MF News SEBI nudges fund houses to promote direct plans

SEBI nudges fund houses to promote direct plans

The market regulator has reportedly asked AMCs to promote direct plans in investor awareness programs.

Nishant Patnaik Jun 4, 2016

SEBI is said to have been nudging fund houses to promote direct plans, said three people familiar with the development. The market regulator has reportedly communicated this message to fund houses through AMFI in a recent meeting.

“Citing an example of RedBus (a portal where users can book bus tickets), the market regulator has communicated that if RedBus can sell tickets of Rs. 5,000 crore a year, why it can’t be replicated in the mutual fund distribution space?” said one of the people quoted above.

Another official said that SEBI is not happy with the way fund houses are promoting direct plans. “SEBI wants us to promote direct plans in investor awareness programs (IAPs) across the country. The market regulator has also suggested us to go digital to promote direct plans. However, how we can create awareness of direct plans through digital media is still not clear,” he added.

Though direct plans account for 35% or Rs. 4.74 lakh crore of the total Rs. 13.55 lakh crore industry AUM as on March 2016, the share of retail investors in direct plans is quite low. Retail assets in direct plans stood at Rs. 27,164 crore (across all scheme categories) in March 2016 which is barely 2% of overall MF assets.

Typically, corporates and banks take direct route to invest in mutual funds. Of the Rs. 4.34 lakh crore total direct plan AUM, corporates had invested Rs. 3.37 lakh crore in schemes while banks had invested Rs. 52,628 crore. Both account for a major share of direct assets, particularly debt funds.

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24 Comments

Raju · 8 years ago `

Direct plan will not much profitable for investor. I know few they doing 3000-5000 pm sip . whereas my investor minimum sip 10000-20000. And they put more n more in market when I say in lower market. Direct plan will not make investor too rich

KV Raghupathi · 8 years ago `

Majority of that 27% of those participated direct are corporate and corporate houses like Infosys, wipro and TCS whose allocation of investment are ? 20,000 Crores each. And they do have their own Treasury department for research and invest wisely. So in case of banks. And they make profit out of their participation directly.

SEBI and AMFI should understand the difference between a consumer and an investor. A customer gets a ticket from REDBUS and complete his journey with a travel time (risk of travelling safely) of not more than 24 hours. But, investor is not a consumer and need to be in investment process (risk period) for years to accomplish his/her goal through investment.

A cooker alone cannot give delicious food without a good cook. REDBUS can ensure getting ticket easily but, cannot ensure safe journey. It is the traveller (here it is the investor) to choose the bus that suits his comfort of journey.

jaideep shirali · 8 years ago `

Every business has distribution costs and unlike many products/ services, financial product distributors add value by investment advice. As in any business, there are black sheep in the financial product business, but every distributor is not unethical. Mutual fund distributors have worked with many restrictions and constantly changing rules, but they are primarily in the business for their livelihood. Regulators have to work with the business they regulate, not bad mouth it at every forum. This "buy at the cheapest price" strategy is hardly the best way to encourage investments. The mess in the fixed deposit market where investors were lured by high direct incentives and are helpless because their money is stuck, should have warned the regulator. Investors and distributors have relationships based on trust, the regulator should work towards reinforcing rather than destroying this trust.

Ranjan · 8 years ago `

SEBI must understand every cheap thing in the market is not great. People goes for branded items with more cost because they know that the benefit they get out of that product is more

bALAN VIJAYASHEE · 8 years ago `

I do all the business in direct plan only.Advice is offered and investment is made accordingly and a fee is collected both the advisor and the investor is happy.

manoj · 8 years ago `

nice

gaurang · 8 years ago `

Sebi thinks that investing is like buying red bus ticket. No investor interaction and advise required :)

Rajesh Gupta · 8 years ago `

The % and amt in the article are not matching

Sunil bhagat · 8 years ago `

In the recent past the tendency of sebi to sideline the IFA community is evident here. Really very sad that the regulator does not appreciate the hard groundwork done by the IFA to push the industry forward. After all it is benefiting the customer who is also human as the IFA. Technology should be an enabler not the opposite. Simultaneous growth of the IFA with the sign of a healthy industry and community. By adding to unemployment in the long run will help nobody as Investors do need hand holding at some time or the other. Comparison of mf products with red bus tickets is preposterous. Client life is not a bus ticket. A bus journey is over in a few hrs. Investment is a lifetime journey.....the regulator needs to be replaced

MANINDER SINGH CHADHA · 8 years ago `

I think the regulator is either being mis guided or does not have sufficient knowledge , data and history the ways its promoting direct plans which will be suicidal for the investors in the long run

Daniel · 8 years ago `

RedBus example is not very appropriate!!
Reason being!!!!

Since, here the traveler knows
his destination,
time taken to travel,
best route to travel,
which season to travel….

Also we should understand, RebBus is not doing charity here, it is charges the fleet owners.
Makes quite a lot of many for themselves & for their investors. Really appreciate their efforts.

RedBus executives does not walk / drive down to the travelers house / office to educate which bus to travel or how to travel..

But where as an IFA, meets the investor in person, spends quality time to educate them their financial needs.
For which he has to be paid.

Certainly, I do favor Direct plans, but only to the matured investors.

Direct plans will only be successful, only when the investors are educated on the importance of paying fee for the advisory.

Remember we live in India, we are happy to negotiate or to get things free always. (Compromise on quality)
Ex. we negotiate for that small sum with a poor street hawker or
Feel so happy when we get a free pen (ball point) / purse while doing textile or jewelery purchase.

Indian Mutual Fund is long way to go. So please go slow, avoid RedBus, better walk...
Understand the sentiments of the stake holders!

Dweepesh · 8 years ago `

First SEBI introduced Distributor , now they are killing them , . A push product comparison with Redbus shows the SEBI 's understanding about financial market and product . I think government is also not listening .

Chinmayananda · 8 years ago `

If SEBI and AMCs want to promote direct plan, then there is also such a rule that the investor cant change from regular to direct if he/she is the first time investor and an IFA did his KYC. IFA are working hard to educate the people to become an Investor and SEBI wants that AMCs promote Direct plan to those investors. GOOD JOB SEBI... and one more thing dear SEBI, if you want more transparency then fist identified the companies of default category.

anjay anand · 8 years ago `

yes the way to promote direct plan is wrongly and it should be banned.

Bala · 8 years ago `

Does the regulator know that recently a women was molested on this same "Redbus". Its good to be aspirational but it's shallow to think that one can grow by disrupting the business ecosystem in this manner. Here is the link to the story...
http://bigstartups.in/blog/molested-by-redbus-driver-woman-appeals/

Rajesh Sharma · 8 years ago

Gd1 Bala.... this is what exactly SEBI want. Let the AMC molest investor, the way JP Morgan/ICICI Pru/ Franklin molested direct investor, in the case of AMTEK, JSPL etc...

ANIL ARORA · 8 years ago `

Surprisingly SEBI doesnt know the difference between investing and buying a bus ticket. If you were to invest in RedBull bus, will you be as casual as buying its ticket? Great logic!

Nilesh KAMERKAR · 8 years ago `

Its just one more half-baked idea, which shall be soon forgotten like ' Simple & Performing Schemes' that were to be sold through new cadre of distributors, remember?

Rajan Yagnik · 8 years ago `

Sebi and Amcs are aggressive to sell direct plan its ok but if you want to sell direct then each fund nav has to start from rs.10 not in regular fund which nav has 500 50 or 150 they are selling direct plan in current navs in which the scheme has large amount so expense ratio should be lower for direct,if you want to sell direct then setup new offices only for direct new fund which nav is 10 and start from first why with old funds which we grow them by our efforts.And if customer goes for an amc office then he only acquire the fund of that particular fund house whether they are good or bad or inrelevant to them and if that customer comes at IFA then he may get the fund which he requires.

ruma mukherji · 8 years ago `

comparison with redbus!!! Just think. what is the degree of chances that a bus driver(fund manager) will manipulate to kill/harass the riders(kill may be a harsh word) and bring benefits to the bus company(AMC)!!!!

Anil G. Salvi · 8 years ago `

I am still unable to understand, that if an advisor has to undergo training and tests, then how can an individual understand the mutual fund products for buying it for himself without training and understanding and experience. I feel for a client advisory is about the experience of the advisor. It is not like any thing like buying bus ticket or cinema hall ticket, where you choose the best seat available. Then people could buy medicines directly from medical stores, why go to a doctor?

Ankush Rahalkar · 8 years ago `

SEBI's example is great Joke.... RedBus itself is a broker. It is not manufacturer.
Great Joke.....

K.P.Balakrishnan · 8 years ago `

Investments are done for better returns.Long experience of distributor will enable him to find out well performing schemes.It is found that the financial literacy in India is poor.But the saving habit in India is very high'. Unlike foreign countries we have got no Social Security Measures.One periodical remarked____Avoid killer products like ULIP and ANNUITIES.for retirement planning.L I C advertises 10 choices of immd. annuity. The regulator has to find out whether the returns are reasonable. In INDIA working class has to retire at 58 or 60 unlike foreign countries. The longevity has been increased. Available CORPUS matters much. For this good returns are needed..This can be achieved by the advice of a capable distributors. His ability is out of hard work,studies etc.etc... Then why after the brokerage reduction....

parag · 8 years ago `

Regulator is one man dictator bhismpitamah who wants to rule the jungle but has no eyes to do so......uks jai ho

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