The largest ever survey of India?s mutual fund agents and financial products distributors, conducted by research firm IIMS Dataworks, has found that recent reforms measures by the Securities Exchange Board of India (Sebi) to make fund products more easily accessible to the common man has had a significantly adverse impact on fund product sales by agents.
Sebi had recently decided to slash the entry load on fund products to zero, for those investors who invest directly with the asset management companies (AMCs) rather than through an agent. According to agents surveyed in 36 cities across 21 states, almost 62% of fund salesmen, whether organised or independent, took a hit on their business volumes due to the new norm.
Significantly, almost 61% of the fund agents also said that the stricter ?Know Your Client? norms put in place by Sebi for mutual fund investors had a significant impact on their sales.
While zero entry loads for direct sales by AMCs is hurting agents, it is also making them more pragmatic about their future fee structures, especially amidst volatile stock markets and a bleak outlook for the world economy. Almost 40% of independent financial advisers surveyed are willing to consider working with lesser commissions on sales.
Another sign of agents? growing pragmatism is that more of them are looking to become part of an organised sales channel rather than work independently. ?A chain channel means organising themselves into a ?union? of sorts to increase their bargaining power with AMCs,? the report stated.
The survey results also show the need for the mutual fund industry to gain a critical mass through aggressive advertising by the asset management companies. A bulk of the independent financial advisers as well as institutional distributors said that sales lead from AMCs account for a negligible part of their sales. Word of mouth still holds the key to marketing, as most new customers for IFAs are referrals from their existing clients.
The aggregate retail customer base in the mutual fund sector was 5.3 million working age investors in 2007 and the number has fallen now because of adverse market conditions, the report stated. In comparison to this, life insurance sector had over 105 million customers in 2007.