What happens when artificial and real solid barriers are put in a growth area? It is good for the OLD and successful players. So when the mutual fund industry makes it difficult for new amc to come in, it is the big and old players who are likely to grow stronger. Let us say there are 43 players, and a weak amc wants to exit, he is more likely to approach the big and powerful guys, not the weak guys.

Now if all trucks were driven by AI and shops did not need a check out counter what will those millions of truck drivers and check in counter boys and girls do? I guess you will still need people to man the counters, keep stock, etc. Somethings will not change – restaurants will automate many things, but will still be largely human driven.

Smaller IFA will not be able to take a big fall in income and may quit the mutual fund business, but it is likely that they will add on other businesses – retail loans, travel insurance, loan consolidation, loan recovery – just to mention a few new lines. Other thing that will happen is that the bigger IFA will go about buying off the smaller IFA. Next year you will see the big and strong get bigger and stronger thanks to falling margins. I have no clue how removing upfront commissions make it good for the end investor, but all the respectable journalists think it is good, so I guess it must be good. Journalistic solutions apart, the market is likely to find its own solutions. The small Ifa may just drop out – his aum may be too small for anybody to be interested in the business. The mid level IFA will go and sell off his aum to the bigger IFA who wants to grow bigger. The IFA who is say 60 may not be too keen to learn new tricks – and will find some younger IFA to sell off his business or profession.

Will the smaller Amc be hit? Yes, their growth will happen at a slower rate, HOWEVER, their main job is to get good fund managers and show good performance. Remember even the bigger Amc is under threat – we will soon see ETF and Index funds beat their flagship. So Hdfc Top 100 could be under threat just as much as Franklin India Bluechip.

However the IFA business (like almost all businesses) grows on trust, competence, story telling, confidence building, hand-holding, empathy, – I am not sure that all of this can be automated. Frankly I do not think that everything that can be automated will be automated. Some things cannot be automated. In fact is an IFA sits down and thinks what all he should be doing he will realize that many of those things cannot be automated. For example getting the clients to maintain an investment diary – hard copy, not soft. Talking to 2/3 generations about investing. Helping (nudging) proper record keeping (tools can only help, they cannot goad), making a will, family communication – all this can be automated but will require human intervention. As long as IFA understand their role (today they think they are mini fund managers, which they are not) IFA will continue to be in the business (profession).

So which IFA will be successful? Well that is a difficult question to answer, but I have seen what a good IFA has – compared to an IFA who does not build on this – trust, being more concerned about the investor rather than the investment, competence, temperament, patience, communication skills, …..how much of this can be automated?

When you meet IFA who have sold say x amount of mutual funds but have a 3x aum, you know that it is a ‘growing’ business and not just a ‘selling’ business. Yes some organic and inorganic growth will happen, but for x to become 3x it will take 10 years. That is difficult to automate.

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