However, in case upfront commission is banned, 57% of IFAs felt there would be no change (36%) or higher focus on mutual funds (21%), another 43% of IFAs say that they would move to other products.
AMFI’s recent proposal to ban upfront commissions has created a stir in the industry. In this context, Cafemutual did an online survey of IFAs to gauge the perceptions of IFAs regarding the ban of upfront commission and related issues. Till the time of writing this article, 503 IFAs had responded to the survey.
Here are the key findings of the survey.
Commission structure – status quo preferred
When asked what kind of commission structure they would prefer, 72% respondents say that they prefer the existing model – upfront plus trail, 26% said that they prefer an ‘all trail’ model and only 2% said they want ‘all upfront’.
Mis-selling
When asked if upfront commissions induced mis-selling, 61% disagreed while 39% said that upfront commissions does entice them to mis-sell.
Cap on upfront commission
When asked if there should be a cap on the maximum upfront that can be paid, there was a mixed response. 55% felt that there should be a cap on the upfront commission while 45% said that upfront should be decided based on the market dynamics.
Impact on inflows
When asked about the possible impact of ban on upfront commission on sales, an overwhelming majority of 73% said that it would impact the inflows in mutual funds negatively.
Impact on willingness of new advisors to join the industry
When asked whether banning of upfront commission would deter new IFAs to join the industry, 71% said that it would be tough to attract new IFAs in the industry. The remaining 29% said that it would not deter new IFAs to join the industry.
Who gets impacted the most?
When asked whom would the upfront ban affect the most, more than half of the IFAs (54%) felt that it would affect new IFAs who have recently joined the industry while 36% said that it would only affect those IFAs who focus on NFOs. Only 10% felt that it would negatively impact existing IFAs who have large assets under advisory.
Impact of commission claw back
66% IFAs felt that SEBI’s rule of clawing back commissions if investments are redeemed before one year has helped reduce churning and the remaining 34% felt that it has not.
Approach towards mutual funds
21% of the IFAs said that they would push mutual fund products even more aggressively if there is a ban on upfront commission while 36% said that their approach to mutual fund business would not change and the rest 43% said that they would focus on other products if upfront commission is banned.
