Tuesday, April 30, 2019

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.

7 comments:

Unknown

I have been saying this from last 13 months now but I am termed as negative by big distributors and I am being told to focus on business and grow AUM to double at least. They are visionless and big fools who can't see the future and also feel that they will be ok since their big AUM will bring them enough brokerage to survive. Or they are under the wrong impression that if the smaller distributors are out they will get those clients and will be able to survive or sustain the business. Here is an eye opener to them, You are wrong and you have wishful thinking about this whole idea. All AMCs are going to kick you out as well and only RIA model where in they don't have to give anything directly as brokerage will be implemented soon. Surprisingly regulator who is supposed to stop all this is silent and in fact helping this process. Regulator's job is to safeguard investors to which they have failed miserably ( equity funds have not performed at all but still they have allowed fund houses to charge the same or even allowed them to increase the TER and debt crisis has been prevelant from a long time now but still they never interfered till date because of which there will be huge loss to crores of investors but AMCs will still earn money by way of TER but SEBI is completely silent on this. Also AMCs are so notorious that they gave and are giving commissions in direct plans to web aggregators and RIAs but SEBI still silent on it. ET MONEY advertised against distributors openly which is demeaning our profession and us still SEBI silent on it. Everyone has a right to their dignity which was taken away by these people and SEBI silently watching it meaning they acknowledge it and in fact who knows if they themselves were a part of this.).

All this just to maximise AMCs profits at the cost of crores of investors because without distributors investors will be at the mercy of AMCs and we all know how cunning AMCs are.

Shame on them all.

Jaago distributors jaago

Unknown

MF distributor will be vanish from the market it is true at the same time there is no unity in distributor fraternity to over come such hurdles

DreamNRealise

Very well said. The distributors have to xome out of the closet and raise a unified voice against the steep income cur

Kaushik

Very true... AMCs hardly borne TER cut. When TER is same on AUM, why different rates for OLD business & new business.

Anonymous

I too have raised this since last 15 months but I was told by stawlarts Leaders that increase your client base instead of cripping. They never understood the need to come together and raise our voice strongly.

Unknown

Time has reaped to unite and raise voice against the AMC and show them IFA power ,all ifa shud stop work for next 7 days on all india basis ?

Unknown

SEBI has been plan it intentionally, perhaps AMCs and SEBI tie-up game . Like "dui bighaa jomi" wrote by Novelist Rabindra nath Tagore.

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