and carrying forward of the business.
However, the fast pace at which the advisory business in India is growing makes it a very lucrative career option. As the business flourishes, the experienced advisory can be encouraged to bring in young advisers and train them in specific areas of expertise.
Legacy is very important not only for the firm but for the clients and future business. So the next generation of leadership is very crucial for continuity. Succession planning process may take 5 to 10 years to plan and implement this
effectively. The most important part is that you need to nurture the new leader under your guidance so that he/she demonstrates the same passion and work towards investor interest.
In the U.S., firms like BlackRock, Invesco, Charles Schwab and Fidelity have either purchased or have in-house robo-advisory platforms. Do you see asset managers in India venturing into offering platforms for distributors?
These U.S. firms already possessed the distribution license and then included the robo-advisory platforms into their gambit.
In India, manufacturers can utilize their digital assets to facilitate investors in purchasing the required products. However, they cannot act as advisers. The distinction between the manufacturer and the distributor is well established in
India. Robo-advisory platforms being a part of the AMC may be evaluated at a later stage.
The awareness about mutual funds is increasing and so is competition. How should brick and mortar financial advisers prepare themselves to gain bigger market share going ahead?
The efforts from all the industry participants and campaigns like “Mutual Fund Sahi Hai” are influencing the investors towards the importance of financial planning. The mutual fund assets have been growing at a very healthy pace in the past few years (around 2X in 3 years). However, the investor growth has not been commensurate.
There is enough opportunity in the Indian market to enable the expansion of advisers (the mutual fund industry in India is only 20% of GDP compared to European and Western countries where the proportion is 80%-100%).
The key to succeed for distributors in such a scenario will be to reach out to more investors and garner a higher share of wallet. For a brick and mortar distributor to expand reach, the approach should involve offering simple solutions to support the investors needs throughout the life cycle. A physical + digital (Phygital) proposition will play a pivotal role in providing the correct advice to mass investors.
The Indian regulator has proposed advisers and distributors to choose either ‘advisory’ or ‘distribution’ model. Do you think India is ready for this structural change yet?
Indian mutual fund industry is witnessing a growth phase and the awareness about mutual funds is increasing multifold among investors. At this stage, the core focus should be to facilitate the financial planning journey of our investors and hand holding them to make the right decisions. This requires for the co-existence of distribution and advisory models. However, we need to ensure that investors as well as distributors are given sufficient time to choose and make the necessary adaptations towards this transition.
This post has appeared in the India Markets Observer 2018, an online publication that brings together experts who discuss these challenges in the fund industry and investing insights and various perspectives.
Download your FREE copy Now!