In a move aimed at attracting more distributors to sell mutual fund products, the Association of Mutual Funds in India (Amfi) has waived fees to those who register to be one till June 30.
Come February 1, individuals who want to register with Amfi to be an MF distributor would not have to pay Rs 3,000 as fees. Amfi hopes it will be able to add around 100,000 distributors in the sector, taking it to 150,000 from the current 50,000 active ones.
“The objective is to create a larger number of feet-on-street to distribute MF products,” says H N Sinor, chief executive officer (CEO) at Amfi.
There will be no registration fees for new distributors in the categories of individuals (including senior citizens) and new cadres of distributors.
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A person who had attained the age of 50 as on May 31, 2010, or has at least 10 years of experience in the securities market or in distribution of MF products will qualify as a senior citizen, in line with the Securities and Exchange Board of India (Sebi) criteria.
“The registration fee of Rs 3,000 was a deterrent for distributors, since their earnings are not very significant. Waiving of this fee will have a lot of genuine distributors interested again,” says Rajiv Bajaj, vice-chairman and managing director, Bajaj Capital.
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Many distributors had stopped selling MF products since August 2009 after Sebi banned entry load, an initial fee that funds charged investors to pay distributors. Stringent rules in the registration process also resulted in distributors selling other products with higher fees, such as company deposits and insurance.
However, Amfi has said the new distributors should have passed the examination of the National Institute of Securities Markets. It has also decided to include agents engaged in distribution of other financial products such as insurance, public provident fund or fixed deposits, among others, with at least five years of experience under the special cadre of distributors.
According to Waqar Naqvi, CEO at Taurus MF, the earnings of distributors after the entry load ban had gone down. “This is a good move, which will attract distributors towards selling MFs,” he said.
MF sector officials said distributor apathy and unfavourable market conditions had contributed to the lack of growth in the past couple of years. Indian households have one of the world’s highest saving rates (30 per cent plus) but this money is not going into MFs.
“If the sector gets more people on the ground, it will help us reach out to retail customers. We are a nascent industry and we need a better distributor network. I hope this move will help increase the base (of investors),” said Sundeep Sikka, CEO of Reliance MF.
While Amfi tries to rope in more distributors, executives say mis-selling needs to be checked. Jimmy Patel, CEO of Quantum MF, says, “This move will certainly help create a new cadre of distributors but this should not act as a licence for them to mis-sell. Appropriate training is essential to ensure they play an appropriate advisory role, since the new cadre would leverage their existing personal relationships with households, which would be helpful to increase MF penetration.”
Agreeing, Bajaj said Amfi has to ensure quality filtration and only genuine and long-term oriented distributors take the Amfi registration number code during the free drive.