SIPs are clearly the biggest success story of the industry, and everybody has impressive numbers to show for themselves on their SIP book growth. Amidst this explosive growth for the industry, we take a deep dive into different distribution channels to figure out who’s riding the crest of this wave better than others, and who’s losing market share rapidly even if their own books show healthy growth. A close look at the numbers suggests that IFAs – particularly the mid-sized firms (ranked 1001-5000 among top 5000 ARNs on AuM, with an AuM range from 18-78 crs) are the ones who ought to be a little concerned about losing out on the biggest opportunity in the industry.

We looked at the top 5000 ARNs by AuM and sorted them by channel. Instead of clubbing all non-bank, non-IFA distributors as ND/RD which is how our industry has traditionally grouped the players, we split this ND/RD category into distinct business models, to get a better sense of which models are capturing this growth wave the best.

The top 5000 ARNs (along with direct) account for over 83% of industry AuM and 76% of total SIPs. The balance is contributed by the thousands of small IFAs spread across the country. Among the top 5000 ARNs, IFAs are represented in three categories: IFA platforms (the top 3 platforms in the country), large IFAs (829 IFAs who make it to the top 1000 ARN list – individual AuM range from 79 crs – 2000 crs – ex liquid) and mid sized IFAs (described earlier).

Here is how the SIP numbers pan out for the top 5000 ARNs:

Observations:

• The fastest growing channel is neither online distributors, nor direct – its stock brokers! Broking firms have taken to SIPs in a huge way, clocking a blistering pace of growth – 573% volume growth over last 3 years, 774% value growth and healthy improvement in average ticket size – though ticket size is still below industry average. In their quest to ramp up revenues from their large client bases, stock brokers seem to have discovered a new gravy train. The irony of the situation is difficult to ignore – a broker whose conversations with clients have hitherto focused on trading ideas, is now talking the language of long term disciplined investing through SIPs to the same clients! Wonder how he would be managing both conversations in the same call….
• The top 12 online distribution firms have grown remarkably, next only to the amazing growth of stock brokers. Safe to say, online distributors have moved from being niche players to mainstream growth contributors. The only jarring note in their growth story is the rather steep decline in average ticket size of their SIPs – however, the current ticket size is around industry average, so not really a cause for too much concern here.
• Direct is growing faster than industry average – on volumes and value, and average ticket size is only a shade below industry average. This is not welcome news for intermediaries, as SIP is as retail as it gets. Clearly, direct is not just being used by institutions and HNIs, but increasingly by younger savers for starting their SIP journeys. Food for thought for all intermediaries.
• It is instructive to note that the three channels that are growing faster than industry are all relatively new – direct, online and stock brokers who are now furiously selling SIPs. Traditional channels have all lagged industry growth – some by a slender margin, others by a worrying distance.
• Banks have lost some market share in volume and value terms and have grown marginally slower than industry average – though a 224% growth in their SIP book over the last 3 years is not going to make them really fret too much about lost opportunities. Perhaps private sector banks are not finding that many new customers within their systems as brokers are and as online modes are reaching out to.
• National retail distributors have marginally improved their market share in SIP book size despite a highly competitive market place, though they have ceded share in SIP volumes. A sizeable enhancement in average ticket size seems to suggest more attention to existing customers and a higher wallet share focus rather than new client acquisition. Private wealth and institutional channels are not really SIP stalwarts – SIPs mean very little to their target client segments.
• Within the large IFA channel, there are three different stories for the 3 segments studied here. While all 3 have lost market share in volume and value terms, IFA platforms seem to have lost relatively less share. Now this may not be a like-to-like comparison, since platforms have been growing their IFA bases, which will reflect in their overall growth, while growth of the overall IFA channel is not captured since this study is restricted to only the top 5000 ARNs. What comes out nevertheless is that IFA platforms, despite their huge investment in technology, have grown slower than the pure tech plays of direct and online distributors. Clearly, the reach of the internet is far deeper than the growing army of IFAs working with platforms.
• Large IFAs (over 800 who feature in the top 1000 ARNs, and whose AuM spans a wide range from 79 cr – 2000 cr ex-liquid) appear optically to have grown slower than industry, although their average SIP ticket size is the best in industry (excluding PWM). This set includes some very rapidly growing IFA firms that are scaling up robustly, adding to their team size and geographical reach and embracing an increasingly phygital delivery model. Then there are those who have taken a conscious choice not to grow their teams – and who therefore are seeing perhaps the highest ratio of SIPs per advisor as they remain one-man-armies even after doubling their book in the last 3 years. One can argue that it is a case of missed opportunities for many of them, given the experience and brand equity they enjoy in their client bases. But then, it comes down to a personal choice of being the team vs leading a team.
• The case of the mid-sized IFAs is somewhat worrying – this is a large set – of 4000 IFAs, with an AuM range from 18 to 78 crs. Not quiet the scale where you may be tempted to take it easy and enjoy a healthy trail book. Their fall in market share is the sharpest in the industry – though they too have more than doubled their SIP books in the last 3 years. It is this segment that perhaps needs to introspect more on why they are missing out opportunities that others seem to be able to grab in this rapidly expanding market. Do they have the right technology support to service a rapidly growing client base, or are they getting too bogged down with service and therefore unable to win more new business? Are they using intelligent and cost effective means to raise public awareness of themselves to attract new investors who are searching for an advisor? Are they willing to invest in their business by growing their team and strengthening their infrastructure to give themselves a big growth booster? Do they have customer propositions that compete with new age delivery models and therefore are able to attract new investors? For those from this set who are growth focused, the market’s message is that there is a lot of growth happening around you which some of you may perhaps not be harnessing adequately. Its time to invest in your business to become more competitive and get your fair share in this expanding market.

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