2021 was one of best years for the mutual fund distributors. The year’s trends show that many MFDs executed successful SIP drives, witnessed growth in AUA and were much ahead of their competition like fintech firms.
Here is a quick recap of the key events of 2021 that have influenced MFD business.
SIP drives became the new trend
Doing SIP drive has now become a regular practice among distribution community. Thanks to motivational articles published on Cafemutual and digital transaction platforms, the number of MFDs doing SIPs has increased substantially. In fact, Cafemutual has covered 92 stories on successful SIP drives in 2021 compared to 62 stories in 2020.
AUA of individual MFDs skyrocketed in FY 2021
FY 2021 was a rewarding year for individual distributors, at least for those who have assets under advisory (AUA) of over Rs 1 crore. Industry data shows that 90% of such distributors together registered a 61% rise in equity AUA in the last financial year.
Among them, MFDs in the lowest AUA bracket (Rs 1-5 crore AUA) reported the highest growth in assets. Of the 17,034 MFDs who come in this bracket, 15,193 saw a growth in assets under advisory. The average growth was 76%.
The second highest AUA growth was seen in the 'Rs 5-10 crore AUM' bracket. Their aggregate AUA (excluding MFDs who saw a decline in AUA) went up 76% in FY 2021. Top MFDs, who have AUA in the range of Rs 500 to Rs 1,000 crore witnessed 25% growth in AUA.
MFDs ahead of fintechs in the world of mutual funds distribution
Fintech firms are gaining ground in distribution business but MFDs are still far ahead. Individual and national distributors (NDs) command 37% share in the total industry AUM compared to 5% in case of fintechs.
As on March 2021, assets under advisory of distributors and NDs amounted to Rs.12 lakh crore out of the total Rs.32 lakh crore industry assets. Fintechs have an AUA of Rs.1.60 lakh crore, shows an industry report.
MFDs and NDs command lion share in top fund houses
An analysis of quarterly data by Cafemutual shows that half of the total assets managed by top 25 fund houses has come from their non-associate distributors like individual MFDs and NDs. Over 47% of their assets has come from non-associate distributors as on September 2021.
Nomination against ARN gain importance
One of the biggest concerns of MFDs that has come to fore especially during Covid times is nomination. Many MFDs have revisited their nominations against ARN.
In addition, many MFD associations have requested AMFI to introduce a centralized nomination facility for MFDs.
Currently, MFDS have to submit a physical nomination form at the fund house level. There is no centralized online system to make nomination against ARN. In addition, making changes in nominee details entails a complicated offline process.
35% MFDs are active in the MF industry
The industry data reveals that of the total 94500 individual MFDs, 33050 MFDs or 35% of the total individual MFDs manage assets of over Rs.1 crore as on March 2021.
Nearly 16,000 MFDs or 17% of the total MFDs have assets under advisory in excess of Rs.5 crore. These MFDs have been making meaningful money from the MF distribution profession.
Importance of MFDs/RIAs gain prominence
A report release by Boston Consulting Group (BCG) said that just like ‘Mutual Fund Sahi Hai’ campaign, the mutual fund industry should focus on inculcating the investing culture through advisors/MFDs by launching ‘Saarthi Zaroori Hai’ campaign.
In fact, a new ad film featuring Sachin Tendulkar also stresses on the importance of experts in selecting mutual fund schemes. In another such example, ‘Wagle Ki Duniya’ fame, Srinivas Wagle rightly advises his son Rajesh Wagle to leave investment decisions to experts in one of the episodes.
New commission methodology
Fund houses will have to introduce an approved methodology to determine commission structure of their distributors. Another key development is clawback in commission. SEBI has made claw back provisions voluntary for AMCs.
AMFI cuts ARN registration and renewal fees by 50%
AMFI has reduced ARN registration and renewal fees by 50% effective May 1, 2021. With this, the new ARN registration and renewal fee for individual distributors have been reduced to Rs.1500 and Rs.750 excluding GST, respectively.
Similarly, AMFI has slashed EUIN registration and renewal fees to Rs.500 and Rs.750, respectively.
ARN registration becomes completely online
AMFI has resumed Aadhaar based authentication to register new ARN and EUIN. With this, individuals and corporates can obtain new ARN and EUIN online.
MFDs will have to obtain NISM certificate to sell PMS
MFDs will have to pass the NISM Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination to distribute PMS.
However, mutual fund distributors can continue to sell PMS until the validity of their ARN i.e. up to 3 years. MFDs will have to appear for PMS examination at the time of renewal of their ARN.
