to Rs 150 in the past and then allowing them to charge an additional fee of 30 basis points as expense ratio, the moves have not had any notable impact and have also failed to rejuvenate distributors.
“Almost 85 per cent of the industry sales happen in the top 15 cities and there is hardly an incentive for distributors in the major markets,” said the CEO of a leading mutual fund on condition of anonymity. “The fact that the industry has not grown even after measures taken by the regulator tells us that we need to think on other ways to oil the distribution system.”
There are others who feel that in the current times the motto should be to over-communicate with the investor and the frequency of interaction with investors needs to go up.
“The outflow of folios suggest that investor confidence is very low and in these times the last mile communication is critical. Both manufacturers and distributors will have to interact with investor because if an investor leaves the industry it is tough to get him back,” said the CEO of another mutual fund adding that it is the time to be with the investor and reassure him of his investment decision.
Insiders say that the additional fee of 30 basis points will help the penetration of the mutual fund products beyond top cities and thereby is beneficial but they say that the majority of the benefit is to the large players who after crossing the threshold sales of 30 per cent beyond top 15 cities can claim the additional fee on their entire AUM.
“The distributors in the top cities are getting nothing and even the smaller mutual fund players are at a disadvantage,” said an industry insider who did not wish to be named. “While the entry load may not be the solution, a method needs to be framed that ensures everyone is nurtured.”
What it means for you?
Under the existing rules, even if you are an old investor, if the AMC manages a revenue of 30 per cent from cities beyond the top 15, you will see fund houses deducting