The number of
distributors opting in for transaction charges has gone up to 9000, which was
around 6000 earlier.
of clarity on rollback of entry load and whispers of ban on upfront commission
has led more distributors to opt for transaction charges.
to sources, there has been a 50% jump in the number of distributor’s opting for
transaction charges. When the incentive was first introduced by SEBI last year,
out of the 40,000 KYD compliant ARNs, around 6,000 had opted in. Now, the
number has gone up to more than 9,000. The window for changing status on
transaction charges was open from March 1 to March 25, 2012.
numbers show the strain on revenues. This (transaction charge) at least takes
care of their (distributors) staff salaries. Apart from banks and NDs,
transaction charges also make sense for distributors in non-metros. Distributors
catering to corporate and retail investors are in a dilemma because companies
don’t want Rs. 100 to be deducted from their investments due to accounting
issues. Financial planners catering to HNIs would not opt for transaction
charges because it would block a hindrance to collect fees,” says a
distribution head of a private sector fund house.
distributors like Bajaj Capital, NJ India, Prudent, Karvy Stock Broking, who
bring a substantial chunk of business for AMCs, have opted in since the
introduction of transaction charge. For NDs and banks, even Rs. 100 translates
into good cash flows. For instance, if an ND gets one lakh new SIPs in a year,
this translates in to one crore as income. On the other hand, if an IFA brings
in 500 new SIP applications in a year, this translates into Rs. 50,000 as
officials say that many new IFAs have opted in this time. Distributors are
allowed to change their status on transaction charge twice a year. Distributors
are not allowed to charge one set of clients and not charge other clients. They
have to either opt in or opt out completely. Thus, resistance from a few clients
sometimes forces distributors to opt out of transaction charge.
with us your views/experience on transaction charge.