An interesting twitter conversation ensued today between CIEL’s Uma Shashikant and
Mint’s Hindustan Times’s Gautam Chikermane. It started with a conversation that Gautam had with Raghuram Rajan in which the latter made some interesting (and a bit unexpected) comments about financial products distribution. (You can read the full interview here).
During the twitter conversation, Gautam asked the oft-repeated question regarding financial service intermediaries – who do they represent? Do they represent the manufacturers (such as the AMCs) or the consumers (the investors)? Whose interest is of concern to them?
(Full conversation here )
I responded (using the @fundsindia twitter account) saying that this question presents a false choice. That is, the question presumes that it is an either-or situation without a third or a middle option possible.
The reason I said so was that at FundsIndia, we have been successfully doing both over our tenure. And I do know quite a few other advisors/distributors who can claim to do the same as well.
We represent AMCs to the investors – there are close to thousand investible schemes in the mutual fund market today, and I often hear representations from the AMCs who try to highlight good funds to me that go unnoticed. Whenever such claims have merit, we use that as input when we talk to investors then on. For example, a mid-level AMC with a very good balanced fund recently visited our offices and showed us how their fund has done better than more well-known names in the market. Another even smaller AMC showed us how their MIP product is as good or better than many other such products in the market. There are many such pitches every week, but with these two, we found that their arguments have merit and we have absorbed them into our recommendations.
And, we are always representing investor views back to the AMCs. Regardless of the fact we get our commissions from the AMCs, we know that all the money eventually comes out of the investor’s kitty. We service our customers by working every day with AMCs to make this or that accommodation or exception as much as possible. Apart from that, to all the sales and marketing folks from the AMCs who visit our offices, we make it a point to tell them what we are hearing from the investors in terms of performance of their funds or what kind of products they’d like to see (if I had a dime for every time an investor asked for a silver ETF, I’d have many, many dimes).
FundsIndia or any intermediary business will work only if we have a robust group of manufacturers make good, useful products and also if we have a investor population who are served well. It is not a choice, you need both. As an intermediary, it is not a choice for us either.
So, we do both – represent each side to the other and work for the benefit of the industry and the market place as a whole. It is possible to act with that sense of enlightened self-interest that calls for a healthy industry with a well-served market so that both (as well as us, the intermediary) thrive and prosper over the long-term.