In the final part of a two-part interview, Dhruv Mehta, FIFA chairman and Yogesh Sharma, founding member, discuss the future roadmap for the association.
Cafemutual (CM): What initiatives has FIFA planned for its members?
Dhruv Mehta (DM): Right now our focus is on spreading the word about FIFA and getting more members on board. We encourage people to become our members. We will try to come up with a code of ethics for our members. We have requested SEBI that IFAs should get representation with the regulator too.
Yogesh Sharma (YS): Recently we conducted a session on how distributors should handle due diligence. We had called up a few auditors and operation heads of fund houses to train distributors on due diligence. Many distributors didn’t know what it was all about. Earlier, most IFAs were required to learn about the subject on their own. This is where FIFA fills in the gap.
CM: Currently there are many local advisor associations spread across India. Besides enrolling existing IFAs, would FIFA also look at encouraging more people to take up the financial advisory profession?
DM: IFAs who are successful should share their experience with others. That itself can be a very great motivating factor for others to take up the financial advisory profession. Everyone starts with some role model that they can look up to.
CM: How do you plan to make FIFA a pan-India group? Can FIFA empanel existing IFA associations?
DM: Prior to our incorporation, we were in touch with KAMFA and IFA Galaxy. We have a provision in the FIFA constitution that an association can also become a member of FIFA. The goals and objectives of an association which would like to join us should be similar to FIFA’s charter. That association should have at least 20 members.
YS: IFAs across the length and breadth of the country should become members of FIFA so that their voice can be heard. Even before FIFA was formed, we were able to interact with regulators. IFAs spread across the country may not get this opportunity. The membership fee is nominal.
CM: Some distributors are of the view that FIFA only represents top-rung IFAs from Mumbai. How do you plan to make your group more broad-based?
YS: There is a prevailing myth that FIFA consists only of Mumbai-based IFAs. Our purpose is to be a federation of all IFAs. Most of the members are from Mumbai because it started from here. Now we want to reach IFAs across the country. We encourage all regional bodies to continue operations. In fact, we also want FIFA to have regional bodies. We do not want to step on any association which IFAs have already formed. Any representation has to be from a pan-India body.
DM: If four people from Mumbai or Madras meet SEBI, then their voice may not be heard properly. SEBI can’t give weightage to individual voices. It is important that one organisation represents IFAs. When SEBI floated the concept paper, we contacted 200 IFAs to take their feedback. We engaged an outside agency to guide us and we submitted a response to SEBI. The agency apprised us of the regulations in the US, UK and Singapore. Receiving external independent feedback makes sure that our representation is unbiased and objective.
CM: Distributors are confused over which model to adopt—advisor or distribution. Which model will help mutual funds penetrate smaller towns?
DM: The distribution model is important for retail penetration. Distribution is required across the length and breadth of the country. It requires a simple distribution model to start an SIP and not a high-tech model. It just requires some commitment from IFAs. They need to be convinced that there is enough remuneration to earn a livelihood. There is a lot of negative perception that all distributors are churning. But that’s not the case. You will always have some section of people who don’t do business in the right way. Rebating on commission is banned but it is still prevalent. Nobody has yet been punished for rebating. It has become an accepted practise in insurance. You should take action against the wrongdoers and not change the rules of the game.
(The first part of this story was carried on May 23, 2012).
