Advisors pitch for charging varying expense ratio for different ticket sizes which would give AMCs more headroom to incentivize IFAs.
Mumbai: Ahead of the SEBI’s board meeting on July 28 in which SEBI may take a call on the recommendations of the seven member MF committee, the reported proposal of incentivizing advisors in the range of Rs 50 to Rs 200 does not enthuse the fund houses or the advisors
Sources indicate that every transaction would attract a charge which could range from Rs 50 - Rs 200 based on certain criteria except on redemptions Advisors would reportedly be entitled to a higher incentive for a first-time investor. However, neither advisors nor fund officials that Cafemutual spoke to are enthused about this recommendation. According to a top advisor from Mumbai, the committee’s move is intended to revive the retail market but the move is unlikely to deliver the desired result.
One of the suggestions put forward by some advisors is to charge varying expense ratio for different ticket sizes which would give AMCs some headroom for incentivizing IFAs.
“Some IFAs are in the business only due to their past trail. The recommendation is like a direct selling agent model wherein upfront is paid for first transaction. I have to service clients on an ongoing basis. A lot of advisors have changed their focus from retail to HNIs and they are not going to change it for Rs 100 or Rs 150. It’s like asking someone who has divorced to marry the same person again. Doing retail business is costlier than catering to HNI clients,” says a top Mumbai based distributor.
The same sentiment is echoed by top mutual fund officials. “It’s not a life changing recommendation. Advisors make more money from upfront commissions on SIPs,” says a sales head of a bank sponsored mutual fund.
“It could cover our transportation cost but still it’s not a game changer for the industry,” says Jayant Vidwans, President, Society of Financial Planners (SOFP).
