The Foundation of Independent Financial Advisor (FIFA) will soon approach SEBI requesting them to reconsider its decision on banning upfront commission and reducing TER.
FIFA Chairman, Dhruv Mehta told Cafemutual that they would approach SEBI on the issue of upfront commission and TER reduction. He said, “The federation believes that the move will challenge the existence of small IFAs. Currently, close to 30,000 IFAs manage AUM of less than Rs.1 crore. These IFAs are hardly earning Rs.10,000 to Rs.15,000 per month. A hit of 20% on their earnings is a big blow to them.”
Mehta further said that the move would also affect retail investors. “In my view, the cost of servicing retail investors has now gone up. It is not viable for many distributors to service investors investing up to Rs.10 lakh as distributors end up spending more money to acquire such clients.”
In a letter sent to SEBI before its board meeting, FIFA had said that reduction in TER could affect earnings of IFAs. The federation had said, “Many small investors have just started investing in mutual funds over the last couple of years. If you reduce expense ratio, that would mean a reduction in earnings for IFAs. This in turn will harm small investors as the earnings out of their investments will make it unviable for IFAs to service and handhold them.”
