As we have seen Real Challenges to MF Distribution Business one is from Regulatory body in Part-1 and another is from our own way of working in part-2. Now in this 3rd part we will be discussing why Investor think for Direct Plans and what is the solution to this challenge.
When Direct Plans were introduced in 2013 distributors were thinking that “HNI have not that much of time to research and invest at their own” but the Reality as on today is almost 15 to 20% of the transactions are done in Direct Channel.
What was wrong in Distributors Thinking?
Where the Distributors were wrong?
They failed to accept the reality
- There are so many free sites which gives high rated research which are blindly followed by distributors can also be used by HNIs
- They have money power to hire man power for doing procedures after that also they will be saving money from generating difference in returns. See the reality that can hurt you
The same mistake is repeating by Distributors they are thinking that “We have Retail Investor model and Retail investors will not move to Direct Channel because of so many documentation in doing investment and difference will also be negligible“.
See the reality that how it can hurt you
- e-KYC has removed documentation
- OTM has removed the Banking procedures
- A small difference in return will generates huge valuation over the period [What distributor taught Investor about Compounding on an investment of just 11000, 1% return difference make more than 100000 difference in value in 30 years]
- There are so many Mobile Apps and Websites providing investments in direct channel on your fingertips.
If distributors are thinking that Advisory will save them think about Robo-Advisory sites now a days there are more than 40 sites live which are providing free advisory and also facility to invest in direct.
I have so many examples across the India that Distributors are complaining that “My HNI client, Mr. xyz to whom I have teach the Mutual Fund, is now became so harsh to me on so many little things and started doing Direct Investments and switched 1Cr, 2Cr etc… in Direct Channel from my code” [Still not Thinking to find the solution when will think after all the money transferred in Direct Channel].
In reality client is not saying clearly that he need more returns which he is getting from direct investment. Do you know why an Investor is coming to you? just to invest and earn handsome return. In Direct Plans Investor believes that he is making more money than Regular Plan. Now it is your turn to play, generate the returns which can beat the returns generated by direct scheme. Can you do this? if not than forget the client or develop your own mechanism.
By adopting traditional mechanism like SIP/STP/SWP you cannot generate higher returns because Direct Plans, already having advantage over regular Plans, having lower TER so the returns will be higher.
If you are not able to do the same [Develop your own mechanism] you should hire some other’s mechanism which are capable to beat the direct plans like
BLTP – The NeXT Gen Investment Strategy.
Next Practices focus on what to do in the time ahead
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