CEO Speak 17th Sep 2012
A solution to get clients into long term SIPs
Harshendu Bindal, President, Franklin Templeton Investments India
 

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One of the biggest challenges these days for the industry is to help investors commit to long term SIPs and stay invested in SIPs through turbulent market conditions. A goal based approach helps significantly - and solutions like Franklin Templeton's Family Solutions help do exactly this, in a simple and effective way. Harshendu Bindal takes us through FT's experience with Family Solutions over the last 18 months and how it helps advisors get clients to adopt long term investment plans. We also spoke with some IFAs who are using Family Solutions to understand how they are leveraging this proposition in their own businesses.

WF : There is an apprehension in some quarters that a goal based approach is too time consuming and therefore may not be possible at the retail level - due to the relatively large volumes, low ticket sizes and existing margin pressures. Is this a valid apprehension?

Harshendu : The Family Solutions package is actually aimed at addressing this exact need and concern. It simplifies the task of asset allocation and makes it less time consuming. It is easy for an advisor to implement and typically requires not more than 15-30 minutes of an advisor-client interaction time per plan. The aim was to offer advisory type services through Family Solutions for small tickets as well.

We strongly believe that this is the best approach to ensure that investor expectations are in line with market realities and the respective risk profiles.

WF : How has investor response been for your Family Solutions initiative? How many investors have used this solution to make plans and invest with a goal based approach?

Harshendu : The response to our Family Solutions initiative has been quite encouraging. Since launch in March last year, over 25,000 investors have invested through the programme. Our key messaging has been built on the plank "If you fail to plan, you plan to fail". By creating awareness on the offering and advocating a goal-based approach to investing instead of just a product or performance based approach, we are looking at inculcate a long-term approach.

WF : What has been distributor response to Family Solutions? How many distributors are using this solution to promote goal-based investing among their clients?

Harshendu : We have received good response from distributors as well - over 2,000 advisors have already recommended Family Solutions to their clients. In the new regulatory environment, smaller distributors/IFAs without adequate resources required a simple and comprehensive asset allocation solution that they could recommend. Family Solutions is helping them reaching out to the large but hitherto untapped retail client base in a cost effective manner.

WF : Is goal based investing a largely metro-centric phenomenon or do you see traction for this approach from smaller cities and towns across the country as well?

Harshendu : Family Solutions is being actively sold by our distributors all over the country and as part of our efforts to raise awareness we continue to engage with distributors/investors on a pan-India basis. A positive aspect is that we are seeing a lot of traction for Family Solutions beyond the top 8 cities with both the investor and the advisor in these smaller towns adopting the concept quite seamlessly.

We have noticed that more than 50% of our investors are beyond the top 8 cities. This is encouraging, especially with the ongoing industry focus on expanding reach of mutual funds beyond the metros. Going ahead, we expect that the off-take of Family Solutions as a concept will continue to grow in the smaller cities - especially since it simplifies the entire process of planning, investing and tracking one's goals.

WF : Do distributors and investors have a facility to review their plans on a periodic basis (for example, annually) within the Family Solutions utility? How should they keep track of their plans that they have made using this utility?

Harshendu : Yes, the package has goal tracking features and the advisor/ investor can monitor how they are progressing towards each of the goals. This feature helps keep the focus on the goal and the investment progress, rather than the performance of the underlying funds.

In addition, from the advisors perspective, they can monitor their Family Solutions book of business for all clients through the Online Account Access facility (also known as DPIN) on our website. Client wise details are shown goal-wise level as well as a fund-wise level and are updated real-time basis. In addition, the advisor also receives alerts/ feeds when client's goals are near to completion or when goal has been achieved or when certain percentage of the goal has been reached vis-�?� -vis target set, etc.

Investors can track the progress of their goals through the financial advisor/distributor or through the Family Solutions Account Statement, which provides a goal-wise summary of all his investments. We believe that this statement is an unique piece that helps focus on investment goals.

WF : Is there any evidence - locally or internationally - that suggests that when investors start SIPs with a goal based approach, they tend to be investing for a longer term as well as tend to continue their SIPs through periods of market volatility? We expect this to be the outcome - but is there evidence that suggests that this is actually happening?

Harshendu : Yes, if we look at the voluntary savings in the pension space in countries like US, UK, Singapore, Australia - the investments remain on course over the long term. This is also evident in the children education accounts such as 529 plans.

Even in India, we have seen that investors are willing to lock-in their investments for a longer time period in goal-oriented products such as Pension and Children products.

WF : One of the big challenges in the industry is premature termination of SIPs and non-renewal of SIPs. What are the key factors behind this? In hindsight, what is it that as an industry we should have done better in terms of selling SIPs? What steps must we take now to ensure that investors maintain their SIPs through good and bad market conditions?

Harshendu : Increased market volatility often exacerbates investor emotional biases and overwhelms rational thinking. Most of the premature terminations for SIPs have been due to the sharp swings in equity markets over the last four years or so. Investors tend to chase performance and it is important that the industry works together to raise awareness about benefits of SIPs and staying invested over the long term.

As a firm, we have always communicated to advisors and investors about the merits of SIPs and staying invested through various media platforms and our training initiatives (Franklin Templeton Academy). We were one of the first firms to advocate SIPs in the fixed income space, given the success we had in expanding this category over the last few years. Family Solutions is yet another initiative on this front that encourages investors to shift focus away from chasing performance to financial goals.

WF : Is the Family Solutions offering mainly aimed at regular investing or can it also be used when lump sum investments are to be made?

Harshendu : The Family Solutions planner helps prepare a customized investment plan to suit the investors' needs and cash flows. It has both lump sum and SIP options to choose from.

WF : What is the road ahead for Family Solutions? What more can we expect over time within this suite of solutions?

Harshendu : Presently, our focus continues to be on engaging with distribution partners through roadshows and other engagement activities to present the proposition to existing/ potential investors of the distributors and running them through the various concepts and case studies involved in the offering. The idea is to keep the Family Solutions proposition simple and effective.

As we expand our suite of product offerings across domestic and global asset classes, we aim to offer investors more avenues to diversify their investments.

We plan to increase the awareness of investors to have a long-term perspective to investing by designing solutions to meet their life-goals rather than focus on product oriented traditional approach.


Wealth Forum spoke with some IFAs who have been using FT's Family Solutions proposition to understand how they are leveraging it in their businesses. Here is what they have to say :

Nikhil Naik, Naik Wealth, Mumbai

Family Solutions helps us achieve many objectives with a single solution. One, it enables us to streamline our sales process and offer a more uniform and structured advisory approach to retail clients. Goal based planning was always prevalent in the insurance world, but with Family Solutions, there is a convenient option for those of us who choose to emphasise mutual funds as the vehicle for goal based planning. In a sense, this is also aligned with what SEBI is asking of us - to ensure that we adopt a needs based and suitability based sales process and thus serve our clients better. From a client's perspective, the visual appeal of the graphs and the run rates in the FS package make it something they can easily relate to. The tracker in the system is a convenient way for clients and us to track how we are doing against the plan - so it actually becomes a fill it, shut it, forget it kind of a proposition for us. And finally, I keep remembering Gandhiji's motto : find a purpose and the means will follow. We have seen that when clients get committed to their goals, they are able to find means to invest that otherwise may not have come so easily. It therefore becomes a real win-win for all.

Jignesh Shah, Surat

We have had a good experience with Family Solutions. Clients who are otherwise undecided are able to take quick decisions, once their goal sheets from this package are made and presented to them. Even for new client acquisition, this is a good tool. We conduct Family Solutions camps, where we introduce prospective clients to a goal based approach towards managing their investments, using the Family Solutions package. This helps in attracting new clients. The other big benefit for us as well as our clients is the tracker facility. Once I put in my login id and password in the website, I can get a portfolio tracker against the goal at any time. Clients like this facility as it helps them keep a tab on how they are doing against the plan. Many times, we find that clients are willing to commit more money into the plan, as they are keen to achieve the goal fast.

Jugal Kishore Marwah, Jalandhar

I am very happy with FT's Family Solutions package and I promote it aggressively among not only my clients, but I also encourage my other IFA friends to use this effectively. We are able to promote long term investments with Family Solutions and are also able to provide them solutions that have a high emotional need for them - like children plans, retirement plans etc. Clients find this very convenient as they get a well constructed goal sheet which is simple to understand. Using FT's Family Solutions is also in my experience a good way to get new clients. I also appreciate the fact that FT provides us a higher commission for making the effort to get clients to commit to long term investment plans.

Prakash Hegde, Bangalore

Since I got empanelled with FT in Jan 2011, I have been only selling Family Solutions from the FT suite. I have seen that clients who would normally agree to SIPs of 2000 rupees are happy to commit to SIPs of 5000 rupees once I have taken them through Family Solutions. I have a case where a client first told me that he would start a 2000 rupee SIP, but after I took him through the Family Solutions tool, he signed up for SIPs for Rs. 20,000 ! One convenience is that only a single cheque has to be made for multiple funds. The other convenience for my clients is the tracker facility, where we can check how his plan is doing against the goals. I must also acknowledge that FT's decision to pay a higher commission for getting long term SIPs through Family Solutions does encourage us to adopt this process with even more enthusiasm.



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