Mutual Fund Distributors are on the Verge of Death
The
Mutual Fund distributors are the biggest risk currently. The Rs 25lakh cr
industry will double in the next 5 years but the distributors will number will
come down to 1/3rd from the current numbers. Old assets and new
assets in both segment brokerages have been reduced significantly which is a
threat to the survival of the community.
AMC and clients will both remain advantageous
from the new reduced brokerage structure but the ones who helped to build this the industry will be out of the market soon. The question is no longer restricted to
which AMC has chopped the hands of the distributors but the final result that
the bugle of death for the distributors have been blown.
The
dramatic cut down of the brokerage raises a significant question about the long
term outlook of the AMCs towards the distributors.
By
cutting down brokerage and keeping around 50% to 80% of TER the industry has
been able to reduce the outflow of the brokerage being paid to the distributors. The CIO, CFO, CEO, Fund Manager and even the
National Sales Head of the AMC gets a significant amount of remuneration but
nothing has been chopped at their end. The below list itself speaks for the
same.
The
salary figures are old and the new ones will be high and this has grown also in
the current year. How the AMC does is able to pay such high salaries to the CIO
and CEO and Fund Managers? Why these salaries are not being reduced? Well, the
distributor is killed for the sake of these people through the reduction of brokerage.
The
industry leaders think that as the size of the industry is significantly high
and clients are being acquired through a digital medium the so-called
distributors are no longer required in this industry. The mutual fund has been one
of the bread and butter products for the 10000+ distributors. SEBI in its
circular has asked to cut down TER but the way it has been reduced by the AMC that it turns out to be a question
mark of survival for the whole distributor fraternity.
The significant rate cut down by the AMC has zero impact on the AMC itself. Rather
they are keeping 50% to 80% of the TER with themselves.
Its,
time for the Distributors community to raise voice about the disastrous revenue
structure created by the AMC. The 2nd generation of the distributor
community is reluctant to run the business. The way the brokerage on old assets is being
reduced that client servicing is now impossible.
Many
AMC has come with zero exit load strategy for the transfer of investments from
Regular to Direct. Well, what do the AMC leaders want to communicate that we
are no longer required?
Brokers
will stop the MF business soon. The
industry sales will be impacted for the short term and the larger impact will
come when future inflows will get dried due to the wrong decision in a scheme selected by the investor.
Distributors
should come together to fight against these malpractices and inferior brokerage
structure decision taken by these AMC. It finally proves that those who wanted
the distributors to be eliminated, finally their true face are now out.