Advisor Speak

Why do IFAs undersell themselves?

FIFA annual conference panel discussion

15th May 2017


(L-R): Lallit Tripathi (Vedant Advisors, Ranchi), Ashish Goel (Vista Wealth, Delhi), Nilesh Shah (Kotak MF), Shrikant Bhagavat (Hexagon Wealth, Bangalore) and Amit Bivalkar (Sapient Wealth, Pune)

In a nutshell

The recently concluded FIFA annual conference witnessed a very engaging panel discussion with Nilesh Shah of Kotak MF moderating a discussion with 4 champion IFAs - Amit Bivalkar (Sapient Wealth, Pune), Shrikant Bhagavat (Hexagon Wealth, Bangalore), Ashish Goel (Vista Wealth, Delhi) and Lallit Tripathi (Vedant Advisors, Ranchi). We reproduce an edited transcript of one segment of this discussion, where Nilesh asked the panellists what is stopping IFAs from being more demanding with their clients and why the IFA segment is not getting a larger market share than it currently has.


Nilesh: IFAs forge genuinely long term relationships with their clients and make themselves available always to serve their clients. Why then do IFAs undersell themselves with their clients? What stops IFAs from demanding more from their clients - more by way of business, wallet share, referrals, fees?

Amit Bivalkar: The first issue is that typically IFAs are never sure of what their own wallet share is, as they don't have sight into the client's total portfolio and total cash flows. They know about cash flows only when the client tells them - unlike a bank who can see the cash flows and pitch proactively. There is also somewhere the competition angle - mainly banks, large national players etc. I guess we IFAs don't want to be seen as aggressive pushers - which is how some of our competition is perceived. We see our moderation as our strength and differentiation - but perhaps as a result we sometimes get less wallet share than what we think we deserve.

The other aspect is a keenness to avoid an unpleasant investment experience, which makes us naturally conservative in our recommendations. We don't aggressively push equity investments, we prefer to take the client gently and gradually up the risk curve - while some of our competitors make aggressive sales pitches and win wallet share. Some of these competitors don't have a long term relationship with the client in mind as they work in transferable jobs. We want to build long term relationships and therefore approach our recommendations with more caution and circumspection, as we understand that unpleasant investment experiences can damage relationships.

Shrikant Bhagavat: I guess the biggest check we put on ourselves is to ensure that we don't superimpose our views into client portfolios, and ensure that every client's portfolio is indeed a reflection of his individual risk tolerance, his circumstances and his expectations. Sales opportunities are naturally sacrificed when you adopt such an approach - but we are fine with this.

The frustration of not being able to demand and get what we think we deserve from our clients is something we did experience in our firm - until we embraced the RIA model, which coincided with the decline in upfront commissions. We have actually become more profitable as a firm than in our earlier upfront commission days. We work harder, we have a much sharper level of accountability, we need to demonstrate our value very clearly, but we also charge fees for our services.

Nilesh Shah: Structurally, the IFA model with its entrepreneurial set-up, lends itself to inter-generational servicing of client families, in sharp contrast to employee-oriented structures that banks and NDs have, which can never match the relationship longevity that an IFA can offer. If we accept that relationship is the most important factor in the advisory business, why then has the IFA segment not garnered a higher market share than it has?

Ashish Goel: IFAs don't work on a time pressure to maximise revenues per client within a year or two, which is the hallmark of RMs in banks and NDs. IFAs prefer to build their relationships slowly, and allow each client his own pace to gain comfort and confidence in the IFA and his recommendations. We never push our clients, even when our own convictions are high - as Amit observed. We believe that more important that our conviction is to instil the same conviction in the client's mind first - only then will he invest confidently.

In terms of market share, I think the issue is more about reach rather than wallet share. Where we are present, we get a healthy wallet share and our wallet share only grows over time. Our challenge is that total active IFAs is a fraction of total RM salesforce of all banks and NDs put together. So, they reach many more investors than we do. Their overall market share therefore is much larger. But with investors who have access to IFA and bank RMs, I believe the IFA wallet share is very healthy and growing.

Lallit Tripathi: While I agree with Ashish, there is one point I think all of us IFAs need to reflect more on, to increase our own reach and gain higher share. Very often, we IFAs spend a lot of our time on understanding and communicating market views, sector views, interest rate outlook, tactical calls on specific categories of funds and so on. We land up thinking of ourselves as mini fund managers and then involve clients in lots of tactical discussions, which makes each relationship a very intensely managed one, and automatically limits the number of clients we can effectively service. And the sad part of this is that there is really no concrete evidence that suggests that this intensive approach actually adds a huge lot of more value to clients than a disciplined goal based long term approach. I believe if we stop the pretence of thinking of ourselves as fund managers and instead think of ourselves only as financial planners, we will be able to reach out to many more clients, help them understand the benefits of a long term goal based approach, put them onto that path and then review progress annually or maybe once in six months at most. And the more help we take of technology, the more our bandwidth will increase. So, even if the IFA community is smaller in total numbers than total number of RMs in banks and NDs, I think there is a case for us to increase our overall market share, by changing our approach.

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