On 23rd I have attended AMFI Summit 2018 and listen, what I was expecting since last 3 years, from SEBI’s Chairman.
After listening above announcement from SEBI’s chief lots of the distributors were worried about their future what will happens to their business.
I have already highlighted this issue 2 year back on this blog in 2 parts.
HOW TO COMPETE WITH MANUFACTURERS ON THEIR OWN PRODUCT? Part – 1
And
HOW TO COMPETE WITH DIRECT PLANS?? Part – 2
To overcome this fear first of all we need to know in what circumstances and situation investor will think for moving to direct plan.
If I am not wrong there is only one difference in Direct Plans and Regular Plans that is the lower expanse ratio of Direct Plans which is the main cause for generating higher returns than Regular Plans. Direct Plan cannot perform more than that so we need to generate little more than that.
Ultimately your investor needs returns which cannot be replaced by just providing good looking reports and analytics without any output. If you can’t generate more returns than you are failed to satisfy your client needs so he/she will think about moving to Direct Plans. Your investor needs returns not reports and analytics without any output.
Then what is to be done?
If any one want to beat Direct Plans they need to generate more returns in Regular Plans by just actively managing the investor’s portfolio, which is not possible while investing in Direct Plans without any assistance.
Always provide Solution Based Investment Services instead of Product Base Investment Advisory which is not possible in Direct Plans focus on financial planning.
Don’t think about being SIP king because all the king’s are at higher risk of Direct Plans because SIPs can be started or switched in to Direct Plans without much efforts. (I have so many reasons for not suggesting SIPs that will be covered in coming time on this blog.)
Always educate your investor about portfolio’s margin of safety, downfall protecting approach, never be focused on Returns only because Returns are the only term where Direct Plans are leading.
Once you achieve higher margin of safety your returns will automatically increases
Why I am not worried about Direct Plans?
I am following some set of rules
- I am not doing SIPs where direct plans can beat regular plans in teams of Returns. If required I suggest sip in debt plan and then I manage portfolio as per market conditions.
- I am doing active management for my clients portfolio and generating higher returns than passive SIPs/STPs in Direct Plans.
- I am always educating my investors on safety of portfolio, downside protection, market volatility and how to encash it and how to avoid risk.
Afterall Managing the risk should be the prime focus of a distributor. For that only the investor has appointed him.
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