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I think the idea behind Birla Sun Life's IFA Advisory Council as well as the way it is executed is very good. What I really appreciate about this initiative is that it recognizes that there is a big gap that exists between top management of fund houses and the IFA who actually connects with the investor, and there is a sincere attempt to bridge this gap. The top management of fund houses decide about product strategy, product design, placement, how to showcase it to investors etc. Between them and the IFA who actually does this job, there are many layers - at the city level, regional level, zonal level. Somewhere in these several layers, the actual ground level feedback of what IFAs are telling - which is critical for top management in its product design efforts - is getting missed. This IFA Advisory Council is a great way to bridge this gap, and I sincerely feel all large fund houses must have similar processes in place. There have been some important points that our Council has shared with Birla Sun Life's top management on diverse aspects. Here are some of our key inputs.
What is our investor looking for vs what we are asked to sell to him
If you look at the last 5-6 years, the fact is that investors' conviction in mutual fund products has been reducing year after year. Today, when an IFA sells mutual funds, investors who buy are doing so more on the basis of trust and faith in the IFA rather than conviction in the product. You cannot build a large business on this basis. It is only when investors' conviction in the product itself improves, that you can look at market expansion. Our Council gave the BSL management a lot of feedback on how insurance products are packaged and sold and where mutual funds are falling short in terms of helping investors relate to their products. No investor knows where his money is being deployed when he goes for an insurance product that is savings and investment oriented. Nor frankly does he want to know. He wants to know how this product or solution will help him meet his goals, help him take care of his responsibilities. Fund houses are not really understanding this well enough, and are insisting on educating the investor about exactly where their money is going rather than what this money can do for them. Instead of promoting Large Cap funds, mid cap funds, small cap funds, value funds, growth funds, short term income funds, long term income funds, accrual funds, duration funds and so on and asking IFAs to sell them based on market views of the moment, it is critical for fund houses to package them into simple solutions like Retirement solution, Childrens' Education solution etc and present them as such to investors. Put the right mix of debt and equity products within each solution and sell the solution - not individual products. Investors will relate a lot more to these solutions rather than products that we take to them.
What can be done to increase the IFA base in the country
Every fund house keeps talking about a dwindling IFA force and how it is impacting business. Lot of effort, time and money is spent on training and motivating IFAs. Our simple feedback in the Council was that it is time a fundamental ground reality is understood. An IFA or a distributor is primarily a salesman. His job is to sell a proposition, which will deliver results only after a long period of time. The more he is able to sell, the more he earns. The more he earns, the more motivated he gets. The more motivated he gets, the more positive energy he spreads among other distributors. And thus, the distribution business will expand automatically. So, the fundamental requirement in this chain is to enable the distributor to become a champion salesman, so that he can boost his business volumes.
Now, if you look at what is actually happening on ground in terms of training inputs is that distributors are being trained to become champion fund managers, not champion salesmen. So much training, so many discussions, so many conference calls on economics, markets, GDP, CAD, inflation, duration. And how much training on sales strategies? On successful sales tips? On how to handle client objections? On how to sell more, sell better, sell smarter? We are in the business of helping investors create long term savings plans through mutual funds. The fact is over a 10 year period, there is not much difference in outcomes between one fund and another. If we internalize this basic truth, we will automatically spend less time on whether we should sell a midcap fund now or a large cap fund and whether we should switch from an accrual fund now to a duration fund. All these discussions and product training inputs only help us become better fund managers - not better salesmen. Are we actually going to sit in front of a client and talk to him about how the CAD of the economy has moved over the last 6 months and therefore which is the best segment of the market now? Is our investor interested in this discussion? Or is he going to get even more confused and run away further from mutual funds? Whereas, if the IFA is given inputs on how to engage a client, how to pitch long term solutions, how to handle objections that may come in a typical sales process etc, he will be able to interact better with his clients, will be able to sell more and will thus directly contribute to business growth. Don't make us champion fund managers, please make us champion salesmen. Do this, and the IFA business will grow and more people will want to participate in this business.
How to make a Privilege Club membership meaningful
Our Council was asked what it would take to make a Privilege Club membership coveted and sought after. After all, every fund house wants more IFAs to aspire for, work towards and achieve this recognition. Our feedback was in several areas. First, the criteria for qualification must be spelt out well in advance and progress towards qualifying for a particular level must be shared with the IFAs. Only then can they decide how much effort they want to put in, if they wish to cross any particular threshold. For them to want to cross these thresholds, there must be visible differentiation. The fund house should consider simple things like a special blazer or tie for members of a particular level, which they can wear when they come to the fund house's events. Other participants should clearly see that these are privileged members. Study circles must be organized, exclusively for Privilege Club members, where selling strategies are discussed, and coaching is given where required. If there are visible privileges as well as business support in the form of relevant coaching, there is automatically a desire to reach a particular level to qualify for these memberships.
Completing the loop
What I and other Council members appreciate most about this initiative is the Action Taken Report that the fund house shares with us. There is a proper agenda set for the meeting, discussions are handled in a professional manner and all action points discussed and agreed upon are followed up, implemented where possible and advised through the Action Taken Report. As a Council member, I get motivated to offer more suggestions and inputs where I know that these are being implemented and the loop is completed with us.
Having an IFA Advisory Council helps the fund house also get ground level feedback on its specific products. For example, we gave specific inputs on Century SIP - like introduction of a switch facility, avoiding stoppage of insurance and charging if required - but giving continuity of protection, highlighting payouts from the insurance plan to show it works etc - which will no doubt benefit the company, because this is actual feedback coming in from distributors who are selling it in the market.
I sincerely believe this initiative must be followed by other large fund houses as well. Get the top management to connect directly with distributors on the ground, and you will see everybody working together in a much better manner to help grow the industry and take good products and solutions to our investors.
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Continuing the coverage of Birla Sun Life's IFA Advisory Council (