Distributors came to the CII Mutual Fund Summit with expectations, and they were given a lot to smile about. Mutual funds complained of “image” battering bad language, but they got some music to their ears. Even the usually insatiable media ran out of questions when met with patient, detailed answers. Welcome to Sebi and the art of keeping everyone happy, now playing in India’s Rs 6-trillion fund industry.
“He is our man. Whatever he does will only be good for us,” said V Kasinathan, a Salem-based financial advisor after Sebi chairman UK Sinha completed his key note address. Independent financial advisors (IFAs) like Kasinathan have lost seven per cent market share to banks and organised distributors since Sebi banned entry loads in 2009. But Sinha on Wednesday hinted that Sebi would provide incentives for the middlemen. “It is very encouraging,” said Shirish Patel, CEO, Prudent Corporate Advisory Services Ltd.
“We had moved to an advisory model. But, the model does not work when the market is not supportive. If the market is falling and schemes are not doing well, investors are not too keen to pay advisory.”
While distributors are happy to hear that creating an incentive structure for them is high on Sebi’s agenda, funds are happy with the change in the language and tenor of the speech itself.
“The regulator is not negative (about the industry). That is a big positive,” said NK Garg, CEO, Sahara Mutual Fund.
Earlier, it didn’t take long for the accumulated angst of the past couple of years to burst when the funds saw in the new Sebi chief one of their own. Amfi chairman Milind Bharve, who spoke before Sinha, explained how painful it was to see the industry’s image being tarnished in this manner. “Hardly a good word is said. Every small detail is exaggerated and whatever good we do is completely ignored,” he bemoaned. “We were made to feel like a bunch of no-good people.” Successive Sebi chiefs have chosen past MF summits to drive home their messages for the industry. The messages were usually bitter medicine, sans the sugar-coating for MFs.
At the MF summit in 2007, M Damodaran, the then Sebi chairman, said the industry was fast becoming one of the distributors, by the distributors and for the distributors. Over the next three years, his successor, C B Bhave went about making structural changes to make it one with investor interests at its centre. Bhave and his lieutenant, K N Vaidyanathan banished all requests for a breather from the industry at last year’s summit. What is good for investors would ultimately be good for the industry, they professed. But Sinha underlined that protecting the investors could not come at the cost of development of the market. “Protection of investors, development of the market and regulation — all three are important to Sebi. One need not come at the cost of the other,,” the Sebi chief said.
K Ramesh Bhat, CEO, IFA Galaxy, an association of over 10,000 IFAs, says, “The tier II towns have severe operational issues as the banks are not co-operative. They charge Rs 100 to initiate an auto debit. They do not accept cheques in small towns. Many people in small towns don’t use cheques.” “Taking MFs to small towns needs a coordinated effort from fund houses, banks, Sebi and RBI,” said A K Narayanan, president of Tamil Nadu Investors Association.
Some veterans at the summit also felt, expectations were running ahead of what was possible realistically. “With Sinha assuming charge, expectations have gone up tremendously. Some AMCs are even fanning these expectations. That may not be good,” said Prem Khatri, CEO, Cafe Mutual, a portal for distributors. Khatri was in the industry for two decades before moving out. A member of the panel on loads said, “Because Sinha is the chairman, there are some unnecessary expectations. All of it may not come true. Earlier you had nothing. Now you have something. You should be happy about that,” he said.
