Wealth Forum conducted its 2nd annual Advisor Confidence Survey in June 2013, where we invited 220 leading IFAs from 40 cities across the country to share their outlook on markets, products, business and AMCs. These 220 IFAs form part of the top 5% of IFAs in their respective cities. Their views therefore represent the pulse of the leaders - the business leaders and opinion makers of the IFA fraternity across the country.
The first survey was conducted in Jan 2012. Results of last year's survey are available here :
Business Confidence Market Confidence Product Confidence AMC Confidence
This year, we moved the survey date from Jan to June 2013, to enable the dust to settle down after the introduction of direct plans in Jan 2013, and thus enable respondents to form a clearer opinion on their business outlook. We received 189 responses in all, from the 220 IFAs who were invited to participate in this survey. We are grateful to all 189 leading IFAs who took out the time to respond to this rather exhaustive survey. The geographic spread of responses received is given below :
This year's survey results will be published in 3 parts : Business Confidence, Market & Product Confidence and AMC Confidence. In this part, we bring to you the pulse of the leading IFAs on their business confidence.
1. Outlook on volume growth
While the average score column is self-explanatoty, the subsequent columns perhaps need some explanation. In the columns 1 to 10, we have given the percentage of responses for each score. This means for example, that out of total responses received from East, 6% of respondents ticked 1, while 38% of respondents ticked 8. The average of all their responses for this question came in at 7.38
Here's a quick comparison of this year's numbers vs last year :
Overall confidence in volume growth over the next 12 months is fairly good, with an all India mean score of 7.5, up marginally from 7.2 last year. Only 8% of respondents have expressed low confidence in volume growth, with scores of 1-4. On the other hand, a sizeable 36% of respondents have expressed very high confidence in volume growth over the next 12 months, by giving scores of 9 and 10 for this question.
There doesn't seem to be much of regional variation this year - in sharp contrast to last year, where East was significantly less confident about volume growth as compared to the rest of the country. Is this because East was bearing the brunt of the chit fund mania last year, which has burst this year?
2. Outlook on revenue growth
East is a lot more confident about revenue growth this year as compared to last year. This could perhaps be attributed to the fact that 7 out of the 8 cities in East are classified as B-15, which is where commissions have gone up. The other big move can be seen in the North - again perhaps for similar reasons.
Overall, the message is one of a stable margin outlook, with revenue growth prospects being very closely equated with volume growth prospects. There don't seem to be any fears on upheavals in brokerage structures - like we used to see in the past.
3. Outlook on fee based income
Collecting fees from clients is clearly proving to be a challenge. There is a significant toning down of expectations on this score, compared to last year. As many as 66% of respondents don't expect fees to be a material revenue stream (0% and 1-10%) - up from 50% last year. Even among respondents who are clearly collecting fees (the last two brackets), the share of fees in total revenue is expected to fall over the next 12 months. Difficult market conditions seem to be taking a toll on this revenue stream, for the small section of IFAs who charge fees.
In terms of regional dispersion, West and South seem to be markets where fees are relatively better accepted by clients (25% or more of total revenue), as compared to North and East. West however also has the highest proportion of respondents who have selected 0% - meaning no question of any fees from any clients. The polarisation is clearly sharpest in the West. Overall, South continues to be ahead in terms of fee acceptance, with as much as 49% of respondents expecting fees to contribute upwards of 10% of their total revenue over the next 12 months.
4. Outlook on costs
Cost pressure on East IFAs seems to have eased off the maximum over the last year, as compared to their counterparts in the rest of the country. Overall, cost pressures are less this year. Perhaps poor market conditions is making employee mobility lower and also reducing salary hike expectations. The only region not to have some relief on this score as compared to last year is South.
Unlike with other questions, responses here are very evenly distributed across all scores - there is no "clustering" visible, which means that drawing a uniform conclusion from this table is unlikely to be an accurate observation.
5. Impact of direct plans
Responses to this all important aspect don't paint either a rosy picture nor a grim one. An average score of 3.9 suggests that even for some of India's most successful IFAs, direct plans are seen as making a reasonably negative impact on their business. While 23% of respondents don't see any impact (score of 1) of direct plans on their business, 45% of respondents see a moderate impact (scores of 2, 3 and 4). 33% of respondents see direct plans having a significant to very significant impact on their business (scores of 5 -10). The silver lining is that these scores are indeed a far cry from the fears that were expressed in Jan 2013, that direct plans will serve a death blow to distribution. Its only 6 months since they were introduced, and some would suggest that its too early to draw firm conclusions, either way.
On balance however, it seems that direct plans are more like a sharp jab that's landed on the distributor's chin, rather than a knock-out blow that ends the game. This conclusion can be drawn by putting together a score of 3.9 on impact of direct plans, coupled with healthy scores of 7.5 and 7.4 on volume and revenue growth prospects over the next 12 months.
Interestingly, South IFAs are seeing relatively the highest impact of direct plans, as compared to other regions. This is also the region which sees the highest propensity to pay fees. Putting the two together, does this mean that investor sophistication is higher in South than elsewhere - which is why they are able to make up their minds clearly whether they are happy with a do-it-yourself mode or whether they acknowledge the need for advice and are happy to pay for it?
6. Willingness to invest for the future
It appears that the sharp jab on the chin we referred to, has somewhat dented advisor confidence in investing to expand their business. There clearly seem to be more IFAs - particularly in East and South - who are on wait and watch mode and not in a hurry to expand, as compared to last year. West seems to be most willing to invest in expansion, with 51% of respondents selecting scores of 8, 9 or 10.
7. Eagerness to take up Registered Investment Advisor (RIA) licence
A sizeable 40% of leading IFAs across the country have practically no interest in seeking the RIA registration from SEBI. South, surprisingly, tops this score, with 54% of respondents showing no interest. The region which scores the highest in terms of fee collection also scores the highest in terms of impact of direct plans and also scores the highest on no interest to take up RIA licence - can someone please explain how to read these together and draw conclusions?
There is a noticeable 13% who are sitting right in the middle on this one - with a score of 5 - which most likely suggests a wait and watch mode with an open mind. They are the ones who would rather see how things are going to play out before committing firmly one way or another.
There are on the other hand 20% of respondents who are very keen to go ahead and seek the RIA license (scores of 8, 9 and 10). West stands out on this score, with 27% respondents expressing significant keenness to go ahead. West may well lead the RIA movement - just as it has historically led so many trends in this business.
What do you think?
What are your overall conclusions on seeing these 7 business confidence parameter scores? Do these reflect your own thoughts as well? Are your thoughts very different? How confident are you about your business growth over the next 12 months? What are your biggest concerns that you think can impact business growth? Share your thoughts with peers across the country, by posting your comments in the box below - its YOUR forum !
Share this article
|
