Worth being an IFA?

For a new person is it worth being an IFA? – Independent Financial Advisor for those who do not know what is an IFA.

My take is if you are professionally qualified and can get a decent job in the outside world, it is not worth being an Ifa. We recruit Chartered Accountants at Rs. 6-7 lakhs a year, and MBAs at Rs. 3-6 lakhs – depending upon the college that they attend and the work which they are doing.

For an IFA to earn this kind of money is well impossible. Let us assume that there will be expenses of telephone, travel and conveyance of about Rs. 10,000 a month. The total income that the IFA should earn is approximately Rs. 820,000. As there will be no trail – for the next 2-3 years, he/she will have to live on the upfront commission.

To earn Rs. 820,000 at 0.5% upfront commission, the sales will have to be about Rs. 16 crores.

For an ordinary IFA this is not just impossible, I doubt if there are more than 1000 IFAs (all India!!) with this kind of Aum after so many years’ effort :).

So the logic is if you are planning to be an IFA – i.e. by choice (which means you can get a Rs. 5-7 lakh job) …DO NOT DO SO. The math does not work.

However if you want to be an IFA because you cannot get any other job, or you have to run your father’s business, …or any other compulsions…BEST OF LUCK. Hopefully over the next 10 years, many current IFAs will drop out, some will die, some will retire…so there will be some growth for you.

Not sure what are the views of the I F A community? Have to ask IFA Galaxy…:)

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6 Responses to “Worth being an IFA?”

  1. Abhishek Gupta on July 7th, 2010 at 10:02 am

    Hi Subra,

    One statistic, a source from the Fund Industry shared with me..
    There are only 2,000 IFAs all india who earn more than 25,000 per month.

    Sometimes its funny when SEBI says they want to curb Mis-selling in MFs..Well who is SELLING it ???


  2. Not more than 10,000 agents who HAVE RECEIVED at least one cheque FROM ANY AMC in the past 6 months!! Also why should people be JEALOUS of the commission? They can themselves become agents (it is easy) and keep all the commissions themselves! So many journos cribbing about so many things – the journos would be the first to admit how badly their own portfolios are doing (with or without agents). Ha!!

  3. Sir,
    Do you have the same view for CFPs?
    Pls confirm.

  4. Competence, knowledge and trust cannot come by just passing a 45 minute test, correct? That is my view on any exam. Too many people calling themselves too many names do not understand all the aspects of being a planner! However they charge a nice fee – and more importantly people are happy to pay for they know not what to ask and what to expect.

    Frankly I do not know whether just having a new degree helps…

  5. Sure I agree that nothing can replcae one’s experience. However, correct degree should assist in correct decision making as well, but one should not stick to that degree related information only, to get the better grip on any subject matter one has to spread his wings to the subject as a whole not only to the course material provided.
    Also passing a 45 minutes exams need preparation too.
    Still experience rules all degrees!

  6. Nilesh KAMERKAR on January 19th, 2014 at 9:07 am

    Even for those who have managed to survive thus far. It makes very little sense to allocate incremental capital / resources to an enterprise with bad economics.

    As Warren Buffett has famously said ” When a management with a reputation for brilliance tackles a business with a reputation of bad economics, it is the reputation of the business that remains intact”.

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