The rise of direct plan platforms has posed a challenge for mutual fund distributors (MFDs), with many experiencing client attrition as investors opt to invest directly and bypass brokerages.
This trend has led to conversations around the value of brokerage charges and the need for MFDs to adapt and find new ways to differentiate themselves from direct plan platforms.
In this post, we will explore several strategies that MFDs can use to retain clients and demonstrate the value of their services.
From focusing on their core value proposition to being proactive during market events and highlighting the importance of the human touch, MFDs have a range of tools at their disposal to retain clients in the age of direct plans.
In this situation, MFDs may be left wondering how to compete with direct plan platforms, which often have significant marketing budgets and resources at their disposal. So, how can MFDs navigate this challenge and retain their clients?
1. Focus on core value proposition
One of the key strategies for mutual fund distributors (MFDs) to retain clients in the age of direct plans is to focus on their core value proposition.
MFDs can differentiate themselves from direct plan platforms by emphasizing their expertise in planning and asset allocation, product selection, and management and monitoring.
MFDs can communicate the value of their services to clients by highlighting the benefits of working with a professional advisor who has a deep understanding of the markets and investment products.
By demonstrating their knowledge and expertise, MFDs can build trust with clients and help them feel confident in their investment decisions.
2. Build a brand:
Establishing a strong brand can help MFDs differentiate themselves from the competition and build trust with clients.
This can be done through a variety of means, such as developing a unique value proposition, creating a strong online presence, and offering thought leadership and educational resources for clients.
Building a recognizable and reputable brand can help MFDs attract and retain clients, even in the face of competition from direct plan platforms
3. Shift to passive funds:
Another strategy for mutual fund distributors (MFDs) to retain clients in the age of direct plans is to shift some of their assets to passive funds like index funds to reduce costs.
Passive funds have gained popularity in recent years as investors look for low-cost investment options with predictable returns.
By incorporating passive funds into their product offerings, MFDs can reduce the overall cost of their investment portfolios, making their services more attractive to clients.
MFDs can also use this strategy to demonstrate their commitment to reducing costs for clients and providing them with the best possible returns on their investments.
However, it is important for MFDs to strike a balance between passive and active funds. While passive funds may be less expensive, active funds can offer the potential for higher returns and more personalized investment strategies.
MFDs should work with clients to determine the best investment approach for their specific needs and risk tolerance.
MFDs can let go of clients who want to invest in direct plans. While this may seem counterintuitive, it can actually benefit MFDs in the long run.
By focusing on clients who value their services and are willing to pay for them, MFDs can build stronger relationships with clients and improve client retention over time.
Tangibilize the service:
Tangibilizing the service is another strategy for mutual fund distributors (MFDs) to retain clients in the age of direct plans. This means making their services more tangible and adding more value to the client experience.
MFDs can tangibilize their service by offering regular review meetings to discuss investment performance and financial goals.
These meetings can help clients feel more engaged and invested in the investment process, and also provide an opportunity for MFDs to demonstrate their expertise and value.
MFDs can also provide clients with regular updates on their investment portfolios and financial goals through communication channels such as email newsletters or social media.
By keeping clients informed and engaged, MFDs can improve client retention and build stronger relationships with their clients.
In addition, MFDs can offer multiple products and services to command a better share of their clients’ wallet. This can include additional financial planning services, insurance products, or even estate planning services.
By offering a full suite of financial products and services, MFDs can become a one-stop-shop for all of their clients’ financial needs.
By tangibilizing their service, MFDs can create a more personalized and engaging client experience, adding value and building trust with clients.
Educate clients about the benefits of regular plans:
Educating clients about the benefits of regular plans is another important strategy for mutual fund distributors (MFDs) to retain clients in the age of direct plans.
Many clients may be unaware of the benefits that regular plans can offer over direct plans, such as professional investment management and personalized advice.
MFDs can educate clients about the benefits of regular plans by clearly communicating the value proposition of their services.
They can highlight the importance of planning and asset allocation, product selection, and management and monitoring, which are key components of their value proposition.
MFDs can also demonstrate the advantages of regular plans over direct plans by providing clients with a comparison between the two options.
By highlighting the additional benefits of regular plans, such as access to personalized advice and professional management, MFDs can help clients see the value of their services.
In addition, MFDs can be proactive during big market events, such as market downturns or pandemics, by providing clients with relevant and timely information and advice.
By demonstrating their expertise and value during these times, MFDs can build trust with clients and improve client retention.
By educating clients about the benefits of regular plans, MFDs can help clients make more informed decisions about their investments and see the value in the services they provide. This can ultimately lead to stronger relationships with clients and improved client retention over time.
Be proactive during market events:
Being proactive during big market events, such as market downturns or pandemics, is an important strategy for mutual fund distributors (MFDs) to retain clients in the age of direct plans.
During such events, clients may feel anxious and uncertain about their investments and may be looking for guidance and support.
MFDs can be proactive by reaching out to clients and providing them with relevant and timely information and advice.
They can share their perspective on the market conditions and explain how they are managing clients’ portfolios in response to the events.
MFDs can also use market events as an opportunity to provide education and perspective to clients.
They can explain how market downturns are a natural part of the market cycle and that a long-term investment approach can help them weather the storm.
MFDs can use market events to demonstrate their expertise and value to clients. By sharing their insights and analysis, MFDs can help clients make more informed decisions about their investments and feel more confident in their investment strategy.
By being proactive during market events, MFDs can build trust with clients and improve client retention. Clients are more likely to stay with an MFD who they feel is looking out for their best interests and providing them with valuable information and advice.
Offer multiple products and services:
Offering multiple products and services is another strategy that mutual fund distributors (MFDs) can use to retain clients in the age of direct plans.
By providing a range of products and services, MFDs can command a greater share of their clients’ wallet and become a one-stop shop for all of their financial needs.
Some of the products and services that MFDs can offer include mutual funds, exchange-traded funds (ETFs), insurance products, retirement planning, tax planning, and estate planning.
By offering a comprehensive suite of products and services, MFDs can meet the diverse needs of their clients and provide them with a holistic financial plan.
In addition, offering multiple products and services can help MFDs differentiate themselves from direct plan platforms.
While direct plan platforms may offer lower costs, they typically only offer a limited range of investment products and do not provide additional financial services.
MFDs can also use their expertise and knowledge to help clients navigate the complex financial landscape and make informed decisions about their investments. By providing personalized advice and guidance, MFDs can build long-term relationships with their clients and improve client retention.
Overall, offering multiple products and services can help MFDs build a strong and loyal client base and become a trusted partner in their clients’ financial journey.
Highlight the human touch
Mutual fund distributors (MFDs) to retain clients in the age of direct plans is to highlight the human touch they offer. While direct plan platforms may offer lower costs and convenience, they lack the personal touch and expertise that MFDs can provide.
MFDs can emphasize the value of their services by highlighting the benefits of working with a knowledgeable and experienced professional.
By building strong relationships with clients and providing personalized advice, MFDs can demonstrate their value and differentiate themselves from direct plan platforms.
MFDs can provide regular communication and updates to their clients, showing that they are invested in their clients’ financial success.
This can include regular review meetings, newsletters, and other relevant communications that keep clients informed and engaged.
During times of market volatility or economic uncertainty, MFDs can also be a source of guidance and support for their clients.
By providing reassurance and expert advice, MFDs can help their clients navigate challenging situations and stay on track towards their financial goals.
Overall, highlighting the human touch and the expertise that MFDs provide can help build strong and long-lasting relationships with clients.
By demonstrating their value and providing personalized advice, MFDs can differentiate themselves from direct plan platforms and retain clients in the age of direct plans.
Bottom Line
In conclusion, the rise of direct plan platforms has led to client attrition for many mutual fund distributors.
However, by implementing the strategies outlined in this post, MFDs can overcome client attrition and retain clients in the age of direct plans.
MFDs can focus on their core value proposition, shift to passive funds, tangibilize their service, educate clients about the benefits of regular plans, be proactive during market events, offer multiple products and services, and highlight the human touch they provide.
By emphasizing the benefits of working with an experienced and knowledgeable professional, providing personalized advice and communication, and building strong relationships with clients, MFDs can differentiate themselves from direct plan platforms and retain clients over the long term.
Ultimately, the key to success for MFDs in the age of direct plans is to adapt to changing market conditions, provide value to clients, and build strong and long-lasting relationships based on trust and expertise.
