Direct & Indirect Competition

There are chances that an Insurance or Mutual Fund Agent will pay attention to Direct Competition only, although this isn’t the best thing to do. Some of you must be wondering – “What does one mean by Direct & Indirect Competition?”

Well it’s simple – for a Mutual Fund direct competition is another Mutual Fund. And for an Insurance Company, direct competition is another Insurance Company.

Indirect Competitors can be of 2 types -

• The easily identifiable indirect competitor
• The not so easily indentifiable indirect competitor

Sounds confusing? Don’t worry, it’s easy to understand.

The easily identifiable indirect competitors for a Mutual Fund are Insurance, Investments in Gold, Shares, PF, Fixed Deposits etc. In other words, other investment options.

It is the not so easily identifiable indirect competitors that an Advisor has to identify and be careful of. Some examples are shown in the table below -

You must be saying to yourself - “These are not competitors – these are the very reasons why an investor saves in the first place!”

I guess it is how you look at it. Do you know that a company manufacturing soft drinks sees water (plain water - not mineral water) as an indirect competitor? And they then probably ask themselves – what will make this person drink less water and more of our soft drinks? Look at the table above – what we have presented is a huge amount of money that he has spent – part of which he could have invested. The solution – educate your customer – tell him that Rs. 3,00,000/- spent in a marriage will get over in 3 days – but if he invests even part of that – his son would enjoy the benefits for years to come.

Customers Respect An Advisor Who Has Width & Depth...

A good Advisor should have Width & Depth. What do I mean by Width & Depth? By Width I mean that s/he should be 1) Well read and 2) Should have a little knowledge of every investment product possible, enough to carry on an intelligent conversation on that subject for 5 minutes at least.

Do you as an Advisor know a little about

• Bullion
• Real Estate
• Commodities
• The concept of an Index
• Various popular rating agencies
• Inflation etc.

I am not saying you need to have in-depth knowledge – but you must have some basic knowledge. That is when the customer will start respecting you. Imagine an Advisor talking of an insurance product or a Mutual Fund, and the customer asks him what he thinks about Bullion as an investment option. If at that time the Advisor hesitates, the investor/customer will say to himself “This Advsior does not know about other investment products – then on what basis is he saying that this Mutual Fund is ideal for me?”

On the other hand, an Advisor must have tremendous depth about

• His product
• His industry
• Competitor products
• Direct Competition (We will talk about Direct & Indirect Competition in a later post) 

One often comes across Advisors who lack either width or depth or in some cases, both! There is a likelihood that many agents/advisors would be high on Depth but not necessarily high on Width. So start reading up – and of course, visit this site more often!

The Next Post...

In the next post, around the 1st week of October, we will look at the Impact Of The Commission Based System v/s. The Fee Based System on Investors and Advisors. And let me tell you this - it is not only Mutual Fund Agents who are going to be impacted by this development - Insurance Advisors who don't sell Mutual Funds are also likely to get impacted - much before a Fee Based system for Insurance is introduced! Stay tuned!!!

Watch Out! A New Tool On This Site WIll Help you Remind Clients....

Very soon, this site will introduce a tool through which you will be able to remind your clients about any SIP or Premium Payment!

One more step to getting clients to come to you and stay with you!