Assets under advisory of mutual fund distributors is expected to triple in the next five years, says a FIAI -CRISIL research report called ‘Indian Financial Distribution Industry at the cusp: Vision 2020’.
The report estimates that the assets under advisory of mutual fund distributors will grow at a CAGR of 24% from the current level of Rs.7.92 lakh crore to Rs.23 lakh crore by 2020. Similarly, the report has estimated that the annual life insurance premium collection through agents, brokers and corporate agents will increase from Rs.3 lakh crore to Rs.9 lakh crore and annual non-life premium coming through intermediaries is expected to reach at Rs.1.30 lakh crore from Rs.50,000 crore by 2020.
The growth in mutual funds will be driven by inflows in equity funds and increased participation by retail investors and HNIs in mutual funds. Also, improving macro-economic indicators like GDP growth and increasing employment are likely to push household savings into financial investments.
The report has estimated that the number of individuals having annual income of over Rs.5 lakh will double from 6.24 crore in 2014 to 12.14 crore by 2020. Such individuals are considered as potential investors.
In order to achieve higher penetration and financial inclusion, the industry needs to retain existing distributors and add new distributors to the workforce, suggested the report.
Manish Jaiswal, Business Head, CRISIL Research said, “Relentless focus on fiduciary duties to gain investor’s trust, technology- enabled models for the cost efficiently and training will help win the confidence of millions of investors in smaller towns and potentially change the game for the industry.”
Vishal Kapoor, Director, FIAI is of the view that financial advisors have a key role to play in financial inclusion of the country. “Developing a vast pool of financial advisors is imperative for realizing the enormous potential that our country holds. This also helps in employment creation and retail penetration, and thereby benefits the economy at large. And since the industry requires specific skill sets, it is equally important to put in place initiatives that will foster such human resource development,” he said.
Overall, the report has estimated that the AUM of the mutual fund industry will grow to Rs.25 lakh crore in base case scenario or Rs. 34 lakh crore in optimistic scenario from the current level of Rs.11.86 lakh crore. Similarly, equity assets are expected to grow to Rs.11 lakh crore (base) or Rs. 20 lakh crore (optimistic) from Rs. 3.82 lakh crore in 2015.
