The IFA Galaxy 2011 Magazine was released by H N Sinor, CEO, AMFI
Misalignment
H N Sinor encouraged the gathering to overlook the negative aspects of the regulations and cash in on the opportunities that lie ahead. Pointing out the lack of alignment of three players (AMC, distributor and R&T) in one common direction, he said that manufacturers sometimes focus more on launching and pushing schemes than on fund performance.
Distributors focus on incentives while R&T agents have to ensure that they earn from every transaction, thus diminishing focus on investors. He stressed that only the IFA channel has the ability to operate in smaller towns and reach out to vast number of investors, beyond the top 20 concentrated cities. He pointed out that mutual funds have been able to reach out to just one percent of the 40 crore investible population.
Talking on the issue of conflict of interest arising out of commissions, he said some geographies, particularly Europe have far more stringent regulations for investment advisors. He also gave the example of Hong Kong where every sale is video or audio recorded and stored for two months. India he said has taken the first step in addressing this by introducing agent or advisory model. Further, he asked IFAs to create a federation so that AMFI has a common line of communication.
V Ramesh, Deputy CEO of AMFI fielded queries raised by advisors.
Liquid Funds
Navin Tiwari observed that the industry has seen the entry of many advisors in the mutual fund fold over the last fifteen years. He pointed out that the equity AUM of the industry has remained stagnant for years while bank deposits were growing. There were 20 crore bank recurring deposit accounts in comparison to just 60 lakh SIPs in mutual funds.
Mutual Fund industry’s ‘best return syndrome’ according to him is the drawback, particularly when a plethora of schemes offer different returns across different time horizon, thus shifting the focus from one scheme to another. He said that MFs should steer clear from portraying a ‘reverse mirror view’ to investors by articulating that past returns are not guaranteed in the future, thus setting the right expectations from mutual funds. He said that liquid funds had outperformed one year bank deposit returns over a very long period and advised IFAs to give serious consideration to liquid funds.
