The Business, Challenge and Opportunity (Part 2)

Posted by Motilal Oswal | Posted on Thursday, May 12, 2011

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From Broker to Financial Planner
Brokerage stand-alone is not going to add more value. So more important is value addition. So please, upgrade your skills, don’t think of yourself as a broker or a discounted broker. 5 years down the line, there would be 50 lakh crores of savings every year. Right now its 20 lakh crores. Most of it goes into fixed income and small savings. What share of this wallet do we want to get? We have to position ourselves as a One Stop Financial Service Destination and focus on a greater Wallet share. Standalone brokers may become defunct in the next decade. Some of us have already passed, the CFP qualification. It is imperative that all of us do so. Not just to get broking revenue but also to attract greater wallet share
Not just to survive; but to thrive.

Have you invested in people?
How much can you do by yourself? You have to invest in employees. There is a major difficulty in retaining and attracting new people. We have taken a project internally on helping our business associates in this important area. How many people you have? Have you clearly defined KRAs (expected results and behaviour) for each employee? Have you defined an incentive plan for your revenue generating employees? How much do you know about your employees? Only money is not really going to retain them. Groom or hire somebody who can handle the daily operational matters. Empower this person and handhold him for developing confidence. You need to have this critical resource with you and decide that you are not going to spend more than 15% of your time on operational matters but still would have a complete grip on the operations. Key is to have a good resource who is empowered and you set up a process of reviewing the work through clear dashboards and review mechanisms. You need to spend more and more time on sales, cross sales, meeting top clients and expansion. You need support from your employees too.
So make them your partners.

Knowledge First
Invest in knowledge. It is the most potent and affordable nectar in the world. Knowledge will always be yours forever. Most of us think that they are satisfied with 500 clients, which is not good. How many people read magazines or go for some formal training? Let me tell you, this is a knowledge economy; you have to upgrade very fast. For a start, read at least two business papers everyday. Read a good book on investment or management. Learn the basics of fundamental and technical research. Learn the art of selling and of relationship management. Be prepared for the questions that your client will ask in business. You have to generate knowledge within yourself. If you don’t like reading, then spend time with those people who are smarter and better than you. Tomorrow the customer may ask you different questions which you haven’t heard of.
Knowledge is important. And there is no shortcut.

Technology and Processes
We have seen drastic changes in the way we do business due to the use of technology. Technology is the key driver for our business and we need to learn about it and invest into it for survival as well as growth. If you want to achieve scale, it can not be done without establishing and following the good processes.
Process and technology are the foundations on which strong businesses are built.

Review Progress
Set GOALS for the next 5 years. But change knocks the wind out of all good plans. Unless performance is reviewed regularly, growth becomes stunted. Your business plan depends upon monitoring progress- whether it’s achieved or over-achieved. You have to understand what is working for you or not. Unless you know that, you can’t move forward.
We get what we inspect, not just what we expect.

“There’s a big difference between seeing an opportunity and seizing an opportunity” - Pat Guritz

These were the few challenges, which were important. I just want to say that this business is going to be very big and a lot tougher too. We have to take care of our customers, people and partners. The world is very competitive. The opportunity is huge; but it’s not for everybody. The challenges are far-far bigger than opportunities. But at the end of the day, you have to make the effort.

The Business, Challenge and Opportunity (Part 1)

Posted by Motilal Oswal | Posted on Tuesday, May 03, 2011

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The one thing that is constant is change.

In business it’s very difficult to keep up with changes. And the pace at which things have changed is amazing. Be it products, service or technology, ‘change’ is the name of the game. So it’s upon us to capitalise on the changes around us. Accept them in the right way, and there is a definite benefit for you. I would like to share, the opportunities which you all could really capitalise on; and some challenges and problems which we need to address.

First, lets talk about the opportunities.



The Big Opportunity in Equity

You must've seen India and China; the global powers are shifting from developed markets to developing markets to India. In China 11% of population invests equities and in Korea it is 10%; but at our end, its only slightly higher than 1%. We have only 1 crore DP accounts. These are likely to go up to 5 crores in the upcoming years. But even then that will be only a small part of the 120 crore bank accounts we will have in the country by 2020. In the upcoming years there is a huge amount of new people who would be investing into equities.
Target the equity growth opportunity aggressively.


The Intermediation Opportunity

If you look at the broking business size; in 2009-10 Rs11700 crores of brokerage was generated. Now, the big picture -10 years down the line, the annual brokerage is estimated to be Rs 65000 crores. There is huge growth expected in mutual funds distribution commissions and insurance distribution commissions as well. The goal you set for yourselves in terms of share of this kitty is very critical. Even if you want to target 0.1 percent of the brokerage kitty, it would be 65 crores! I will not be surprised if the above growth estimates are surpassed.
The equity broking business will be big business!


The Market is 10 times bigger than you think it is

We have been talking about thinking big. And it’s going to be much bigger in future. The future will be different from the past. If you don’t think big; you will be redundant. So the first thing is to stop being pessimistic about growth prospects. Plan and think big. Keep on thinking about growth as an opportunity. Are you planning for the next 3-5 years when you invest in technologies or processes? Right now, our corporate office is 15000 sq. feet. We are talking about a 250000 sq. feet office next year. Are you planning big too? With every opportunity comes a challenge as well.
Now let’s outline the challenges and some proactive measures we can take.


Maintaining Strong Client Relationships

If you think the current market is competitive; you haven’t seen anything yet. Everyone is looking to profit from the India growth story. Competition will intensify with new players and consolidation. Your current customer is also someone else’s future prospect. You need to bulletproof your existing relationships so that business from your current customers grows and thrives. Profile your existing customers – are they Investors or Traders, find out about their financial goals - what is their investible corpus, what is their risk appetite, what are their returns expectations. Once you have this vital insight; you will be better equipped to go about fulfilling their needs. The more a customer believes you understand his needs; the more business he will give you. Organic growth from current customers is one of the most efficient ways to grow your business
Do you have an organic growth strategy?

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