Responding to SEBI’s consultation paper on RIA, All Mutual Fund Distributors welfare Association (AMDwA) has expressed their concerns over segregation of investment advice and distribution activity.
In an email sent to SEBI, AMDwA has pointed out that mutual funds have a penetration of only 4%. “To help increase penetration of financial products, investment advisors and distributors should be allowed to co-exist in the industry. This will give investors an option to choose the services they want based on their needs, social status, financial capability and comfort,” the mail says.
Further, the association has said that SEBI should let investors choose between distributors and RIAs. “The investor must be allowed to choose if they want to pay separately for the advisory services or are happy with the existing model,” said the association. Simply put, the association has recommended SEBI to continue to allow distributors to provide incidental advice.
The association has pointed out that in a country like India where the investors are not financially literate, putting a fee on advice might prompt investors to make unguided investments.
“Investors may feel that expenses are being forced upon them; this may prompt them to avoid consultation altogether. This will eventually lead to loss of wealth due to over trading, over confidence and other behavioural biases,” said the mail.
AMDwA has also recommended to SEBI to change the nomenclature of distributors from ‘Mutual Fund Distributor’ to ‘Mutual Fund Expert’.
The AMDwA is a Delhi based advisor association with over 300 members across north India.
