January 18, 2022

Expanding Client Base vs Increasing Wallet Share

Srikala Bhashyam

Director, Vithadwaitha Financial Services Pvt. Ltd.

If we were to look back at 2021, I am sure the year gone by will bring a smile to our faces. Our AUMs have swelled, our clients are happy and we have turned more knowledgeable, attending webinars and conference calls. In the last 12 months, we have learned to do business from anywhere—from our drawing rooms to office rooms to even from the kitchen. It has been a 24/7/365 life.

So, in 2022, should you do more of the same, or is it time to tweak? Isn’t January the time to set the agenda for the whole year? I am sure all of us always look to bring in changes to our business strategies, this piece is a humble attempt to share what we did last year. If it inspires you to adopt a few things, it would be an honor for me and my partner, Roopa Shankar.

It all began in March-April 2020 when our earnings took a sharp dip thanks to the deep cut in equity markets. Like many other mutual fund distributors, we too are equity-heavy in our business mix. The stringent lock-down in 2020 meant limited scope for business expansion. And the sharp fall in AUM meant a sharp fall in our earnings too. So, the option was to increase the client base using technology as India was ready for the digital way of investing. After more than a decade in the business, I was not ready to do more of the same. Instead, we felt that let us focus on quality, profitability, and making our customers wealthier.

Pause—Review—Reshape

The challenging part of any growing business is that after a point, you are no longer in control of your business. It is the business that drives you to run. Luckily, Covid-19 gave us the much-needed time to introspect as we were spending less time on the road and more in front of the computers.

The first thing we did was to take stock of our business. We segregated our client base according to the AUM, the asset class, and the frequency of the interaction. Similarly, the business exposure to each fund and scheme was captured. The first phase of the research showed that more than 50% of active clients had an opportunity to invest in themes that didn’t form part of their portfolio. Similarly, a number of active clients didn’t have SIP exposure commensurate with their AUM. Another interesting data was that we had a large number of clients in the AUM bracket of Rs. 25-50 lakh but were not very active investors.

Technology and tools:

While technology usage is imperative for business expansion, the last year has shown that we need to use technology to increase the wallet share from our clients. As I pointed out earlier, we had decided that we would not look for business growth by adding new clients aggressively but by adding value to our clients. Being in the distribution business, it was time to do more with less. In short, increase revenue per client rather than with more clients.

So, how did we achieve this?

The first step was to remove duds (underperforming mutual funds) from clients’ portfolios and rebalance them in line with the client’s needs and goals.  This is where technology comes in handy. With the use of a combination of tools, you can actually compare and avoid duplication of strategies in your clients’ portfolios. You will be surprised that some mutual funds are permanent laggards for various reasons and you might not even have noticed them. With the help of simple analytics software, you can assess whether a particular fund is an underperformer by accident or with poor strategy. By weeding out the duds from our gross AUM, we were able to increase our revenue by 20%.

Ping, text, communicate:

The biggest advantage of Covid-19 is that most clients don’t expect an in-person meeting and are happy to communicate digitally.  We too, at Vithdwaitha, decided to take advantage of it and regular communication became a norm either in the form of emails or texts. We segregated the top 20% of our clients and they were sent out personalized emails in the form of blogs or a new investment idea. For instance, in the month of May/June 2020, our mailer for increasing the allocation to equity with a 3-5 year view saw our monthly inflows go up by 50% in the next few months.

The biggest learning for us during the last 12-18 months is that as a financial product distributor, you need to be a one-stop shop for all financial products if you have the bandwidth and also as per regulations of course. Widen the product range if possible for your clients so that client doesn’t get tired of one product syndrome. Not only is it important to engage the client on a regular basis but it’s important for the distributors to keep pace with the changing needs and profile of the clients. For instance, MF distributors can widen the product range with the distribution of PMS, AIFs. It’s time for every distributor to think big and say “dil manage more!!”