IFAs are worried that their earnings are publicly available on AMFI and AMC websites. While SEBI’s intention to make public the commission data of top distributors was to bring transparency in disclosing information about distributors, the move has not gone well with distributors, particularly those in the individual category.
In its August 2011 circular, SEBI had asked AMCs to disclose on their respective websites the total commission and expenses paid to distributors who meet one of the following criteria:
- Multiple point of presence (more than 20 locations)
- AUM raised over Rs. 100 crore across industry in the non-institutional category but including high net worth individuals (HNIs)
- Commission received of over Rs. 1 crore p.a. across industry
- Commission received of over Rs. 50 lakh from a single AMC
Cafemutual spoke to IFAs who meet one of the above conditions to get their views about this issue.
Sadashiv Phene, an advisor from Mumbai who manages assets under advisory (AUA) of Rs. 220 crore as on March 2014 says that disclosing distributor’s earnings in public does not help investors.
“It doesn’t serve any purpose for investors. Investors are only concerned whether distributor is giving right advice or not. We don’t mind disclosing commissions to investors. However, disclosing it publicly may land us in trouble as the data can be misused,” said Sadashiv Phene.
Vinod Jain, a Mumbai based advisor says that the commission data can mislead people. “The data is misleading. It doesn’t show how many clients the distributor serves and how many branches he/she has. You can’t compare the earnings of one distributor with another, purely by looking at the net commission earned. Also, the data can be misused by anti-social elements,” says Vinod Jain of Jain Investments. Jain manages AUA of Rs. 224 crore as on March 2014.
Shifali Satsangee of Fundsvedaa says that disclosing commissions publicly may create a negative impression about IFAs in the minds of clients. “Though there is no issue in being transparent, this would work more efficiently and better in more evolved and mature markets. However, it would not add value to the investment decision making process of the investor."
Pallav Bagaria, a Guwahati based advisor says “Disclosure is good but revealing the income of an individual distributor does not helps clients. Company earnings can be published in public domain but disclosing individual’s income is not mandatory by the Income Tax Act 1961,” claims Pallav who manages AUA of Rs. 195 crore as on March 2014.
Distributors are already required to disclose the range of commission they earn from different scheme category to investors.
IFAs say that no other industry is required to disclose such data in public domain and disclosing such data puts IFAs sitting ducks for anti-social elements. “Anti-social elements cannot enter a bank or ND office and demand ransom. However, the situation is different when it comes to disclosing individual’s earning,” says a Navi Mumbai based distributor who manages AUA of close to Rs. 500 crore.
Also, IFAs feel that such disclosures are an infringement on their privacy. “Our income is a personal matter. While I am happy to share this information with income tax authorities and other statutory bodies, putting our income in public domain is undesirable,” said a leading IFA.
