Introducing Cafemutual

Cafemutual (CM): What is FIFA’s objective?

Dhruv 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?

DM: Over 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 reactive.

CM: What was FIFA’s representation to SEBI in the recently-held meeting?

DM: The whole 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 with SEBI.

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.  

CM: Was SEBI receptive to your demands?

DM: The fact 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 remunerated?

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.