A recent Karvy study reveals that an average IFA earns Rs.13,000 per month.
According to the report, an average IFA today earns close to Rs.1.50 lakh per annum. Although it has improved from Rs.81,000 per annum in the FY 2013-14, it is quite clear that an average earning of an IFA is not enough for him to take up MF distribution as his full time activity.
The report says that there are 34,000 active distribution in the mutual fund industry.
Voicing the need to have an alternate source of income at least in the initial days, Mumbai-based IFA Nisreen Mamaji, Moneyworks Financial Advisors says that IFAs should first test the waters and see if they have the necessary skill sets to survive in this field. “I started out as an insurance agent and then gradulally started selling mutual funds. Having established myself in this field, I now sell mutual funds full time. This technique could work for those advisors who are not sure if they can handle this type of work,” she says.
Commenting on the finding of the study by Karvy, Chennai-based D Muthukrishnan, Wise Wealth Advisors stressed the need to increase wallet size to survive in this business. “When you are getting paid as a percentage of AUM, your AUM must be sizable to make the business lucrative. Increasing the expense ratio is not an option as then retail investors will not find mutual funds attractive. So the best way to grow business is to focus on increasing wallet size per client,” he says.
Talking about the merits of a fee based model over a commission based model, Kavita Menon, Mumbai-based RIA, feels that the regulatory environment in more conducive towards a fee based model. “As a fee based advisor you have a choice of fixing a price to the services you will be giving a client, unlike a distributor model where the fund house decides what percentage of commission you are eligible for,” she says.