MF News Steep decline in new IFA registrations

Steep decline in new IFA registrations

The MF industry has witnessed a downfall of 60% in new ARN registration under individual category in April-September 2019.

Nishant Patnaik Oct 17, 2019

The MF industry’s target of achieving of Rs.100 lakh AUM by adding 4 lakh new distributors in five years seems to get more difficult.

AMFI’s latest data on status of registration of new ARN shows that while the industry has added 4489 new ARNs under individual category in April-September 2019 as against 10965 IFAs in the corresponding period last year, a massive decline of 60%.

Experts attributed this to ban in upfront commission and shift to all trail model to compensate mutual fund distributors. Post October 2018, the new ARN registrations of IFAs has declined steadily.

“The last few years have been a roller coaster ride for the advisory community. First came the euphoric phase when markets ran up, investor interest in mutual funds increased consequently leading to business growth. However, challenges have arisen in the last one and half years. While on one hand, the regulator banned upfront commission and reduced trail commissions, on the other hand, equity and debt markets turned volatile making investors cautious. While it is still early to comment, it appears that the current challenging environment has dampened enthusiasm in becoming mutual fund distributors,” said a senior fund official requesting anonymity.

Earlier, in a letter sent to MF CEOs, AMFI has acknowledged that the India has poor per capita distributor to service investors. AMFI had said, “While the aggregate number of folios is over 8 crores, the number of individual MF distributors currently registered with AMFI is just over 83,000 and this number would be far lesser, if the number of inactive distributors is factored in. Thus, the per-capita number of individual MF distributors (or IFAs as they are commonly referred to) vis-à-vis India’s population of 1.34 billion is woefully small, especially when compared to the insurance sector, which has reportedly more than 2.2 million insurance agents.” A rough calculation shows that India has one IFA for every 16,200 people.

In addition, the recent regulatory changes in TER structure may have had further impact on the industry’s attractiveness for new distributors, said AMFI.

Considering all categories of mutual fund distributors (individual, new cadre, overseas distributors, corporate, corporate employees and IFA employees) new ARN registrations stood at 23137 in April-September 2019, most of them being EUIN holders working for banks and NDs.

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20 Comments

P N KESHARI · 4 years ago `

There is a popular Song-CHAL URAH JA RE PANCHHI AAB YE DESH HUA BEGANA
reduction in IFAs registration is symbolic proof of dislike to profession with least payout and advent of Direct in such important field Finance with lot many paper work like kyc, adhar, change in Bank accounts and address at occasions, Nominees, Reduction in folios and many many like non payment of Dividends and hordes of missing data in MF increased responsibility of IFAs at no service cost apart tiny trails less than transit cost compensation. Now easy removal of Advisors without approval or knowledge of Care taker original Advisor.
Such harshness and apathy of deal has soaked our blood to no supplement. It is really frustrating. Now in market IFAs seldom are found.
Go as you like drive as self without competence and leave in situation of market fall has become symbolic do of Direct Investors.
We appeal to SEBI at least pay us to compensate expenses in service.

AGS CONSULTANCY · 4 years ago

Agree sir with your viees,we are thankful to cafemutual for listen our voice and provide us platform otherwise AMC are just ignoring us on this point..

AGS CONSULTANCY · 4 years ago `

SEBI should surely make efforts for increasing revenue portion for ARN holders and increase their enthusiasm , otherwise which advisor like to make efforts for initial five years where even he can't able to meet his business expenses and value for his time , IGNORANCE for mutual fund distributors can be dangerous for SEBI as well as AMFI .

If people of SEBI came in market on field for selling mutual funds than they will realize it is very tough in INDIA to believe people that mutual fund is much better than guaranteed investments options,but SEBI is paying very very less in compare to other government bodies which are paying commission on financial instruments selling.many people whom i know in ahmedabad are still thinking to come out of mutual fund distributorship and do business for insurance , post , corporate deposits rather than mutual fund selling..

I request all new ARN holders to share their views and inform SEBI and AMFI by cafemutual platform that what efforts we are making , what we are getting ?? , what ridiculous competitions we are facing from banks and other platforms who even don't know financial planning ABCD and selling customers by just saying that you will get 15% and 20% etc...They are target oriented employees today with x bank and tomorrow with y bank while we are certified ARN holders ?? In a lighter node i would like to add very true fact which you all know Banks are already facing lots of loss and NPA's in their CORE BUSINESS OF BANKING and they are doing work of mutual funds and insurance , mediclaim etc ...Bhai pehle apna core business to manage karo "...PC bank is latest example..

Really what RBI and SEBI is doing with citizens hard earned money ??

Prashant · 4 years ago `

This is by design. They not only want new distributors but they don't want any distributors at all just to maximise AMCs profits at the cost of crores of investors. When was a study conducted to ascertain how many direct investors are benefitted and how many regular investors are benefitted? This is all western influence and this for sure is done because some MNC wants to enter into our country and wants to remove competition before it does. Almost all banks and AMCs are foreign origins and we Indians are losing our livelihood to them. Where is make in India in this? In fact America is showing the world that they made a huge mistake by allowing everyone to enter and do business and now they are changing that but we are walking on their old path so not learning from their mistakes. We are extremely unlucky that till date we haven't had a leadership which will work for benefitting our people. Last prime minister openly told that India is insulated even when recession hit USA because we were a protective economy than why was it opened and why is it still opening more and more to foreigners?

Rahul · 4 years ago

So true

JYOTI · 4 years ago `

Dear SEBI, I am from very small city i..e Amritsar, having very less knowledge of customers. They are not able to invest in Crores. We are invesing only some thousands of rupees investments. In these commissions, how can we survive. Insurance Companies giving 35% but not giving satisfactory return to customer. Time was that, when we convert Investor from Endowment plan to Mutual Funds. But at this time, we are thinking that JO BOLTA HAI ENDOWMENT PLAN, then USE MANA MAT KARO.. Aakhir humne bhi apne bachon ko roti khilani hai... So pls increase our compensation for retain us in this industry. Thanks & Sorry, if i say something wrong. But really, at this time we are very depressed.

Rajesh Minocha · 4 years ago `

It is indeed an irony that for mutual fund distributors you have all restrictions like a mandatory renewal certification (even for qualified people with decades of experience in finance industry and a relevant certification like a CFP, or equivalent), but for someone investing self there is no education/knowledge needed. When someone invests just based on past returns without factoring in goals and own risk profile, it can back fire badly, thus risking such investors to move away from mutual funds investments permanently. Don't get me wrong, certifications is needed, but shouldn't this be applicable for all. Sudden changes in regulations impacting the business plans of distributors is a "bonus". But those who are agile and adaptable to change based on new game rules will be the eventual winners!

Nakul Mullick · 4 years ago `

My view is that reductions in commission structure is all hand in glove with the AMC's.
As they hv seen the robust appetite of mutual fund consumption by the population of India and they wish to do away with IFA so as to encourage direct plans and not interested in giving commissions to ARN holders.

Pradum kumar jain · 4 years ago `

All well u explained already but 20 % gst impose by govt over 20 lac commission in a yr till yet, for future not confirmed. So in such a tiny rate of commission we have to pay gst, how is it justified, I could not understand. All the time policies changes, difficult to provide services to our customers. We are busy only in providing new guide lines.

VMV Capital · 4 years ago `

I think AMCs are getting all the benefits in the name of TER reduction and claim that SEBI has directed them to do so. In fact AMCs have benefitted on account of GST. We are not paid additional amount of GST, yet we have to pay GST @18% which is supposed to be paid by AMCs. Secondly the kind of multiple services MF Advisors are giving to their clients, it is not there in Insurance products. LI policy once sold for 25 years, no specific services are required to be given to customers. Where as the difference in rate of commission is huge. It is really difficult to manage for new IFAs with this little rate of commission. Even the petrol dealers are being paid hefty commission per litre basis by Govt.
There has to be reasonable justification while paying commission to IFAs considering their efforts being put in.

Rishabh Adukia · 4 years ago `

Its absolutely right for people to not prefer this profession and get into this business for many right reasons. AMFI & SEBI is unfortunately not in favour of protecting the interesting of Distributors who have actually built the overall business and been helping investors in tough times and making them earn extra returns which otherwise would have been a challenging task for them in their individual capacity.
Globally investors cannot invest in direct schemes unless you qualify for an exam, why can we not have such a system in india as well where people have to understand and qualify the basics to start investing. Government is always wanting to please the masses and ignore the people who work day hard to make it successful.

FundsPundit · 4 years ago `

AMC gives different Brokerage structure for IFA’s. New IFA’s don’t get the maximum Brokerage. Insurance industry offers same rate of commission to every agent. Mutual Fund industries discrimination of IFA’s based on AUM is not fair trade practice. This should be corrected so that new IFA’s get equal footing in the industry. Also the trail commission needs to be better

Mukesh Bhatia · 4 years ago

It's true industry is being led by Big banks and big distributors like NJ and these big distributors dictate terms and take away biggest share of brokerage and keep small share to the IFAs under them and keep the balance share with them, banks sell through through branches and make fool of clients by promising higher returns and force them invest in new and ULIP schemes. New advisors have to do lots of farming since they are not privileged to have database which employees and ex employees of banks have that's why for ex employee and banks have majority of easy business under them and they take away higher commission.

Vishal Rastogi · 4 years ago `

As per me best songs fit for IFA's (new * old both) "Babu g jara sambhal Ke , Yeh dhanda nahin hai saab ke , kyon ki dhandha par break hai pal pal pe.... kabhi bhi utha ke phek den thuje Makhi samaj ke !

Vishal Rastogi · 4 years ago `

Well friends ... lets talk something serious apart from my song earlier.... That can anyone justify that there exist a business without a proper remuneration the anser is big NO.... then why our business is like so..... Then how could any one think to join this ? .........

shailendra Pote · 4 years ago `

Both RBI & SEBI is full of half mad people. It is just targeting on distributor's income. What about AMC who is earning crores of profit every year? It is very clear that "Bade log aur Bade Hone chahiye" is the policy of SEBI!

VISHAL CHATURVEDI · 4 years ago `

Out of these 83000 Ind. Distributors 40000 must be searching some other option for their living. For first 5 years in this business a labour, driver, rickshaw puller or plumber can earn more money than a mf distributor with very less amount of knoledge, efforts and without any continuous study or updation. Why anybody should join this worthless occupation. A plumber, carpenter or electrician visit my home for an hour and to my envy takes away rs. 300 from me. And for me to earn this much of amount i have to call any prospect 5 times to take his oppointment, go to him on my vehicle and teach him what is MF, why should he invest in a priduct which can give negative return also, how MF may give better returns than FDs, taxation, economy, types of funds, decide the funds according to his risk appetite. Then he gives another appointment to bring documents. After that filling up his forns for 2 hrs., visit AMCs to deposit these forms, after a week again visit AMCs to collect his statements and again take appointment from client to hand these statements over to him. Then if scheme does not perfom well, we continuously discuss it with client and remain in pressure. If it is rs. 2000 p.m. sips, for all these efforts we would get rs. 300 in two yrs. time. Not only this, Regulator is harrassing mf distributors in every possible way they instructed to take FATKA from each client, than instructed to link Aadhar in every folios, then applied GST on distributors, due to NACH earler 50% OTMs were being rejected, started Direct option, Started promoting direct on TV, started sending clients distributors brokerage details. RIDICULOUS.

VISHAL CHATURVEDI · 4 years ago `

In the meantime, they created one more confusion among distrbutors for harrassment i.e. IFA model & Advisor model. They say they r cutting TER. A distrubutor take all the pain mentioned above to collect even rs. 10000 cheque from client and go 10 kms on his vehicle. If an AMC's RM who gets rs. 50000 p.m. goes to collect it will cost more than rs. 1500 for tbis activity. Would this cut TER , again RIDICULOUS thinking. Killing of hen , which were providing golden eggs.

VISHAL CHATURVEDI · 4 years ago

I am an ex employee of am AMC with 29 yrs of experience in Financial Markets. Have been doing distributor's job for more than 4 yrs and could not earn 15000 p.m. If i had been still working in AMC, with less knoledge and same efforts my salary would have been more than rs. 1 lac p.m. This is just a comparision, how much commission they r paying to distributors.

VISHAL CHATURVEDI · 4 years ago `

After this, this is not an FD. It requires continuous monitoring. Continuous updation of market and economy, many after sales services, risk of early redemption. Many more things to write. But who is going to read this. I have already wasted my valuable 1 & half hours throwing stones in the mud.

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