Drivers of business mobilisation for an AMC

There have been 3 drivers of business mobilisation for Mutual  Fund in India   - brokerage ,performance and value add .

Now with AMFI putting  cap of max 1 % on upfront brokerage and trail calculation on a defined formula i.e making a consistent percentage every year based on total expense ratio,  chances of differential payout is now less until unless AMC wants to circumvent the AMFI guideline . So again scope of creating a differentiating factor on brokerage front for AMCs is now almost over . 

Performance can be variable . Past performance can be taken as yardstick for consistency or volatility but cannot be taken as benchmark for future return .  A fund  can not be a top performer always  nor do all the funds of the same AMC be the best performers.  Creating a positive differentiating factors on basis of historical performance may not be always easy for an AMC and moreover performance is not always in AMCs control .

Now the only driver where an AMC can structure and strategise for big positive differentiator for business mobilisation is Value Adds . With brokerage shrinking , performance being market driven , client ‘s long term loyalty a major influencer for business sustenance , growing competition (from non risky traditional products , tangible assets and Insurance products ) there has to be enough motivation for distributor for selling MF products . This is where AMCs role comes in big way .

The most important Value Add could be Training , skill enhancement , competency development activities given to distributors . Client management challenges , beating the competition , earning the long term loyalty of clients , growing sustainable revenue all these can be resolved through a structured and focussed training activities which AMC should be taking . In fact my belief is one way of judging the seriousness of an AMC playing its role for industry growth is evaluating their training activities both from qualitative and quantitative perspective .  

I think it is a very good opportunity for each AMC to create a value added differentiating factor . We talk of relationship , bonding with distributors  but the underlying reason now for these are who helps most in developing the sustainable growing business model. 

Investment Advisory regulation has been brought almost 2 years back by SEBI but how many AMCs have really structured their training activities to create Investment Advisors? Why SEBI is not having some incentive for those AMCs who are using the resources meticulously on Training and creation of Investment Advisors . Unfortunately training for most in the business is of least priority as evident from the nos of resources put in force but now that should be something AMCs should be seriously looking to create a competitive edge over others and create a differentiating factor .