November 3, 2014
The Kurkure, Mobiles, Colas & Mutual Funds
Amit Bivalkar
Director, Sapient Wealth Advisors
Whenever we talk of retail in the FMCG space we are very optimistic about their business growth as well as revenue growth. In fact we have seen FMCG companies taste success in the retail space in the Indian consumer sheer because of their marketing strategies and distribution, not to forget the bombardment of advertisements. Let me give an example which can be of relevance here.
Whenever we talk of INDIA, we say it’s an agrarian economy and India still stays in villages. I happened to visit some of the remote villages in my recent Konkan Trip and was astonished at what I saw. There was no electricity for about 12 – 18 hours in a day, there was water scarcity and the villagers use to walk for about 3 kilometers to get fresh pure drinking water and there was a kaccha road throughout the village and a tar road was about 9 kilometers away. There is a state transport bus which ferries passengers every hour to the nearest town which is about 23 kilometers.
Power off, but Kurkure, Mobile & Cola on !
What I found unbelievable there is that almost all the villagers are having mobile phones (Electricity is only for 6 hours in a day), had their kids eating kurkure and probably having a bottle of Thums Up on a Sunday. I am not saying that they do not have the money to buy this but I am surprised to the fact all these MNC’s have reached places where tourist are yet to reach in large numbers, hence something might be right in their distribution strategies! Also a guy who barely gets electricity has no qualms in paying ten rupees to the local Kirana store for charging his mobile!! So clearly there is a great entrepreneur spirit in the Kirana store guy who earns out of charging a mobile and selling kurkure and thumsup to the local villagers which the MNC’s have figured out. Let us try to look at what can be done to Financial Services either by brick and mortar or click and mortar.
The messy financial schemes
Cut to financial services, we see a lot of these guys actually falling prey to the MLM schemes or chit funds or bhishi / collective investment schemes which are run by individuals or companies which are fly by night operators. There is a herd mentality which works in this kind of environment basis one guy who is considered as Influential Authoritarian in the village or nearby town and he is being looked upon as god when it comes to Investments. Come to a larger town and the story doesn’t change, the small MLM schemes become big fancy named investment schemes. Some person in the town who has connections in the metro brings in the schemes and make people invest and runs the scheme successfully for about six months and draws more crowd and then vanishes in the dark. People who had invested money with this chap are left high and dry and they are into loans forever after that.
Opportunities beyond Top 15 Cities
Do we as distribution companies sense an opportunity here for ethical selling of financial services? Recently AMFI has given leeway for teachers to become mutual fund distribution partners and I think that can be a big channel when it comes to B15 cities for a brick and mortar model. We have always been running around the big accounts typically HNI/Promoter/Corporates in our own market and try to fight for market share. Even AMC’s are getting 90-95 percent of their business from top 15 cities. It is wrong to paint everything with the same brush but paying additional brokerage in the B15 cities has increased the churn ratios in the clients’ portfolios. Educated people also are very vary about Mutual Funds in the top 15 cities because of lack of knowledge and investor education and hence are unhappy, imagine the plight about of a B15 city investor.
The technology edge
Can technology bring along a change in the way mutual funds are distributed in this country? Some may argue that Investments as a decision is not a spending decision and hence cannot be done online and therefore you need a brick and mortar model instead of a click and mortar model. To my mind people have always this dilemma as to whether we should add people in the existing branches or we should open a new branch in a b15 city? I think you can do both with the help of technology and yet save on costs and increase penetration.
There can be a platform which will do online financial plan, risk profile, asset allocation, and suggestion of funds, fulfillment with many online partners (MFU and others) and portfolio viewer which can be an end to end solution for all your expansion needs. You can also run an efficient frontier model to reduce the risk and optimize the return. By doing this you can get clients to come to your website, make a plan, take a suggestion on allocations, invest online and then can view their portfolios without meeting you or your representatives. Is this not a cost effective strategy to expand your business?
Make technology your extended arm of distribution and see the change in the business !
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