Finance Minister Pranab Mukherjee made a case to open new channels of distribution for greater penetration of mutual funds while addressing top SEBI officials.
The investor’s appetite for market linked insurance, credit and investment products is on the rise, says FM Pranab Mukherjee, according to a SEBI press release. “He (FM) emphasized the need for trustworthy regulated retail intermediation with common minimum standards. For retail investors, he mentioned that there is a case for bringing down the financial costs and increasing access to mutual funds by new distribution channels,” states the release.
Not long ago, SEBI Chairman UK Sinha too had called upon AMCs to reach beyond the tier-I and tier-II cities.Thin margins, high cost of operation and lower distribution incentives pose major challenges for industry players in tapping small towns.
FM also stressed the need to increase financial literacy to address information asymmetry. He said that SEBI may consider expediting the process of framing appropriate regulations for alternative investment funds to avoid any systemic risk arising out of unregulated private pools of capital.
FM’s comments come at a time when the industry has been facing a slump in sales ever since the ban on upfront loads. Many distributors have shifted focus to other higher commission yielding products. Out of 1 lakh ARN holders with AMFI at one point of time, some 40,000-odd are compliant with KYD norms. Unofficial reports put the active distributors’ (those who do fresh business every month) at around 5000, while 15,000+ inactive distributors (having past AUM) that earn trail commission and do not bring any fresh business.
So
far, banks, IFAs, NDs and brokers have been the primary distribution channels
of mutual funds. Newer online models, both business-to-business (B2B) which
empanel IFAs and business-to-consumer (B2C) which reach out directly to
customers, are yet to taste success. A small but growing number of investors
invest through AMCs websites and with debit cards.
