Amfi distributor registrations down by half in FY11

Ban on entry loads and new know your distributors (KYD) norms have led to many distributors staying away from the mutual fund industry.

Earlier, on an average, 6,000-8,000 new distributors used to enter mutual fund industry every year. But, during the financial year 2010-11, only 3,000 new registrations were made.

Industry players also attribute fall in distributor numbers to hike in fees by the Association of Mutual Funds in India (Amfi).

Currently there are over 85,000 registered AMFI Registrations Number (ARN) holders in the country, out of which only 40,000 are active and have completed their KYD formalities.

Amfi deputy chief executive V Ramesh says, ?There has been a fall in numbers of new registration in 2010-11, following lack of remuneration. But we believe it is positive for the industry in the long-run as now only serious players will come in the industry.?

Market participants believe that, renewal in the distributor fee is also a major reason for fall in ARN numbers as small distributor?s have completely stayed away from the selling MF products. In June last year, Amfi increased the fee for the individual distributor from R500 (per year) to R5000 for three years.

HSBC Asset Management CEO Puneet Chaddha says, ?The numbers may have fallen due to regulatory changes that has affected distributor’s remuneration. We believe that, there should a model worked where distributor’s along with asset management companies and investors are benefited.?

In current calender year Amfi have asked all the distributors to complete the KYD process by March, 2011.

A leading mumbai based independent financial advisor (IFA) on condition of anonymity said, ?We have a large business, so we don?t hesitate to pay the high fee, but there are hundreds of small distributor?s who don?t earn as much money and they have not renewed their ARN numbers.?

As per Boston Consulting Group study, IFAs account for 29% of overall assets of the mutual fund industry, though in that the share of small IFAs is about 1%.

A sales head from the top fund house on condition of anonymity says, ?The cost of certification and registration have been hiked and the process are more stringent.

In order to bring in more distributors, there should be more effort from the MF industry to attract new people for the advisory profession, which is not being done now.?

To create awareness of mutual fund products in the country, Amfi is reportedly planning to come with a television advertising campaign, which will be on air somewhere in June.