The mutual fund distribution industry is ripe for disruption given the pro-customer role being taken by the regulator SEBI and the rapid adoption of mobile apps and + internet.
Embarking on a journey as a mutual fund distributor or advisor, you stand at the crossroads, and the path you choose will significantly shape your career trajectory. So, let’s dive in and weigh the pros and cons of each.
Distributor Route:
- Pros: As a distributor, you earn through commissions. This can be lucrative, especially if you manage to sell high-commission products. Moreover, the entry barriers are lower compared to an advisor, making it an appealing choice for newcomers. Better than joining someone else, try to strike your own path.
- Cons: The downside is that the commission-based model might create a conflict of interest, encouraging the sale of funds that fetch higher commissions but may not necessarily be the best fit for the client. Additionally, with the advent of direct plans and increased awareness, the role of distributors is witnessing a transformation.
Advisor Route:
- Pros: On the other hand, an advisor works on a fee-based model, charging the client directly for advice. This model promotes a more client-centric approach, leading to potentially more trusted relationships. It also aligns the advisor’s interests with those of the clients. Also, as Warren Buffet quoted, “Price is what you pay, value is what you get,” your fees as an advisor can be justified by the quality of advice and service you provide.
- Cons: The challenges include higher qualifications and compliance requirements, leading to increased costs. Also, convincing clients to pay fees directly for advice could be challenging, especially in a market where “free advice” is often mistaken for “good advice.”
As the winds of digital disruption blow, the traditional mutual fund distribution is evolving. The internet and mobile apps offer great opportunities for both distributors and advisors to reach out to a larger client base and offer more personalized and efficient services. The choice between the two will depend on your long-term vision, passion for client service, and ethical standards.
Remember, as an advisor, your success rests on the level of trust and credibility you can foster with your clients. Be it as a distributor or advisor, aim to understand and uphold the best interests of your clients.
