MF distributors sweat as direct plan deadline nears

With the deadline drawing near for implementing direct plans, mutual fund distributors are a worried lot as they believe that a host of institutional clients might switch over to these plans. Even savvy retail and HNI clients might opt for direct plans sooner or later, they believe. This exodus will adversely impact distributors as no commission will be paid for the direct plans.

“There is a feeling that the large and bulk investors on the institutional side will switch to direct plans to save on commissions,” said Dhruva Chatterji, senior research analyst, Morningstar India, adding that the impact of the change will be more acutely felt by distributors who focus on institutional clients that invest in fixed income schemes. According to industry observers, institutional investors can save about 40-50 basis points on commission if they choose to go direct.

Not every distributor is losing hope. “Investing in fixed income schemes is not that easy and I believe that treasury desks of companies will continue to depend on distributors that are able to offer solid, independent advice. So, distributors who cater to institutional clients, but follow an advisory model, will survive,” said Sunil Jhaveri, founder, MSJ Capital & Corporate Services.

Of the R7.68 lakh crore of assets managed by the Indian MF industry as on October 31, 2012, R5.47 lakh crore, or 71%, was contributed by income and liquid/money market funds, as per data put up by Amfi. It is estimated that more

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