The costliest mistake IFAs make

Neelesh Shah

President, KAMFA


Neelesh Shah – president of KAMFA (Karnataka association of mutual fund advisors) shared his thoughts on the industry and insights from his experience.

  • Focusing too much on industry changes can be a costly mistake for IFAs
  • Keep relentless focus on adding new clients
  • IFAs need to find a space which they feel comfortable and displays their strengths

Learn how to ride the roller coaster

Learn how to ride the roller coaster would be Neelesh Shah's advice to fellow IFAs as the industry continues to experience changes in regulation and innovation. Rather than leaving the business or getting discouraged, IFAs need to stay put, dig in and get comfortable. Finding a niche that displays your strengths and focusing on clients is the key to riding this roller coaster, Neelesh advises.

Neelesh, who has AUM currently of about 50 crores, has diversified the business to include real estate, gold, bonds and structured products to cater to the investment needs of clients. The current industry climate can be especially challenging for stand-alone mutual fund distributors. Unless a new distributor has capital for five to six years, it can be difficult to run the business without parallel products, he added.

Listening to clients opens up unexpected opportunities

Rather than get discouraged by the industry changes, look for opportunities with new as well as existing clientele. Listening to clients can open up unexpected opportunities. Neelesh recounted that one of his clients asked for help as they wanted to invest in real estate. He initially declined but a few days later, another client mentioned that they were looking to sell a property. He connected the two clients and thus, created a new business niche by also catering to the real estate needs of existing clients.

Where is your focus: on regulations or on your clients?

Many IFAs make the mistake of focusing too much on regulatory changes and get intimidated. Rather than focusing on regulatory changes that are not within their control, IFAs need to concentrate on existing clients and building new clientele. The success of IFAs who have been in the industry more than a decade can be attributed to their relentless focus on adding new clients, Neelesh advised.

There are still plenty of untapped opportunities as many in the country are not very aware of what a mutual fund even is. However, IFAs need to understand that clients are looking for good advice and not just a product. Many IFAs are so focused on selling the popular product of the moment that they don't realize that they don't stand out from competition.

Find your space

Neelesh said that IFAs should not just follow the masses and instead need to find a space where they are good at it and also feel comfortable. Clients need to be able to recognize the value-adds that the IFA is bringing to their investment needs.

Prior to being an IFA, Neelesh was in the sales field and an important lesson he took away was to not be afraid of the word 'NO'. To get over the fear and anxiety, Neelesh recommends that IFAs need to just focus on what they are supposed to do rather than worry about the outcome. Some of the clients who initially turned him down sought his service months and even years after the initial rejected pitch. IFAs need to remember that they are in the business of farming and not hunting, he added.

Despite the potential disruptions from technology, many clients are still looking for a human touch. Neelesh shared that many clients insist on a regular meeting where they can discuss and hear his perspective as they are not completely comfortable with just technology approach. Referrals from existing clients significantly spur growth of new clients, he shared.

Find support

Many IFAs struggle with trying to keep up with the changes and understanding the new rules that they lose focus away from the business. Neelesh encourages IFAs to get involved in their associations and network with others in the field.

KAMFA was established in 2009 with just 14 members and it has now grown to be the largest state-wide IFA association with over 800 members. With CSR initiatives like tree planting and flood relief, the association gives IFAs opportunities to get involved with the society as well.

With 7 chapters across Karnataka, the association runs regular education initiatives for its members as well an annual convection where speakers from AMCs as well as other experts share their knowledge. These initiatives not only cover product related knowledge but also cover soft skills as well as life skills. Knowing how to handle rejection is as important as a skill as knowing how to increase wallet share for IFAs.

IFAs can lean on fellow members within the association to gain insights into concerns like managing data leaks, the KYC rules for on-boarding new clients and how to change brokerage structure status. The support from fellow members can help IFAs to manage the changes in regulation as well as innovation and keep their focus on growing the business.

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