A committee formed by the Government of India has sought feedback from IFAs on commission structure of all financial products such as mutual funds, insurance and pension.
Last year in November, the Ministry of Finance had set up a committee to examine the commission structure across all financial products in order to rationalize commissions paid to distributors. Also, the committee will put forth its recommendation on minimizing regulatory arbitrage and reducing mis-selling.
An email sent to distributors by FIFA lists out three key objectives of the committee:
1. The committee would study the prevailing incentive structure among various financial products taking into account the historical evolution of such structure in India and globally and also the differential nature of the product itself
2. The committee would suggest policy measures such that differential regulatory norms do not favour any particular financial product and prevent mis-selling. The study would also address issues with respect to hidden costs and identical financial products under different regulatory jurisdiction
3. Suggest measures to rationalize the incentive structure across financial products
“At present various financial products have varying incentive structures regulated by different financial sector regulators. There is a plethora of incentives /charges cap imposed by different regulators across financial products making the incentive structure skewed. The Government has set up a committee to suggest measures to streamline commissions across all financial products,” reads out the mail.
Dhruv Mehta, President, FIFA said that they have sent emails to many distributors and associations requesting feedback into the matter. He said that FIFA will collate responses from all distributors and share them with the government appointed committee.
Sources said that the committee has also invited AMFI to put forth its recommendation before the committee. More details about the name of the committee and its members are not known yet.
IFAs can send their comments to response@fifaindia.com within a week’s time.
