A majority of fund houses find it difficult to find and empanel quality distributors, shows a recent report published by SEBI. Fund houses agree that the industry has a dearth of advisers who are serious in their profession and skilled with requisite educational qualifications.
The SEBI survey showed that 61% of fund houses feel that finding quality distributors is a major cause of concern for them while 24% of fund houses had a neutral view. Only few fund houses are of the opinion that they have no problem in finding quality distributors.
The report said, “Of all the fund houses surveyed, 61% of respondents said that finding quality distributors continues to present a formidable challenge. Fund house are of the opinion that due to the current regulations that impose a limit on the incentives, good quality distributors are hard to find. On the other hand a large majority of respondents said that even if a reasonable commission is offered, it is difficult to recruit sufficient number of distributors which implies that there is a lack of skilled distributors. Also, finding quality distributors especially in small towns and rural areas is a major hurdle towards increasing mutual fund penetration. This problem is more prevalent in case of AMCs with relatively lower AUM levels.”
A sales head of a foreign AMC said that both MF industry and investors lack advisors who can recommend goal based products. “Advisers usually recommend products on the basis of its past performance despite the fact that past performances does not necessarily reflect its future. Investors need advisers who can predict which category or funds have the potential to do well in future.”
DP Singh, Chief Marketing Officer – Domestic Market, SBI Mutual Fund believes that many small distributors have left MF distribution due to insufficient incentives offered to them. He feels that the existing incentive structure is not enough for small distributors to carry out mutual fund distribution as a full-time profession.
Besides, only few fund houses believe that distributors selling other financial products like insurance would affect mutual fund penetration. The senior fund official quoted above said that offering multiple products to clients can help advisers to increase their wallet share.