SEBI took up the decision of
charging a transaction charge as a step to increase new MF folios in tier two
and tier three cities. Swapnil Suvarna and Jayshree Pyasi find out the
reactions of small town IFAs and classify their reactions.
Welcome
with reservations - “Something is better than nothing”
Welcoming
this step, Bharat Trivedi from Bhavnagar says, “SEBI has taken care that the
charges would only be for subscription and not on any other transaction such as
redemption. This will benefit both investors and IFAs”. He, however, wishes
that the charges were determined by the amount of investment and not fixed at
Rs. 100 and Rs. 150.
On the
other hand, T.K. Kulothungan of Salem feels it will be beneficial because
getting some sort of incentive is better than the earlier scenario where the
IFAs were not getting anything for their effort.
Naysayers
- “This is going to discourage investors from approaching IFAs”
Naysayers are
of the opinion that this move will further decrease the number of folios and
are not happy about this decision.
Speaking
on the SEBI initiative, Sanjay Mamtani, an IFA from Ajmer says, “Nearly 80% of
investors are taking the direct investment route through online platforms. And
if, in this scenario, an IFA asks for a transaction charge, the investor might
stop going to the IFA altogether. “
An IFA
from Shillong, Suresh Mahto shares similar sentiments and believes, “This move
will initially get a good response but in the long run it would hamper the
industry. Though the move will create transparency, it would not help in
creating new folios.”
Cynics - “Now
the IFA will run to increase the folios”
Certain
IFAs feel that incentivizing an IFA with Rs. 150 for a new investor would
discourage an IFA from servicing existing clients. Ramesh Bharatiya from
Jalgaon says, “Due to higher commission for new investors, new folios would be
generated. But charging an existing investor with Rs.100 is unfair.”
Fault finders - “Problems with uniform
incentivizing”
Some IFAs
have welcomed the incentivizing but are concerned about the problems of a
uniform fee. Ranadip Ghoshal an IFA from Burdwan calls the incentivize
structure unfair and says, “Charging investors the same amount whether they are
investing Rs.10, 000 or Rs. 10 lakh is illogical. Instead the subscription
charge should be as a percentage of investment.”
Many of
people of the advisor fraternity feel that 100 and 150 is not an appropriate
figure to incentivize but the views that have come up are drastically
contrasting
For
instance, Narendra Mehta of Ajmer says “An initial investor must be charged
with Rs. 50 and an existing investor should be exempt from the charge. It is
difficult to make investors understand what the Rs 100 or Rs 150 is being
charged for. This move is something similar to entry load.”
On the
other hand Sandeep Kumar of Haridwar says, “The IFA is getting something in
return for the effort he puts into all documentation and services. However, Rs
100 and Rs 150 is a small amount for any advisor and SEBI should realize that
advisors are not doing social work hence should not be treated as such.”
The
idealists -”Making IFAs technically sound should have been the priority”
Kashinathan, from Salem says, “The need of the hour is not giving incentives but to make this industry more professional that can only be done through updating, educating and making the IFAs technically sound. The board should look into giving a PC and appropriate training to small town IFAs.
