Over three million financial advisors and distributors have decided to come together and form Financial Intermediaries Association of India (FIAI), a not-for-profit company, in a bid to put up a collective face.
The move to set up an entity under the Companies Act was pushed by some of the leading distribution houses in the country after the recent clamp on mutual funds regarding payment of exit and entry load to distributors.
“The main aim of the organisation is not to be a trade union but a trade association representing distributors and financial advisors from every segment of the market, including foreign and domestic banks, brokerage houses, mutual funds and insurance distributors and even individual financial advisors. The body would be the common voice of the industry,” said Rajiv Bajaj, managing director, Bajaj Capital, a financial services distributor. Bajaj said that there was a need to improve the image of the distribution industry and to open a formal channel of communication with various stakeholders.
The financial product distribution business, estimated to be an over Rs 3,000-crore industry, lost nearly a third of the revenue following the Securities and Exchange Board of India (Sebi) diktat on entry and exit load. While the Sebi decision was taken after several rounds of consultations with fund houses, represented by the Association of Mutual Funds in India, the distributors said they were not kept in the loop.
“There was no national level representation for the distribution community and hence it was becoming difficult to make their interests and concerns known. But FIAI can go a long way in representing the industry,” said Kanwar Vivek, CEO, Birla Sun Life Distribution.
“Members have been trying to form this body for over three years and it is not a reactionary move. The aim in the long term is to build a credible face for the industry, which can talk favourably and also make others understand the importance and interests of the segment. However, the organisation is still in its initial stages and it would require representation from all the segments including that from all financial advisors,” said Nitin Rao, executive vice president, HDFC Bank.
FIAI has already conducted several meetings which saw representatives from wealth management and distribution arms of ICICI Bank, HDFC Bank, Citibank, BNP Paribas, Religare Securities and Karvy, among others.
“The organisation will enroll at least 5,000 members in the first year, which would comprise most of the top distributors and financial advisors,” said a member of FIAI.
The one-time membership fees for corporate houses and large institutions would be Rs 2-3 lakh, whereas individual and small financial advisors and distributors would have to pay Rs 5,000 a year. The board of members of FIAI would be elected and the company would also be registered with Sebi, said sources.
