As markets evolve and client expectations change, financial advisers have to mould their offerings and services in sync with client needs.
Wealth creation is just one of the many goals of a client. The client looks for securing her and the family’s life through insurance, saves to provide for better education to children, buy a house, save tax, do estate planning, retire peacefully and pursue their passion. Thus, an adviser needs to be equipped with knowledge and expertise which goes beyond just offering a few products.
Take client feedback
Ritesh Sheth of Tejas Consultancy says that his parents, who started with the distribution of post office schemes in 1980s started offering new products as per client needs. The family business which was started by his mother today offers a host of products like mutual funds, post office savings, insurance and corporate fixed deposits. The firm Tejas Consultancy today manages assets worth Rs 800 crore across multiple products. This helps the firm spread its source of revenue evenly across products.
“A majority of our clients are retail. The services and products offered by us are thus tailored to meet their needs. We don’t offer exotic products like PMS, AIF or private equity. Advisers need to take client feedback on what they want. They should not keep adding new products just to diversify their sources of revenues. They should stick to their strengths and expertise,” says Ritesh Sheth of Tejas Consultancy.
Diversify source of revenue
Offering a diverse set of services also makes sense from the perspective of an adviser’s business. Shrinking margins in one product necessitates the need for IFAs to offer diverse products to sustain their business. If an adviser is not being able to provide what clients are looking for, chances are that the client may hunt for another adviser. Further, it helps advisers get a higher wallet share from existing clients.
“Offering a wide range of products and services helps the mutual fund adviser diversify the client's portfolio which helps in mitigating the risk whilst also offering to maximise return on overall investment products. It also helps to increase the overall wallet share with the client. It becomes a one-stop solution for with respect to personal finance needs,” says Viral Bhatt of Money Mantra.
Adding more products/services under your offerings requires additional manpower, resources and time to be updated with various rules and product features that change from time to time.
Here are a few services/products that a mutual fund distributor can explore, depending on her strength and client needs:
- Estate planning
- Loan advisory services
- Real estate advisory
- Portfolio Management Services
- Alternative Investment Funds
Study products
Advisers should not haste to provide services/products where they lack expertise or don’t have enough service capability. It is advisable to conduct thorough research before introducing any service/product so that client experience is seamless. It is best to consult your peer for feedback who specialise in a service that you are looking to offer.
If a client has a bad experience, it could reflect poorly on the entire practice. For instance, today many youngsters are looking to make a quick buck through stocks. An existing client may approach you to advise her on stocks. This does not mean you have to offer what the client asks, especially if it is not your cup of tea. If the client loses money in a stock, chances are she may grow averse to equities. Thus, client education and setting right expectations is necessary.
Technology
Viral says that lack of knowledge about other products, resistance to change and having the mindset of being expert in one product is keeping MFDs from diversifying their offerings. Viral says that advisers today have a plethora of options like platforms providers which help them offer a bouquet of services at the click of a button. “Technology is making it possible for MFDs to expand their client base geographically and scale up the business,” says Viral.
Stock advisory
Mumbai-based adviser Kartik Jhaveri of Transcend Consulting says that today’s advisers need to actively manage client portfolios. “Asset allocation is important. Just buying and holding portfolio doesn’t make sense. You need do a bit of active management and tweak allocation based on the evolving trend. For this, you need to offer multiple solutions,” Besides mutual funds, Kartik offers direct equity and zero cost unit linked insurance plans (ULIPs) to his clients.
“Stocks have the potential to do both create extra alpha and gives diversity to the client. You can offer direct equity either through PMS, broker or under the guidance of a technical analyst. It gives a fillip to the portfolio. Zero cost ULIPs are also a good option for MFDs to consider as they offer tax advantage,” says Kartik.
Client interest
“If you believe in client-first approach you will provide a wide range of services to clients so that they are not misled by others in the market. When you draw up a financial plan for a client, you need multiple products to fulfill different goals. Besides mutual funds, we offer stocks, mediclaim, car loans, home loans, term plan, corporate fixed deposits,” says Rajesh Sodhani of Sodhani Investments.
In-house products
Besides distributing third party products, some advisers have developed in-house capabilities to manufacture their own products. Mumbai based distribution powerhouse Jain Investment which started from mutual fund advisory in 2002 launched its own PMS in 2015 which is registered under the Securities and Exchange Board of India. Today, the firm manages assets worth Rs 500 crore in its PMS.
To sum up, heating competition in advisory space requires MFDs have to adapt with evolving trends. Unlike a decade back, today the advancement in technology has equipped advisers to offer much more at a lower cost. Given the low penetration of financial products in India, rising workforce and increasing wealth, the potential for advisers is immense. Advisers and mutual fund distributors who are equipped with the right technology, infrastructure, products and skillsets could capitalise on this opportunity very well.
