Even as nearly 8,600 new individual distributors joined the industry in FY20, the total number of individual MFDs rose by around 3500 in the last fiscal. This implies that nearly 5100 individual MFDs did not renew their ARN.
Industry experts feel this is a telling sign of MF distribution losing its attractiveness. In fact, the addition of new 8600 distributors in FY 2019-20 is half of what the MF industry had added in the preceding financial year. In FY 2018-19, the MF industry saw an addition of 17,600 new distributors.
D.P. Singh, ED & CMO (Domestic), SBI MF said that shrinking margins, difficulties in scaling up business volumes and subdued returns from numerous equity funds have forced some of the budding distributors to quit the distribution business.
Sunil Subramaniam, MD, Sundaram MF said that regulatory changes in TER structure, ban on upfront commission and shifting to an all-trail model have dented the attractiveness of mutual fund distribution business.
The trend is a worrying sign for the MF industry as it could take a toll on the pace of equity flows and also slow down the penetration of the Rs.24 lakh crore MF industry. In September 2019, a report by AMFI-BCG noted that MF industry will have to add 4 lakh new distributors to achieve AUM of Rs.100 lakh crore by 2025.
