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MF News A few AMCs cushion the impact of TER reduction

A few AMCs cushion the impact of TER reduction

Fund houses such as UTI, Franklin Templeton and Tata have reportedly decided to cushion the impact of TER reduction on trail commission.
Nishant Patnaik Jul 8, 2018

Not all fund houses have reduced trail commission to the extent of 15 to 20 bps with rationalization of TER.

While UTI Mutual Fund has reportedly decided to absorb reduction of 15 bps, Franklin Templeton is said to have shared the impact of such a reduction to some extent. Similarly, Tata Mutual Fund has reportedly capped trail commission at 50 bps. That means, if your trail commission was 60 bps, the fund house would now pay you 50 bps, a reduction of 10 bps.

A senior fund official from Franklin Templeton requesting anonymity told Cafemutual that his fund house has decided to share the reduction. “If we can share the gain with distributors why can’t we share the pain. Hence, we have developed a certain criteria to decide what would be the impact of sharing. The quantum of such an arrangement would obviously depend on share and longevity of assets.”

At least eight fund houses have reduced trail commission to the extent of 15 to 20 bps following rationalization of TER by SEBI.

Earlier, SEBI has revised the definition of top cities and beyond top cities for additional TER. It has also reduced expenses charged in lieu of exit to 0.05%. Both these changes have led to reduction in overall TER and trail commission.

 

27 Comments
Vinay Singh Gaur · 2 weeks ago
Top AMC should also contribute TER.try to reduce expenses
Sandip · 2 weeks ago
With the reduction in the commission being paid to the IFA's and distributors SEBI does not understand that many people post retirement and as a business model survive on this income. If the remuneration is so unfriendly towards the distribution business then the smaller distributors will eventually die out or look for other greener pastures. SEBI Please make this business more rewarding instead of squeezing out the income of the distributors.
Vikas Gupta · 2 weeks ago
Welcome step by UTI, Franklin & Tata MF. They have proved that they are distributor friendly & Logical. They are not like few amcs who think only about their employees & fund managers. I expect other amcs to follow the good initiative taken by these amcs.
C PREM KUMAR · 1 week ago
Good, Nice initiative taken by UTI, Tata, Franklin AMC's. Others also should follow. Jaihind.
Reply
Suresh Kumar pursnani · 2 weeks ago
SEBI should not reduce Trial, and in fact see the betterment of Distributors.
PRAKASH SAMBARE · 2 weeks ago
Welcome step by UTI, Franklin & Tata MF. They have proved that they are distributor friendly & Logical.“If we can share the gain with distributors why can’t we share the pain. I expect other amcs to follow the good initiative taken by these amcs.
DB DESAI · 2 weeks ago
Welcome step by UTI, Franklin & Tata MF. They have proved that they are distributor friendly & Logical.“If we can share the gain with distributors why can’t we share the pain. I expect other amcs to follow the good initiative taken by these amcs.
AJITH · 2 weeks ago
APPRECIATE THE MOVE BY AMC'S LIKE FT WHO ARE SENSIBLE TO DISTRIBUTORS UNLIKE THE OTHER AMC'S WHO WERE NOT EVEN WILLING TO CONSIDER THE REDUCTION IN TER AND THEY RUTHLESSLY REDUCED THE TER FROM DAY ITSELF, THEY WERE NOT WILLING TO BEAR THIS LOSS FOR EVEN A SINGLE DAY, BUT THEY ENJOYED THE SURGE IN THE EXPENSE RATIOS IN THE LAST 4.5 YEARS AND NOT EVEN A PAISE WAS SHARED WITH THE OLD DISTRIBUTORS, THIS ATTITUDE OF THE AMC IS DISGUSTING.
Akshay Tiwari · 2 weeks ago
But the problem is that all AMC charged extra .20% against the Exit load on whole Equity AUM and may be I think only just 5 or 10% AUM exit within 1 year.

Problem is 97% distributor of this industry subsidised or companciate to 3% distributors for pay higher commision by MF to like NJ , IIFL Wealth , Indusind Bank, ICICI Bank etc.

Where they pay 90 or 95% of TER from scheme as a brokerage

SEBI should go and rationalised the brokerage structure in one or two category only .

This is the only industry where difference between retail and wholesaler in down counter is more then 40 or 50%
Rupesh mundhra · 2 weeks ago
Distributor work Based on give & take policy.
Really appreciable work done by Uti, tata & franklin.they proves that they are distributors friendly.
Binoy · 2 weeks ago
IRDA SUPPPORTS AND ENCOURAGES AGENTS.
SEBI PERIODICALLY DISCOURAGES DISTRIBUTORS PERIODICALLY. SEBI INDIRECTLY ENCOURAGES DISTRIBUTORS TO BECOME INSURANCE AGENTS AND DESTROY THE MUTUAL FUND INVESTMENTS.
Himanshu · 1 week ago
Yes very true. Such polices are made purposely so that Mutual Fund distributors are forced to become or reconsider insurance business.
Cos government wants public money to make periodic bail outs of its non performing PSUs and to manage there deficits.The latest example is Bail out of IDBI bank by LIC. Also a recent example is the bail out of HAl public issue.
Reply
Harsh · 2 weeks ago
This shows that AMCs who don’t have their own distribution like a bank or an NBFC, are the only ones who are Distributor friendly.

IFAs should always strive to work for AMCs who don’t have or have Smaller in House distribution as these are the only AMCs that will understand the value of distributors. The one who ha e in house distribution will continue their arrogance and make AMFI work like a “MF Cartel” .
PRADEEPKUMAR SABALE · 2 weeks ago
Welcome step by UTI, Franklin & Tata MF. They have proved that they are distributor friendly & Logical.“If we can share the gain with distributors why can’t we share the pain. UTI Mutual Fund always with the Distributor. And always taking care of distributor for all the ways. Other top AMC's are not taking care of distributors.
KUMAR NARAYAN PAL · 2 weeks ago
I had attended a seminar of a particular AMC where openly they boasted that if an IFA is associated with us, then they would earn something else they are free to get out of the industry & it would hardly impact any AMC or their employees in any way as the industry had earlier proved the same. In 2009 when the SEBI had scrapped off the entry load of 2.25% many IFAs had gone out of the industry as this was given to the distributors as upfront brokerages. Just think about industry's market capitalisation or the industry AUM & present compared to 2009. It has only increased. So now, if our regulator decides that from tomorrow there will be no payouts whatsoever, again some people would move out of the industry, but few people would stay back saying that "all is well" for the sake of their clients as whatever our GODFATHER regulator decides is all for a good reason as they would have a better pie of the remaining market & there would be no new distributors coming to this industry and small distributors would be gobbled by the larger distributors as the rule of the jungle. Again, a representative of a NPS fund blattently exclaimed that the AMCs should take a lesson from us as in such a short period of time without paying a single penny as brokerage distribution expense we have acquired such a mammoth asset. So whatever we say or write, nobody is actually bothered about the distributors as the decission making authorities have more important decissions to make & so much things to do. The situation with us is as the then famous singer sung " I JUST WANT TO SAY THAT THEY DON'T REALLY CARE ABOUT US"
S MURALIDHARAN · 2 weeks ago
AMCs and SEBI should seriously think in terms of the revenue model and success of the mutual fund distributors. There is one school of thought that prescribes that MF distributors should diversify into other asset classes. This would mean diluting the knowledge levels . An MF distributor would move away from being a master of his field into a " jack of all " situation which is not good, unless he appoints vertical heads.This once again would involve huge fixed cost. The reality is cost of living / inflation is sky rocketing on one side whereas the revenue is coming down for MF distributors. Aren't they part of the economy ? Aren't they contributing to the capital markets? If the AMCs hire people for distribution , it would cost them very high . What about knowledge levels of such staff. Would they have information on other AMCs to give an unbiased advice ? What about attrition of staff ? Would the staff come up to the level of a regular MF adviser who would have oodles of experience ? The focus on reduction of commission should be less and focus on alpha should be more . I don't think that a discerning investor would grudge a 15BPS to 20 BPS difference in returns. Professionalism comes in when rewards are adequate. The AMCs should reduce their share of profits and share it with the Distributors rather than quoting SEBI every time. It is really high time. Quality distributors would definitely ask for opportunity cost .
mINESH mEHTA · 2 weeks ago
Highly appreciated the move of Franklin, TATA & UTI. Hope other will learn from them.

Most important is there is a huge difference of brokerage between ND's ( i.e. NJ, Prudent, Anand Rathi, Bajaj Capital etc...) and the normal IFA (Distributor's) which must be rationalise.

Everyone is doing hard work whether small or a big AUM than, why should be biased for few?

Fact is because of such dirty practice by AMC's the whole industry is suffering which SEBI should notice it and immediately stop such practice. It's time to think on!
Mukesh Mehrotra · 1 week ago
Reliance has reduced trail from 20 BPS to 5 BPS . Under such heavy reduction in commissions distribution will become non profitable .So many distributor may exit the distribution activity.Which will have imapct on innocent investor as they will not be able to get proper advise and may avoid putting their money in Mutual Funds,
Neeraj Mohan · 1 week ago
Highly appreciated the move of Franklin, TATA & UTI. Hope other will learn from them.
Himanshu mehta · 1 week ago
Such a reduction in trail commission puts a big question mark on the reliability of the revenue model of the IFA business. IFAs put so much efforts in expectation that he/she would be remunerated in form of trail commissions in future and one fine day learns that the commissions have reduced.So what if after couple of years the trail commissions are further reduced? All the efforts will go down the drain.
Manas Paul · 1 week ago
Sebi should initiate Euthansia for Small Distributors & their family rather than torturing them frequently.
Manas Paul · 1 week ago
Sebi should initiate Euthansia for Small Distributors & their family rather than torturing them frequently.
XYZ · 1 week ago
Why does AMC does not pay a increased trail on older assets where trail is much lower than current prevailing rates.... secondly SEBI is on a wrong track by reducing the TER and Commissions paid to the distributors. In place of making such unwanted and useless noises why don’t they penalise the AMC who scheme underperform their benchmark this will give more benefit to both the customer as well as the AMC and distributors. The funds outperforming the benchmark should be allowed to charge some fee as a token of apprication and those underperforming shall be penalised. I think the people siting there are narrow minded and they should be replaced by people who can actually work for the benefit of the clients in real.
XYZ · 1 week ago
An eg for the same ..... in every sports the owner fights for the best player and is ready to pay the higher price so his team can win ..... so just cutting expense is no solution u should actually try and reward people who do well and punish those who underperform. Every investor wants his selected fund to stowaway beat the benchmark and he barely minds paying the fee for the out performance.
Reply
devender Goswami · 1 week ago
I think LnT MF is also in the same row of sharing the reduction in brokerage with MFDs. They have reduced only 10 bps for MFDs and bearing 5 bps themselves.
Sridhar Heda · 1 week ago
Hello Please note I believe Distributor Commission doesnt fall with in Additional TER . So SEBI guide line should not impact the brokerage rate. Also AMC should stop sponsering Hefty Parties in the name of product launches.
Subramanian gomathinayagam · 1 week ago
Hello Mutual fund investments are delivery best returns only after 7 to8 years closely related with economics changes both macro&micr o
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