This article has been written by Gaurav Suri, Senior Executive VP and Head - Marketing, UTI Mutual Fund.
Recently I was on an industry panel to discuss the future of the IFA business. Though just a 30 minute discussion, it got me thinking.
With change so pervasive, inevitable and in our faces it will be foolish to predict the future. In fact, change is happening as I write this. However, I would like to make a few points.
The discussion between advised and direct sales is actually time wasting as the market exists for both to co-exist and thrive. Sufficient anecdotal evidence exists for the same. Research the world over has proved that consumers find the task of making decisions around their own hard earned money very onerous. They are comfortable finding a neck to catch regarding investment decisions.
People buy into People, then Brand, followed by Product.
- This has been evidenced and validated many times over, so the task of financial literacy and creating awareness has to continue. The need for intermediation will remain.
- Choice architecture will become more complex and diverse as the number of choices consumers will have will only increase.
- Trust building will remain an essential ingredient in doing business. A long inter-generational journey of consistent continuous conversations.
Let’s now look at a few trends and implications as we view the world through the lens of a consumer.
Context of money.
Over the years the context of money has changed. And it is best exemplified in Bollywood movies which were a reflection of the larger societal context.
In the 1960’s to 80’s, it was the bad guys, such as smugglers, who had money. Money is evil!
In 1990’s money was the fuel required to grow and create enterprise. Money is necessary!
Today, Money is good!
We need not be embarrassed about flaunting our wealth and material possession. In fact, we are urged to dream big.
Implication: The conversations with the consumers have to change and play on the desires, dreams and ways of achieving them rather than making hard choices or tradeoffs.
Nuclear families on the rise.
The larger cities are growing and many are coming from the smaller towns in search of employment and wealth generation. The old joint family system is breaking down and with it the need, the comfort and security of a fall back option. People have to rely on themselves
Implication: The need for intermediation and financial planning will grow as people realise that they need to fend for themselves and create their security blanket.
The internet will move your cheese.
Ubiquitous mobile internet access will probably be the single largest driver for change in how we do business. With the exponential growth of internet access, consumers will become more aware, engaged and discerning about their financial choices.
Implication: The role of the intermediary as the source of information will diminish and they should be able to reconfigure and upskill themselves. Use technology to increase convenience. Manage the back office with technology to get more time to hand hold customers.
Information will get democratised, but knowledge will remain rare.
The deluge of information on the internet will end up confusing customers instead of educating them. A point of view that can be trusted will gain traction. Consumers will align to risk management frameworks and philosophies and not just on pure relationships.
Implication: It is important to upskill, and focus on distilling knowledge out of the many information and data points that exist. It is also critical to have sharp clarity on risk management style.
Paucity of time.
Attention deficit will rise. Complex lifestyles will have many conflicting demands on our time.
Implication: We need to harness technology to speed up document processing online, reduce distribution and transaction cost, provide instantaneous access to information and enable investment decisions. Develop a R.O.T.I (return on time invested) framework.
IFA as a portfolio specialist.
With real online payment systems, financial service aggregators and e-commerce becoming mainstream, consumers will chose to go direct.
Implication: The consumers would like the IFA’s to advise them on the larger picture instead of staying with them on a transaction-to-transaction basis. The shift will be from a back-end facilitator of transactions to a front-end specialist who advises on quality of instruments.
Ageing population in India.
In India, the proportion of the population aged 60 years and above was 7% cent in 2009 and projected to increase to 20% by the year 2050. This calls for an approach to be sensitive to the needs of the elderly and how to plan for the same.
Implication: The need for retirement income generation and retirement planning will come to the fore. All this means choosing the niches and customer segments in a manner wherein one becomes proficient and a beacon for customers. There are opportunities galore for IFA’s to become specialists in retirement planning, education planning, estate planning, etc.
The views expressed are of the author and not the organisation he represents.
