Indian fund houses, reeling under the impact of a ban on entry load or an upfront fee that they collected from investors to pay distributors, may have something to cheer about, with a majority of these intermediaries saying that they expect the ban to either have a positive or no impact on the future of the industry. A survey of 622 distributors in Mumbai and Delhi by Cafemutual, a Mumbai-based mutual fund industry tracker, shows that 57% of the participants expect the ban on entry load to have positive or no impact on the future of the mutual fund industry.
The , imposed by capital market regulator the Securities and Exchange Board of India (Sebi) and that came into force in August 2009 to prevent distributors from pushing clients to switch across products in shorter durations for fees, has prompted 31% of the IFAs or distributors surveyed to ‘try charging’ fees to their clients, Cafemutual said. Significantly, 79% of those who tried were successful, the survey said.
Prior to this ban, distributors of mutual fund products got their upfront fee of 2.25% money they brought in from the AMCs, which deducted the commission from the investments.. Sebi felt the routing of commissions through AMCs resulted in distributors pitching for products that were not in the best interests of investors.
The regulator said that investors needed to pay distributors directly for selling a product rather than obtain the fee through AMCs. According to wealth managers, most investors, who put money in mutual funds, refuse to pay fees for advice, leading to many distributors shifting to selling other products, including insurance. But even distributors are getting more comfortable with the role of advisors, they said.
“There are fewer distributors and IFAs which are selling mutual funds after the ban on entry loads, but some, including us, are focusing on the advisory business. As long as the investor is ready to pay us for our advice, we will give advice and this can be a product that suits his needs...not necessarily a mutual fund or insurance product,” said Om Ahuja, head-wealth management, Emkay Global Financial Services.
The Cafemutual survey said that according to 63% of the IFAs, Ulip sales rose due to the entry load ban, while 15% said sales of structured products to the wealthy went up.
Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Its-biz-as-usual-for-MFs-despite-load-ban/articleshow/6648205.cms
The , imposed by capital market regulator the Securities and Exchange Board of India (Sebi) and that came into force in August 2009 to prevent distributors from pushing clients to switch across products in shorter durations for fees, has prompted 31% of the IFAs or distributors surveyed to ‘try charging’ fees to their clients, Cafemutual said. Significantly, 79% of those who tried were successful, the survey said.
Prior to this ban, distributors of mutual fund products got their upfront fee of 2.25% money they brought in from the AMCs, which deducted the commission from the investments.. Sebi felt the routing of commissions through AMCs resulted in distributors pitching for products that were not in the best interests of investors.
The regulator said that investors needed to pay distributors directly for selling a product rather than obtain the fee through AMCs. According to wealth managers, most investors, who put money in mutual funds, refuse to pay fees for advice, leading to many distributors shifting to selling other products, including insurance. But even distributors are getting more comfortable with the role of advisors, they said.
“There are fewer distributors and IFAs which are selling mutual funds after the ban on entry loads, but some, including us, are focusing on the advisory business. As long as the investor is ready to pay us for our advice, we will give advice and this can be a product that suits his needs...not necessarily a mutual fund or insurance product,” said Om Ahuja, head-wealth management, Emkay Global Financial Services.
The Cafemutual survey said that according to 63% of the IFAs, Ulip sales rose due to the entry load ban, while 15% said sales of structured products to the wealthy went up.
Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Its-biz-as-usual-for-MFs-despite-load-ban/articleshow/6648205.cms
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