MF News Impact of upfront commission ban: Industry sees 13% decline in new individual ARN registration

Impact of upfront commission ban: Industry sees 13% decline in new individual ARN registration

The MF industry added 17,625 new IFAs in FY 2018-19 as against 20,339 in FY 2017-18, a decline of 13%.

Nishant Patnaik Apr 22, 2019

Ban on upfront commission has not gone down well for the industry at least in terms of new ARN registration.

AMFI’s latest data on status of registration of new ARN shows that the MF industry added 17,625 new IFAs last fiscal as against 20,339 distributors under individual category, a decline of 13%.

If we look at the data in greater detail, the industry has seen massive decline in new ARN registration under individual category post October. While the industry added 6,660 new distributors under individual category in the second half of FY 2018-19 i.e. October 2018-March 2019, close to 11,000 individuals joined mutual fund distribution business in the first half of FY 2018-19. A rough calculation indicates that the industry witnessed a decline of 40% in terms of number of new distributors post October 2018.

SEBI banned upfront commission in October 2018 and asked fund houses to move to the all trail model. Experts believe that the ban in upfront commission would discourage new professionals to take up distribution business.

Though it is too early to say that this decline is due to upfront commission ban, the short-term impact of the move is clearly not in favour of the industry.

Overall, the industry has added 59,955 new distributors including 17,625 IFAs, 37,048 employees of corporates and IFAs in FY 2018-19. In FY 2017-18, while the industry added 20,339 new distributors under individual category, 57,831 joined MF distribution business including IFAs, corporates and employees.

Further, AMFI data shows that nearly 3,898 individual distributors chose not to renew their ARN in FY 2018-19. This is much higher than the corresponding figure for the previous fiscal. AMFI data shows that 2,475 distributors did not renew their ARN in FY 2017-18.

Meanwhile, 33,677 ARNs got renewed last fiscal. Of these, over 19,531 ARN renewals were from the individual category. In FY 2017-18, 26,712 ARNs were renewed.

As on March 2019, the mutual fund industry has over 2.01 lakh ARNs of which over 92,959 lakh are individual distributors and 1.09 lakh are employees.

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22 Comments

G.Vijaya · 4 years ago `

True, lack of business procurement is only because of withdrawn of upfront. Every one needs some financial requirement to meet expenditure for getting new business.

Vikas · 4 years ago `

Better to go for insurance agency.

Sanjay kumar jha · 4 years ago `

Many law put on ifa. Sebi wants without ifa industries. Many types of band on brokerage and put forcely law, like We are terrioriest. Very bad . Slowly slowly IFA run way from this industry

Ranjan · 4 years ago

Yes. It is true that SEBI considered distributors as criminals. So all punishments are for distributors and IFAs. Like this if the salary of SEBI officials decrease day by day will they continue to work for SEBI ?

vivek B. · 4 years ago

Very demoralise step taken by sebi. They want 0zero commission for ifa ,s do work without payout, what the he'll. . All laws are for ifa . ..damming he'll sebi ..

E RAVINDER · 4 years ago `

Last year, there were a cap of 20lakhs for GST registration, for this reason most of IFAs were registered family ARNs.

Now it is increased to 40lakhs on the other hand commission decreased, so many family ARNs are not renewed.

MukulkumarRoy · 4 years ago `

Verybad.

Nikhil miahra · 4 years ago `

I fully disagree with sebi....There is only 2% of brokerageb in MF and in insurance sector 35 % brokerage...I want to say that again check of sebi decision.

prashant · 4 years ago

Nikhil a very foolish and unthoughtful arguement. Insurance commissions are on annual premiums whereas mutual funds commissions are on collective AUM. So much higher commissions in mutual funds compared to insurance even though insurance is 100 times more difficult to distribute than Mutual funds. Also if they reduce insurance commissions will it increase your commissions automatically or you are just of the opinion that if they lose their income than your income lost is justified? Also if their income is reduced Weill that make you happy or your own income not going down willake you happy? If later is true than don't keep quiet,fight with the malicious bodies.

Prashant · 4 years ago `

Exactly what they(AMCs with the help of SEBI) want. In sometime now ARN holders also will start

Prashant · 4 years ago `

Exactly what they(AMCs with the help of SEBI) want. In sometime now ARN holders also will start surrendering their licenses since we are treated as illegal people and have committed heinous crimes by earning commissions where as when the same commissions are earned by web aggregators and banks they have done the most noble work. Also when AMC has a huge jump in the profits because of commission reduction are most noble. SEBI should appoint people to visit AMC offices, banks and web aggregators to know how are they misselling and misleading people so that they can come to the conclusion on how important we are for this industry and how we take care of investors interest and not our own like all other channels.

Shame shame shame

vivek · 4 years ago

Very demoralise step taken by sebi. They want 0zero commission for ifa ,s do work without payout, what the he'll. . All laws are for ifa . ..damming he'll sebi ..

Hemanshu Parekh · 4 years ago `

Dear SEBI
I would like to draw your attention towards the rate of commissions paid to insurance agents and the level of misseelling prevailing in the insurance sector.
Your action ban on upfront commission and reduction in trail brokerage is demotivating the honest mutual fund distributors and encouraging them to divert themselves towards the insurance agency where by though unwillingly but they can further accelerate misseling activities.

Prashant · 4 years ago

Himanshu a very foolish and unthoughtful arguement. Insurance commissions are on annual premiums whereas mutual funds commissions are on collective AUM. So much higher commissions in mutual funds compared to insurance even though insurance is 100 times more difficult to distribute than Mutual funds. Also if they reduce insurance commissions will it increase your commissions automatically or you are just of the opinion that if they lose their income than your income lost is justified? Also if their income is reduced Weill that make you happy or your own income not going down willake you happy? If later is true than don't keep quiet,fight with the malicious bodies.

jaideep · 4 years ago `

I hope that SEBI takes a lesson in understanding that mutual fund distribution has to be a viable business, not a business where earnings do not rise, but fall with each year. Unless of course they want every investor to go direct, in which case one can understand whose interest is being served, definitely not the investor.

jK · 4 years ago `

It is Obvious. And as per my opinion, coming days should be challenging for the MF industry if SEBI does not change it's stubborn stance and steps. SEBI have illegitimate problems over MF commission, but it does not have interests to visit other segment(s) to investigate illegal trading(s) in direct equity like dabba trading and gray market traps. Black & White is that good commission amount is ARNs pure right,because ARNs have lots of duty to provide best to clients. I think if SEBI,AMFI, even AMCs does not have care of ARNs, Industry AUM must affect slightly and slowly. As per my view, MF industry still is in a baby walk time, and if SEBI kicking the baby, surely the baby lost legs.

naga · 4 years ago `

Going Fwd its increased next financial year its coming 30 % to 40 %

Kiran closepet · 4 years ago `

True, just started to decline,. Not good sign, Hope things will be better.

Prashant · 4 years ago

How do you hope for the things to get better after all these malicious regulations?

Sib Sankar Dey · 4 years ago `

MF Industry @ SEBI think that in India all the cities are B30 category ,they are not in the field,they think in the sit of AC room,so their no idea of the business how much tough.

karthik · 4 years ago `

in future Some of Minimum AUM IFA's are quit the business and some average AUM IFA's are moderately switch to some other Distribution ( Like Insurance , Loan etc ). Then automatically Reduced the MF Business and Customer Services then only AMC and SEBI realize the IFA Rolls in important in industry

jatinder kapani · 4 years ago `

if sebi does not want to pay upfront commission to ifa for betterment of investor why the employees of mf r getting hefty package and moreover ifas should b given few things directly like rice wheat pulses fruits vegetables petrol and more directly from govt so no middleman commission is involved
kill all the industries

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