subject: Mutual Funds : A Sidelined Investment Sector In India [print this page] Mutual Funds : A Sidelined Investment Sector In India
Currently,mutual fund industry in India is facing a new problem: A new talent is not interested to work as a mutual fund distributor.There are rules for mutual fund distributor and investors which have made this industry sidelined.
1.Few months back SEBI abolished entry load from mutual fund investments.Entry load was a main and only resource for mutual funds to pay distributor a commission.Since it has abolished,mutual funds can't pay brokerage to distributors.
2.New guidelines says that investors should pay distributor after taking review of service rendered by him.But ,,how can investor judge in first meet that how distributor will serve him in future?
3.Distributor can decide their charges on lumpsum amount.But what about SIP? How to charge for SIPs? And even if distributor get trail commission,,there is no guarantee that investor will remain with same agent till end of term.
4.As per new AMFI guidelines when investor change the distributor neither new nor old distributor will receive the Trail commission for exising investment. It means that one can not rely on trail commissions also.As per guidelines,,this amount should be utilised by AMCs for investor education purpose,,but who knows AMCs using this money for it or product advertising?
5.Currently,mutual fund units are allowed to trade at stock exchanges.which has minimized the distributors role.
6.Since last 3-4 years,,equity market has not been able to perform well.It has also affected the performance of mutual funds.so investors are not so much keen to invest new money as they are in loss for earlier investments.Rather they are preferring investment in Gold and silver which they think will generate handsome returns.
7.I think mutual fund industry may be only industry,,in which distributor do not receive commission for investment made for himself.This rule is applicable since inception though mutual funds were charging all loads for investment.This rule is not applicable for any other sectors like insurance agent,postal agent etc...
8.Mutual fund industry have remained far away from maturity.Regulators want distributors to work as advisors,,,but who will payyou for advice?
9.Know your Distributor (KYD)process has made compulsory for mutual fund distributors.Fact is that maximum mis-selling takes place in insurance industry and there is also no compulsion for it.
10.Mutual funds is the only sector in which investors are facing KYC rules,,unlike insurance sector where investor can pay by cash also as well invest without Pan Card.
All these things have impacted the earnings of mutual fund distributor.very few people are interested to renew their registration as well no new talent want to enter this field.
