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New IFAs from smaller cities may take a hit in the near term from the upfront ban as they may not have the capital to sustain during client acquisition and meet expenses.
Solutions may come in the form of cross selling, migrating to insurance, the sub-broker model, a platform solution or consolidation with other IFAs.
Most successful IFAs are on full trail model and not on upfront commissions. Small IFAs should make a business plan and focus on building their advisory skills so investors make money.
Conditions to build business in small towns are good as there are plenty of clients available. Compared to other products, mutual fund is the easiest client acquisition and retention.
Adaptability of IFAs and AMCs have already been demonstrated with previous regulatory changes. Technology as a means to enable transactions will go up as IFAs battle cost.
None of these guys have any experience of working directly with clients. But are ADVISING the IFAs the ways & means to do business despite the regulatory onslaught orchestrated by them. Please do such meetings with a representative from IFA, NDs & Banks & take their views on this same questions as they are the people who have the experience of working day to day with clients. Amc CEO’s just meet IFAs and maybe a few corporate treasuries to come out with their views coz that’s their only experience of working with clients.
"Most successful IFAs are on full trail model and not on upfront commissions. Small IFAs should make a business plan and focus on building their advisory skills so investors make money." ! YHE HE RIGHT HAIN !
While the key take aways of the current round of regulation appears on the face of it to be not too bad as has probably been foreseen , there are a few grey areas that need to be looked into. The path forward will be in acquiring rural where the capacity to invest is growing significantly but is still largely underserviced primarily due to :- (1) Lack of proper info / knowledge (2) Unproductive cost of client acquisiton with complete ban on upfront. There could have been a fair logic in the ban on upfront, but the point is does it take care of the point above. This is an humble request to The Regulators / Manufacturers to address some key issues to make them more level. While technology of course is going to be a game changer let us keep in mind that remote places will take a lot of time to adapt to this change & in this process let us hope that we will not make it exclusivity than large inclusiveness. I recall mentioning this in person to Madam Harini Balaji of SEBI during the MFD meet at NISM complex , Patalganga, on 1st. December 2017. I optimisticallt hope all concerned will address these issues.
