V Ramesh, Deputy CEO, AMFI says that the MF industry is not witnessing any slump. He says that there is a lot of money in the industry; distributors and IFAs just need to smartly promote and market their products. In a conversation with Paromita Dey, he talks about the performance of the industry, responses to investor awareness campaigns and more
Some of the small mutual fund players are reportedly exiting the industry following low returns and increased regulations. How do you view this?
I am not quite aware of it. Even if any of the MF players plan to quit the industry, they are not mandated to inform us in advance. It would be a business decision the promoters of the fund take. AMFI will definitely be informed if and when the deal is completed. Therefore, I have no views in such things.
So how do you see the expansion prospects of the MF industry, if fund houses are planning to exit?
I don’t think anything like this is about to happen. As I said, I am not aware of any such exit plans by any fund house. On the contrary, major financial institutions like IIFL, IndiaBulls, Union Bank of India (UBI) have already obtained the trade license for mutual funds and their schemes will be floated soon. Moreover, I believe there are more than 20 applications with SEBI for license. This clearly shows that the industry is experiencing a rise in the number of players.
A SEBI committee is reportedly considering a new proposal of charging Rs. 100/150 as transaction fee for distributors. IFAs and distributors feel that this amount is inadequate. How do you perceive this?
This SEBI proposal on transaction fees is still in the pipeline so IFAs and distributors need not worry about it.
The entry load ban on MF was already a major blow to the source of income for distributors. Now with increased regulations and restrictions, income from MFs have dried up, forcing them to shut shop. What is your take on that?
Yes, I do agree that the MF business for IFAs and distributors has become tough, especially with the ban on entry load. Earlier it was easier to earn healthy commissions from investors, but now with increased restrictions, it has become difficult to derive good income by selling MF products.
However much depends on the skill of distributors in selling products. The money is still there to be earned; distributors and IFAs just need to package and sell their products skillfully and appropriately. For instance, if a distributor charges a service fee of 2 per cent from the client investment of Rs. 10,000, the latter will not mind paying him Rs. 200 as commission.
A number of AMCs are organizing investor awareness campaigns across India. While fund houses believe these programmes will boost investor awareness about mutual funds, distributors and IFAs are not too enthused about them. Why is there a difference of opinion?
These investor awareness campaigns are purely educational in nature. We are working at a very grass root level. The objective is not to attract investments or to win more clients, but to create awareness to the people at large about existence of a new investment avenue. These campaigns will continue to be conducted and people who are unaware about mutual funds are welcome to attend these programmes. But it should be kept in mind that this is a long term process and is not expected to yield results in the short term.
As for IFAs, they, quite obviously will not be excited about these campaigns, because the campaign is not meant for them, in the first place. Moreover, the knowledge shared in these programmes, is of a very elementary level. Thus, even if IFAs want to attend these programmes, they don’t find it worthwhile and hence would recommend to their potential clients.
How successful are these campaigns? What is the kind of response that you receive?
A lot of investors have shown great interest in these awareness campaigns and are attending in large numbers. They are finding the programmes quite helpful in taking decisions on mutual fund investments.
