Podcast 23rd March 2016
Hi I am Arjun Parthasarathy speaking and this podcast is on “How can IFA’s Prosper even as Technology Disrupts Traditional Business Practices?”
Independent Financial Advisers (IFA’s) who advise clients on where to invest their money are increasingly finding the environment turning disruptive for their business. IFA’s either get paid for the financial products they recommend to clients to invest in or charge clients an advisory fee for their advisory services. The former is much more prevalent than the latter with distribution commissions accounting for a very large part of the total IFA business.
Distribution commissions are now being strictly monitored by regulators to prevent misselling even as technology has taken over many basic functions of investing. Investors can now invest in stocks, bonds, mutual funds, insurance products directly online, saving on transaction costs that are beaten down by technology and on commissions.
As in any disruptive environment, the disrupted becomes increasingly marginalised and finally only a few highly innovative businesses survive and prosper. How can IFA’s prosper even as their business is getting disrupted?
IFA’s have to first identify the value they offer to their clients. The value is no longer in the form of time and effort on transactions as technology has made that redundant. The value is in the form of providing the right investment advise, focusing on the client’s requirements. To provide the right investment advise, IFA’s must be able to navigate the highly dynamic world of financial markets. Constant upgradation of knowledge is a must given global interlinkages of markets, businesses and economies.
IFA’s must also communicate transparently with their clients especially at times of market volatility. Hard decisions such as booking losses must be communicated with the right explanations. Advise will go wrong at times and letting the clients know that the advise given went wrong will reinforce the client’s trust.
Effective communication using technology to keep clients’ in the loop on what’s happening to markets will give clients the peace of mind that they are in good hands. Using platforms such as Facebook, Twitter, Whatsapp, IFA’s can easily communicate with their clients without taking up their time.
Using a web or mobile platform for clients to log in to view their investments or to consume relevant content will go a long way in client satisfaction. Educating clients on investments is a huge value add.
IFA’s must also learn to think independently rather than get swayed by market forces or by views put out by other market professionals. Independent thought process will help clients avoid boom bust scenarios.
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