We know Mutual Fund is a product of exceptional caliber, and are a boon for your investor's portfolio. But how do you explain the value of this wonder product to your clients, especially the new ones. People have varied perceptions about Mutual Funds, some believe it is a different kind of a direct equity trading product, some think of it as an insurance policy, while others just don't want to know about it because either they are focused on other investments or they think it is a financial jargon which is beyond their comprehension. Such investors do not choose mutual funds because of these beliefs and also because of sour experiences of their friends and family in the markets.

We try to sell our product by explaining how good it is, how it has been outperforming its competitors, how you as an advisor have helped investors make huge money. And then we wonder that even after our best sales efforts, the client is too confused to say 'Yes'. The logic behind your client's response is, he's clueless about the product you are trying to sell. We forget the basic, that it is very important to explain the product in detail to our client. Unless he knows what's the base, he would not be able to develop a conviction about it and the confidence to purchase it.

Explaining the product right can help your clients in building wealth and help you in achieving your sales targets. In this article, we will focus on explaining the concept of mutual funds to your clients.

• The Concept: The first step to explaining Mutual Fund to your client is explaining the essence of it in layman language. A Mutual Fund is nothing but an instrument, through which a large number of people pool in their money. This money is then used to purchase stocks, bonds, and other financial securities, and is managed by professionals, who by their wit and experience administer these assets, with a view to generate superior wealth for you. You are getting a small piece of all the invested securities by investing a small sum of money.

• Offer him a solution & not a product: There is a unique scheme for each investor profile. So you have to first understand the client's needs, his risk appetite, his goals, his age, family background etc. And after a thorough analysis, offer him a solution. Remember, you are here to help your client first. So, if a client is looking for regular income, then you may suggest him a dividend option or SWP. If he's looking to invest for long term, but is not ready to risk his money at all, you may suggest him a debt fund. If he's the one who wants to make money and is ready to take risk, you may suggest him an equity fund, and the like. The bottomline is, whatever product you recommend, should be a solution to his problem.

• Not too technical: When you go to buy a car, in the salesman's one hour speech, he'll talk about the engine capacity, the torque, BHP, etc in two lines. And 90% of the dialogues will be on the features of the car, the comfort that you will experience, how it is better than others, etc. It is because the buyer understands the end result, the features, how the car will benefit him, how it looks. He would not conceive the engineering technicalities of the car. Similarly, while explaining the MF concept to your client, you must not go too much into technical details. So, if you are marketing an equity mutual fund, you shall not talk about the percentage of equity allocation, or the number of scrips in the portfolio, ratio analysis, risk ratios, etc. You have to explain the fund in terms of his requirements, how the attributes of the scheme matches his needs, how has been the performance in comparison with the benchmark, other schemes, and how well it has performed historically.

• Explain the benefits of a mutual fund: Next, highlight the advantages of a mutual fund. Explain about the operational ease, online & quick transactions, easy liquidity, SIP option for a convenient & disciplined investment, STP and SWP options for easier transfers & withdrawals, choice between dividend and growth options, professional management, etc. If the investor is an equity investor, explain to him how through a mutual fund, he can invest in a variety of stocks from diverse sectors, being handled by specialists and he doesn't exercise such comfort in direct trading.

• Disclaimer: Lastly, be honest with your client. Don't forget to mention that the returns are not guaranteed, in case he goes for an Equity Fund or a Balanced Fund. Tell him about the risks involved and tax implications of the product. Also, bring to light the benefits of long term investing, and how his investment will be better off, if he invests for a longer term.

Mutual Fund is an awesome financial product which assists the investor in long term wealth creation. It is our responsibility as a financial advisor to explain about this opportunity to the investors and spread awesomeness in our clients' portfolios!

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What is a Business Strategy?

Business Strategy lays down the policies and plans for achieving the objectives of the organization. The objectives entails the mission, vision, and goals of the business, and the strategy is the masterplan of how you are going to achieve these organizational objectives.

Why do you need a Business Strategy?

Just like you do financial planning for your clients, you devise a plan for them to achieve their long term and short term goals, keeping in mind their needs, perspectives, their risk profile, etc. The financial plan serves as a guide to the investor through his investing journey, since it gives a broad view of the trajectory towards his long term goals, and he can understand the impact of various investing decisions on his goal achievement.

What financial planning does for an investor, business strategy planning does for the advisor. Your business strategy is the master plan for your business, it is a step by step action plan for achieving your business objectives. Having a well defined business strategy not just gives you a sense of direction, but it will give clarity of approach to your employees too.

So, the first step, Define your vision and your long term goals. Once you have visualized where you want to see your business 10 years down the line or even further, break down your long term vision into short term targets.

Next Define the strategy which is going to maneuver your business all the way to reach your goals, actualize your vision, while overcoming the challenges that come in between.

Following are the key ingredients of a business strategy.

• Identify the client segment/s you intend to target and how are you going to approach your prospective clients. You can cater to the entire universe of investors also, but targeting a specific lot on the basis of your strengths, interests, like-mindedness; will enable you streamline your business processes and concentrate your efforts in one direction. It may be difficult in the initial stages when the client base is small, but as the business grows, and you have established yourself in the niche, then it becomes relatively simple and more rewarding, since you understand the target segment deep down, people trust your knowledge, and chances of getting referrals also increase.
• How do you want to position your business and build your brand? For a product provider, his brand is imprinted on his product package, it's all around on his advertising campaigns, websites, everywhere. But for a service provider, brand building brings in additional challenges, because he is not offering a tangible product which shows off his brand. So, what impression do you want to create in the client's mind? How are you going to differentiate yourselves from other advisors? How do you want your clients to tell your story? This is your brand strategy, which must be clearly defined and communicated, because this is what each person of your organization will reflect in his eyes, in his words, in his expressions and his gait.
• Identify your take on business expansion. How will you get more leads and referrals, to get more clients on board? Identify the techniques you will use for business development activities, define the broad lines for marketing activities.
• Next, define your client retention strategy, what service practices will you adopt to ensure client satisfaction. Define a mantra for client servicing and satisfaction, this is something which you and your employees are going to look upon and practice everyday.

The above were the key elements that go into making up of a business strategy. However, Business strategy like your client's financial plan is not a one time thing, your goals evolve, specializations may change, your methods may change, so there is a need to constantly adjust your business strategy to the developments. Hence just like you review your clients' financial plans from time to time, you need to regularly look back at your own business strategy. Business strategy gives a direction to business, it is a vast concept, this was just an overview to give you a broad sense of how you can go about developing yours.

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Indian economy is a growing economy - a land of opportunities. We have multiple investment avenues and we have both domestic and global investors tapping the growth opportunities. Indian investors have some typical shared characteristics. Indians have a high savings to total income ratio. These savings are directed towards various investment options. A major percentage of the investors invest in debt asset class through products like PPF and Fixed Deposits. We also give huge importance to gold in our homes and lockers. Many invest in traditional insurance options as well. A small number of investors among them are exploiting the potential of our country by investing in equities. These equity investors invest either by investing directly through a broker's terminal or by investing in an equity mutual fund.

This article concentrates on the former chunk of people who invest in equity stocks directly. Direct equity investors is an alluring segment, because here people believe in the underlying asset 'Equities', these people are not restricted to traditional investments and hence an eye opener is not required. But the difficult part here is pulling these investors out from their comfort zone to exploring a more organized, 'Equity Mutual Fund' option. Most direct equity investors are just skeptical about Mutual Funds, and the reason for their disbelief is inadequate or false information about the product.

The equity investors invest on their own and most of them have a portfolio of their few favourite stocks. These investors buy and sell frequently, based on market movements, their gut feeling and on the advice given on the business news channels. These investors are risk takers, they enjoy the thrill of picking stocks on their own, they do have knowledge of the markets and they are optimistic about their investments. So the major challenge for the advisor is dealing with their psychology, and explaining to them that there is a better way of investing in equities.

So, what do you tell the direct equity investors so that they are convinced to explore the Mutual Fund option.

• Performance: So, your first point would be performance of Equity Mutual Funds. You have to explain to the client that his investment product and amount remains the same, but routing the investment through Mutual Funds, would yield better returns. Though the underlying asset is the same, yet Mutual Funds have always performed better than the markets. If you look at the past 15 years' performance, the average of diversified equity schemes have given a return of 20.86%, while Sensex's return for the same period remained at 15.20%. (Data as of 31^st Jan 17).
• Professionally Managed: Your second contention would be, Mutual Funds are managed by experts. There is a fund manager and a full fledged research team, and these people have the knowledge and expertise and after long brainstorming sessions, stocks are selected on the basis of the investment objective of the scheme. Further buying and selling and overall management is also in the hands of these professionals. The investor don't have to worry about stock selection, tracking the performance etc., he just has to invest and relax. When an investor goes by the direct option, he might choose the wrong product, he might make wrong decisions based on emotions or wrong information. But when the essence of so many wise brains is going into it, erring is a seldom phenomenon.
• The Cost factor: The next major factor to switch from direct equity investing to equity mutual funds is the cost associated. In Direct investing, every time you hit a purchase or sale button, you have to pay a commission irrespective of you making a profit or not. In Mutual Funds, the expense percentage is very nominal, and there are upper limits fixed to the expenses that can be charged to the scheme.
• Diversification: The next point in your pitch would be Diversification. A mutual fund has a huge corpus, and it is spread across multiple sectors, and classes of stocks. So, if your investor has invested say Rs 1 Lakh in equities, he might have diversified among 5-6 stocks at the max. But by investing in a Mutual Fund, he gets exposure to at least 30-40 stocks of different sectors and classes with the same investment of Rs 1 Lakh. And because of such extensive diversification, risk is minimised to a large extent.
• SIP: Another major reason which investors might find attractive is the SIP option of investing. You shall acquaint the investors with the benefits of SIP investing in terms of both better returns as well as convenience of investing

The direct equity investment segment is a big opportunity for the advisors, as they do not need ice breakers, they are optimistic people and are not risk averse. So, add these people to your client base by targeting the right spots.