Anybody who does a business has to have a business model. Whether it works or does not work is a completely different ball game, but people need to have a business model and make an attempt to make it work.

If you do not have a business model, you cannot create a company, employ people, employ resources, raise debt, capital, …well you just cannot grow it. This is true of any operation – whether it is expected to make money or just render community service like helping the accident victims or run an organisation for helping the needy, poor, children, senior citizens, etc.

Let us take the Financial services Industry and the Running Industry. In the financial services industry the big daddies who make a lot of money is of course the banking industry. Banks make money from you by accepting deposits (and lending it to a borrower at a higher rate), selling 3rd party products (Insurance, mutual funds, Reit, gold, etc.). Mutual funds take your money and manage it for a fee. Immaterial of whether you make money or not the fund house makes money. They love a bull market because they get more investors and their asset management money goes up even more. Good business model. If there are 50 in our country they believe that another 400 can come in and make money.

Life insurance also is a story similar to the mutual fund business.

Then there is distribution of financial products. Banks, national level distributors, brokers are the big players who have a lot of assets and make a lot of money and keep growing the business. There are 4-5 players in the digital aggregation space and they also seem to be doing a good job and will make tons of money going ahead. However there are huge risks in the fund management business and in the distribution business – so much so that the pure mutual fund sellers are a dying community. Will big people with a lot of technological investments be able to make money? Not so sure. This is because the people who sell are not necessarily the best people to give advice on what to buy. Conflict of interest is another issue – so the buyer may not want advice from the guys who sell (or so say the text books).

Then come the financial planners – these are the people who tell you where to invest and how much in each scheme..well these are the people who might ask you to use a model where you reduce the cost of investing by going direct. This is a good method for people who do not need any hand holding.

All models seem to be working. In a country with such pathetic mutual fund penetration, it is obvious that all models need to exist. Not everybody needs an adviser, not everybody needs to go online, not everybody can go direct. Most RMs in banks have a book which runs into crores…All business models work.

Then there are some disruptive people. They write what works for them. No vested interest for sure. No interest in you either. They are evangelists. Narcissism, if you may. Journalists, experts, bloggers, …they generally write based on their own experience. No. They have not met fund managers, operations people, customers, analysts, …nothing. However they can write, so they write.

Some bloggers do not understand what they write. Some write for money. Some write for fun. Some take money and write like they are independent. Some are biased. Some can be bribed. Some are foolhardy. Some can see all the options. Some cannot understand, some will not. Many can be bribed. Some cannot be bribed. Or it has not been attempted bribing him…

Like I said…Many people, many models.

I like the paid model better than the risky ‘free’ model….