Almost 10 months since the entry-load ban on mutual funds was implemented, the asset management companies (AMCs) are considering low-cost distribution models to supplement their existing network.
AMCs are looking at taking on fresh graduates as trainees or on internship to market their products and create customer awareness, according to senior industry experts.
Inflows into equity funds have slowed down with distributors opting to sell products such as the Unit Linked Insurance Product (ULIP) and the post office savings scheme, with the income from mutual funds becoming almost negligible.
Distributors were earlier earning 2.25 per cent commission on the sale of funds which, in turn, charged the amount from the customer.
The Securities and Exchange Board of India banned entry load on mutual funds effective August 1, thereby bringing down distribution premium charges to 0.4-0.5 per cent from two-to-three per cent earlier.
Trainees
In order to overcome this hurdle, AMCs have been trying to devise models for distribution. While some fund houses are offering the distributors' commission of about 1.5 per cent from their pockets, others are looking at appointing trainees for creating consumer awareness.
ICICI Prudential, for instance, plans to hire 50 trainees to support its existing distribution network. “The bank has a strong branch network and we are trying to leverage on that. We are also looking to hire about 50 people as trainees to work in co-ordination with our existing distribution network,” said Mr Raghav Iyengar, National Head-Sales and Distribution, ICICI Prudential.
Some of the AMCs have also been hiring B-school graduates as interns for marketing their products. “The fund houses have been approaching us and are ready to send their interns to work with us to boost the sale of mutual funds,” said the head of an investment advisory services company in the city.
IDBI AMC plans to rope in AMFI-certified graduates in a limited number of branches in Mumbai and Pune to market its products. “The graduates will be a part of our out-bound sales team and will initially use the bank and AMCs' existing infrastructure as the nodal point. To start with, they will be off the rolls, but based on their performance could be absorbed in the company,” said Mr Arun Kumar Singh, Executive Director and Compliance Officer, IDBI Asset Management.
The company has initiated a pilot project in a few cities and has recruited 76 graduates. “We are looking at pricing. It should be enough to keep the new recruits motivated. We will expand the model in 53 locations, and eventually to the entire country. We will leverage from the large network of IDBI branches for the mutual fund business,” Mr Singh said.
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