All of us have been doing the glorious task of doing good deeds for others, by assuming the role of a Wealth Creator. Our fellow countrymen have limited earnings and unlimited aspirations, and they have to steer a piece of their income regularly towards the passage which leads to their destination: their future goals. However, they need someone, who can guide them through this passage and you have been their helping hand. You are the one who helped them select the right set of products.
Equity mutual funds have emerged as the undisputed leader by offering unmatched returns incessantly. For investors who have had a long time horizon, equity MFs have been successful in multiplying their wealth irrespective of the good and bad times. Yet there are people who do not want to try their hands on equity as they are not ready to risk their hard earned money and are looking for steady and stable returns.
According to the India Wealth Report 2015 by Karvy Private Wealth, in India, the individual wealth in equity mutual funds stood at Rs 3.16 lakh crores in FY 15 as against fixed deposits, which stood at 32.37 lakh crores during the same period. This states that the fixed deposit market is approximately 10 times the equity mutual funds market. These stats bring to light the fact that most people in our country prefer investing in products which offer safe and steady returns.
So as a true salesman and wealth creator, you try your level best to explain to the client that how equities overpower all other forms of investment products when it comes to returns, yet it carries an element of risk. There are people who do not have a high risk appetite, probably because of their age or existing liabilities or other demographics and they can't afford to loose their money at all. Such investors will always put in their money to safer avenues like fixed deposits. So, in order to target such investors, you have to bring something else to the table – Bonds.
Why shall I sell Bonds?
Secondary market bonds offer a number of advantages to the investor over the traditional fixed deposits. Bonds bear an interest rate of over 10% on an average while Fixed Deposits bear an interest rate of 7-8% on an average, offer a higher liquidity than an FD since it can be traded in the secondary market if the investor want to withdraw before the maturity date, and has a number of other operational benefits.
Bonds have their own set of advantages for the advisor too:
New business: Secondary market bonds bring their own share of clients, they do not carve out investors from your mutual fund base. Bonds are based on two basic principles: Safety and Stability, and equity mutual funds do not possess these characteristics. And hence investors who are looking to invest in bonds are the ones who yearn for fixed income. So, this is a new business opportunity altogether, you can have an additional client base or you may get additional investments from your existing clients who have been investing in fixed deposits apart from the investment products from your bag. Secondary market bonds will eventually expand your client base and total sales.
Additional income: You must be thinking that why shall you not pitch Debt Funds to the investors who are risk averse and are looking for a uniform income, since you will gain an upfront brokerage on the value of the investment as well as a trail brokerage will follow until the investor remains invested. The answer to this is firstly, you get an upfront brokerage of 1% flat at the time of investment. Secondly, a debt fund is not a substitute of a secondary market bond because in case of a debt fund you cannot guarantee a specific rate of return to the investor and there are the 'Fixed Deposit Investors' who want a guaranteed rate of return only. Thirdly, you can also generate regular income by advising investors to reinvest their interest income in other financial instruments.
Diversification: To be a successful advisor, it is imperative that you have a diversified basket of products to offer to the client to meet his specific requirements. He must enjoy a wide choice of investment opportunities in varied asset classes so that he can choose from the available options, the one that is best for him. Adding secondary market bonds to your basket will expand your product base and increase your chances to never lose a client.
A Secondary market bond is a Win Win product for both parties. The investor gets what he wants, an income which is fixed and safe and is generally higher than the traditional instruments where he has been investing, and the advisor gets more business and more profits. Adding bonds to your offerings and helping fixed deposit investors increase their wealth adds to your share of good deeds.
Keep up the good work!
"Let us not become weary in doing good, for all the proper time we will reap a harvest if we do not give up." - Galatians 6:9
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