caught up with Dhruv Mehta, Chairman of the Foundation of Independent Financial
Advisors (FIFA) and Yogesh Sharma, founding member. In the first part of a two-part
interview, Dhruv talks about the challenges facing advisors and suggests some
Cafemutual (CM): What is
Mehta (DM): Our
objective is to act as a common knowledge-sharing platform for all IFAs. FIFA
wants to be the voice of the IFA community.
CM: How did the idea to form
FIFA come about?
the past three years, the regulators and various stakeholders have said that
all IFAs should come together on a common platform to represent the voice of
IFAs. Secondly, we realised that most of our learning happened when we would
meet. These thoughts prompted us to
think of forming an association.
The MF industry has seen a
host of regulatory changes over the past three years. IFAs operate through a
different model unlike banks and NDs. The regulators had not taken into account
an IFA’s business model while formulating certain policies. We thought of
entering into a dialogue with regulators which is proactive, rather than
CM: What was FIFA’s
representation to SEBI in the recently-held meeting?
discussion was around the viability of this business. The regulator wants us to
become advisors, but there has to be enough remuneration to move to this path. After
the entry load ban, statistics show that folios are falling, there have been
redemptions, and distributors are fleeing the industry. It’s the small IFAs who
have been impacted the most. In any industry if the margins fall by 50% overnight,
you can’t scale up volumes again easily. Scaling up of volumes is possible in
large organisations, but the IFAs’ model is different. It’s personal advice-based selling. They have limitations in terms of handling a certain
number of clients. If an IFA is handling 100 clients, you can’t expect him to
handle 500 clients overnight. If IFAs increase the number of clients, then they
would not be able to give enough attention and service to all their clients. The
quality of advice may get compromised. This was the one key issue discussed
Apart from this, we
discussed improving efficiency, processes, KYC, application forms, etc. SEBI
has recognised the role of IFAs in penetrating smaller towns where large
organisations will not find it viable to set up a branch. You will find more
IFAs joining the trade if they are remunerated well.
SEBI receptive to your demands?
that they had called us for consultation is itself a positive sign. Such consultation
process didn’t happen when the entry load was banned. We had sent emails to
SEBI individually on behalf of all IFAs, but that was not recognised.
CM: What is your view on how IFAs ought to be
DM: If SEBI aims to
penetrate the retail segment, then somebody has to service that customer.
Earlier, the customer was paying for that service and the industry was seeing
some growth. SEBI should define what is churning and in which category it is
happening the most. If there is any malpractice, it is necessary to penalise
that segment rather than changing the rules of the game. If a cricketer bowls a
no ball then he is penalised but not banned from playing cricket. The
punishment depends on the gravity of the offence.
CM: How many members does FIFA have currently?
DM: We have 50 members
right now primarily from Mumbai because FIFA is based here. We are getting
membership requests from Delhi, Calcutta, Pune, Ranchi, Lucknow and Indore.
(The concluding part of the
interview will be carried tomorrow).