In 2017 I had started a project, “Abhimanyu”. On 3rd May 2019, during one of my BLTP Distributor Meet in Nashik, I had floated a pseudonym to MFD as Abhimanyu, who knows how to enter the market but never know how to come out of the market, which became very popular and used in so many webinars, by various mentors thereafter.
Nowadays, somewhat improvement is seen, and some of the MFDs have taken it seriously and started managing the portfolio actively.
Pandemic has played A big role in changing the MFDs mindset. Just because of that, MFDs had realised the requirement of profit bookings when their AUM had gone down due to sudden collapse in the market, which I was referring to by giving pseudonym Abhimanyu in “Project Abhimanyu”.
Now, the project Abhjimanyu is on the right track.
So, I have started working on a new mission to educate MFDs, which will be most relevant in the coming days for MFDs survivals. They should realise it before it becomes too late. I have given a unique name to my new mission, “Project Ekalavya.”
Now, I am saying, “MFDs are Eklavyas of the Current Era.”
Have you shocked and thinking that what is the similarity between Ekalavya and an MFD?
There is a big similarity between Ekalavya and MFDs, whether you understand it or not.
For that, we have to recap the story of Ekalavya, from Mahabharat.
We all are knowing Ekalavya very well as an Icon of “Guru Shishya Parampara.” Ekalavya is a character from Mahabharat, came to Guru Dronacharya for learning Dhanurvidya(Archery) but was refused for not belong to the Royal dynasty. Ekalavya was firm to get knowledge from Dronacharya only, so he makes one idol of Guru and started to learn silently by hiding himself.
One day, when the Guru went to the forest with Arjuna and other students. Suddenly, they have seen that his dog, who was barking some time ago, was silent, but after seeing it, they were surprised that the dog’s mouth was full of arrows so accurately that there was not a single wound.
After knowing none other than Ekalavya is responsible for that, who was refused to take Dhanurvidya from Guru, he was asked to give his right-hand thumb as Guru Dakshina (fees for being his Mentor). Because Guru was committed to the Royal family that Arjuna will be the Best Dhanurdhar in the world, but after knowing that Ekalavya was better than Arjuna. Ekalavya cut his right-hand thumb without any hesitation and laid on the feet of Guru.
Although he knew that archery would not be possible for him, Eklavya gave his thumb to his guru as Gurudakshina. “Ekalavya” is the most prefered pseudonym for MFDs because they are behaving like Ekalavya.
Like Ekalavya, MFD has sacrificed its skill of managing the portfolio against the knowledge of SIP, which is running without putting any effort. This will not hurt immediately, but definitely, it will be.
I am saying this line many times, “Every MFD needs to be able to beat Direct plans”, since 2013 when Direct plans were introduced. Today you can justify your 1% commission by saying that you are providing services like Documentations, Door-to-door services for transactions, providing portfolios etc. Down the line, 5 to 10 years later, the difference in absolute returns will force investors to lean towards the direct plans.
Today after 8 years, what I was saying turned into a reality. Today Contribution of Direct Plans is almost 50% and still growing rapidly. In the last 5 years, All the channels contributions were reduced, except Direct Plans.
MFDs are thinking they are growing their AUM, then how its contribution can be reduced? The simple calculation is that Industry has increased its AUM by 141%, Direct Plan has increased by 228%, where MFD has grown by 101% only. We will discuss this eye-opening topic later on in this blog.
Now, it would be understood why Ekalavya is an appropriate salutation for MFDs.
Then what is the solution?
Since MFDs have learnt to do SIPs, they have stopped building strategies and started using SIPs only. In this context, MFDs and RIAs both are sailing in the same boat.
MFDs are using only traditional transactions, which are also available in Direct Plans. Once the market comes into a correction phase, Investors will be misguided by the Direct plan vendor by convincing them that they have got fewer returns just because MFDs have taken commission from their investment. The commission is MFDs right, there is nothing wrong with it, but MFDs have to justify it by making investor’s portfolios safer than Direct Plan runs under DIY.
First of all, MFDs should become Active instead of being Passive.
Read my most visited Blog Posts for more solutions written in 2017.
I want to see that every MFD should work, with their full of ability, which can be improved, if required, once started.
Because in future, MFDs will have to compete with Direct Plans, which are already benefitting based on cheaper NAVs.
MFDs have to justify themself, for getting a commission, which is only possible when MFDs can generate more returns than Direct Plan.
What is stopping MFDs from becoming limitless Advisor?
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Keep Learning, Keep Investing, Keep Growing !!!!!!!
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