Amfi to revive plans to start a fund trading online platform, front-end portal

Association of Mutual Funds in India (Amfi) is reviving an earlier proposal to launch an online platform which will help distributors and financial advisors transact mutual fund schemes across sales channels. The "front-end" portal will link the stock exchange fund platforms and also enable investors to buy or sell schemes directly from any of the registered 41 mutual funds, according to fund industry sources.

By planning to link the proposed portal with exchange platforms, the mutual fund industry body is trying to bypass stock brokers, who are not keen to sell mutual funds, industry sources said. The wire-frame platform is expected to be functional in six months, the sources said.

Initially, Amfi will ask independent financial advisors (IFAs) and other Amfi registration holders to get empanelled on the online platform. The industry body is yet to work out on aspects such as portal membership fees and site ownership, which are expected to be discussed at the board meeting next week.

"We've plans to start a fund platform, but it's too premature to talk about it now," said V Ramesh, deputy chief executive of Amfi, adding, "It's going to be a non-profit venture. We expect to keep transaction costs at a lower base."

The Amfi platform will help IFAs either transact through the exchanges or link up with fund houses directly. IFAs continue to contribute in a big way to mutual fund sales. According to data from registrars CAMS and Karvy, 45% of equity fund sales were done through independent financial advisors compared to 29% by banks in 2010 -11.

Capital market regulator Sebi, post-entry load ban in 2009, had asked Amfi to design a common fund platform which will allow retail investors to transact, switch over and compare the schemes online through a single window. While Amfi was working on the platform, Singapore-based Ifast Financial launched fundsupermart.com and registrars CAMS and Karvy jointly launched their fund platform 'Finnet'. Chennai-based Wealth India Financial Services also launched fundsindia.com at around this time.

But private online fund portals are yet to take off as expected, with most of them logging just about 200 - 400 transactions daily. "Net-based transactions will take time to be popular among retail investors. We need Amfi-like models to make the channel popular," said Rajesh Krishnamoorthy, managing director of Ifast Financial. "It'll take 3 - 6 years for any online distribution model to turn profitable," Mr Krishnamoorthy said.

The stock exchange platforms BSE Star MF and NSE MFSS, which started in December 2010, are hardly seeing volumes because of broker apathy. For stock brokers, selling mutual funds is not profitable in the absence of volumes. The BSE on an average logs about 193 buy or sell orders worth about 1.79 crore every month while the NSE executes about half the number of trade orders worth about 70 lakh.

Stock brokers get about 0.5% as commission for executing fund trades on behalf of investors. The BSE, according to officials, has 180 empanelled brokers. Out of which, about only 50 are brokering funds.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/amfi-to-revive-plans-to-start-a-fund-trading-online-platform-front-end-portal/articleshow/8754813.cms

Low Retail Investor Interest A Cause Of Concern

H N Sinor, CEO, Association of Mutual Funds of India, tells Tanvi Varma that mutual funds should be viewed more as 'investment managers'.

Of late, the mutual fund industry has seen some degrowth, especially in equity funds. What according to you are the reasons and how does the industry plan to tackle this?
We are concerned about this. While most of the segments under the financial services industry i.e. banking, insurance, NBFCs, have seen an annual growth of 15-25% during the last 2 years, the mutual fund industry has seen a decline in business during the period.

We have seen a lot of volatility in institutional participation, but we are more worried about low retail participation. We have seen stagnation in equity, balanced and tax-saving schemes that most retail investors invest into.

There are various reasons for this including low investor awareness, mindset of investors, fundhouse performances and the role of the distributors and financial advisors. Investor awareness is a long-term issue and is essential in bringing in more participation. Investors still identify mutual funds with capital markets and are apprehensive, while the fact is that funds help to spreads one's risks, especially when you don't have the expertise, and generate better returns.

What is the role of the financial advisor or distributor in servicing an investor, post the entry-load ban?
Mutual funds need to be pushed and that is where the distributors come in. Post entry-load ban (which came into effect from August 1, 2009), we are still trying to figure out what will be the change in the business model, which can be a win-win for all stakeholders-investor, manufacturer and distributor.

Unless all are in sync with each other, the industry cannot grow and the investor will not benefit. Earlier, the investor used to pay the financial planner by way of entry load, which was embedded in the money one invested. This is the practice in markets such as the US and Europe. But now, a financial advisor has to collect his commission directly from the investor. It is difficult for a distributor to go to individual investors and get a fee from him, unless the investor is an HNI and a portfolio management fee is charged on an annual basis. This model has not worked.

Do you think we can go back to the entry load system?
I doubt it.

How is the Indian mutual fund industry doing compared to those in developed markets?
Internationally, the mutual fund industry has come about by way of investments from compulsory saving instruments that get tax breaks like the 401k retirement savings in the US. Pension and provident fund investments automatically flow into mutual funds, which are actually called 'investment managers'. In India, mutual funds are voluntary investments and often face competition from other products such as bank deposits, insurance, unit-linked plans, other pension products, etc.

We have simple things to be done. All compulsory savings should come naturally to investment managers. We don't need insurance companies to have their own treasuries. All money pooled by insurance companies and pension money should come to investment managers (let us not call ourselves mutual funds) to the extent that they are required to be invested in the capital market.

Further, there have been turf wars in the investment community. Pension regulators want pension under them, the Forward Markets Commission (FMC) wants the commodity Exchange Traded Funds (ETFs) under them. We cannot have fragmented regulators. Ideally we should have a super-regulator at some point, though I think this is wishful thinking.

How cost-efficient is our mutual fund industry?
We are extremely cost-efficient compared to global markets. The annual expense ratio in the US, for instance, is around 4%, while our mutual funds (equity) work on 2 to 2.5%. In fact mutual funds work on a shoe-string. This business gives only 10 to 15 basis points on the entire assets under management (AUM).
Now-a-days we don't see many new fund offers (NFOs) hitting the market. What has changed?
The regulator has not seen NFOs in good light and permission is tough to come by. They believe that we have too many schemes and that manufacturers should focus on their mother schemes.

How adept are the financial advisors or distributors of mutual funds in advising investors?
Both financial advisors and agents have to pass the same exam, whether he is a commerce graduate or a doctorate. Ideally, an advisor should be put through a tougher examination. For agents also, the Associatoin of Mutual Funds of India (Amfi) is trying to ensure that only serious people are in this business. We increased our fee from Rs 500 to Rs 5,000 for individuals. Earlier, large number of agents did not even update themselves in terms of skill-sets. We are changing that by making certification tougher.

There are a lot of new funds houses in the mutual fund space. What would your advice be to the retail investor?
Although there are no entry barriers, there is a licensing arrangement in place, which comes with strong duediligence by the regulator. Investors must take it for granted they have been properly scrutinised and are not fly-by-night operators. The ultimate aim of regulators is to ensure that small investors' money is protected. So, one should not worry about new names. What is more important is performance, the kind of offering etc.

Will the new Direct Taxes Code change the way people make investments?
Immediately, we could see a negative impact. Having said that, people will get used to it. We have been trying with the Revenue Secretary to get some leeway on investments in equity-linked savings scheme (ELSS). In spite of the changes, people should continue with their mutual fund allocation and think of it as a long-term plan. Systematic investment is the best route of investment for the middle class, salaried person.
Source: http://businesstoday.intoday.in/story/mutual-funds-fail-to-lure-retail-investors/1/15756.html

SEBI panel on MFs recommends Rs 100 transaction fee: Srcs

Source: http://economictimes.indiatimes.com/et-now/finance/sebi-panel-on-mfs-recommends-rs-100-transaction-fee-srcs/videoshow/8750408.cms