Mumbai: The mutual fund industry has widely criticized the recommendation of a tied agent model by the SEBI’s seven-member MF committee headed by Prashant Saran (whole time member of SEBI). There have been media reports recently that the committee has suggested the adoption of the tied agency model in the mutual fund business.
The industry feels that it would severely cripple the choice of investors. They feel that investors would be more prone to being a victim of mis-selling and have called it as regressive move.
“The mutual fund industry is linked to the market performance, so no particular fund house would perform consistently well across all market cycles. From a customer’s perspective you need to offer a choice. If an advisor is linked to one particular product then the investor’s choice gets restricted. The advisor’s loyalty will be with the manufacturer, not the investor,” says Sunil Subramaniam, Director- Sales & Marketing, Sundaram Mutual Fund.
Others believe that such a move would kill innovation and limit competition. “You are restricting growth of new products and ideas. There will be no incentive for us to innovate. It is better to have some competition. The open architecture model is like an IPL team where you are able to pick and choose the best performers,” says Vikaas M Sachdeva, CEO, Edelweiss Mutual Fund.
Tied agency model is practiced by the insurance sector where one agent is only allowed to sell one life, general and health insurance product of each insurer. Recently, an IRDA appointed committee recommended banks to sell insurance policies of two companies each - two life insurance and two non-life insurance companies.
Besides, some IFAs feel that new fund houses planning to enter the market would have a tough time finding a distributor.
“It will be difficult for new AMCs to get distributors empanelled under them. There can be two different IFAs like we have in insurance -insurance agent and an insurance broker. SEBI can allow two levels of distributors to operate,” says Jayant Vidwans, President, Society of Financial Planners.
An insurance broker is allowed to do business with all the insurance companies while an insurance agent can only empanel with a one insurer.
