Very pertinent points. Its importnt that as distributors also we should discourage the AMC by refusing to market dumb schemes.

Excellent Article Brijesh. The Industry has a potential for explosive growth but we need to introspect how we should achieve the growth. The need for increasing the fleet on the street , the no of IFAs ,is a must to achieve retail penetration and hence part of the IAP budget must me used for enrolling new IFAs and equipping existing IFAs on creating Investor Awareness so that the objective of Investor Awareness reaches the length and breadth of the country and there are IFAs to sevice the millions of of new and existing investors

Simply Superb We are waiting for such bold steps.

Continuation of upfront commissions is against the interest of the investors, the industry and that of honest distributors. Upfront commissions only help fund houses and dishonest / big distributors (as history shows us) and cause long term damage to the industry. May be the sudden surge in NFOs and closed ended funds is a ploy by some fund houses to keep upfront commissions alive and not give only trail model to small distributors.

Nice one Brijesh. Very well articulated views.

I said it in Wealth Forum Mumbai meet this year and saying it again. There are three participants in this industry - Manufactures, distributors and the investors. The only one we think has to think long is poor investor. Other two keep thinking of amassing AUM by short term techniques which has led to big disconnect at the ground level. We need strategies and not products to reach to the bottom of the pyramid. For god sake, think of creating a better 2024, 2014 will take care of itself.. WHY CANT WE THINK LONG....

Well said Brajesh Sir, Its the time to show the correct attitude both from AMCs & Distributors too. we all should that "one cannot be totter of all thing" so what the AMCs are doing may be right for them as the moods comes only this time too (still long to go where investor would develop understanding the correct time of investment & holdings in Equity) but as a distributors we had experienced many times that what is the right allocation in different time, we should try our best to practice it well.

Well drafted things presented in professional/polished language. The points raised are important for AMCs to review and bring about the required changes in approach, New offering, engaging with IFAs, and yes they need to spend money on upgrading IFAs knowledge, competitiveness. I may like to add here few points: 1. We at MF industry needs to be more simplified, and investor-friendly both in our approach and paper (less) work. 2. We all need to build Trust and Confidence in Investors mind about the benefits of investing into MF on a continuous basis (persistently).

good points presented well.It is very essential to improve the quality of advice to train through regular as well as refresher programmes conducted by good trainers of caliber.It will go a long way in improving business and capability of IFAs.

sir, i endorse the views expressed by mr.shenoy.the only way to respond is to stop selling NEW FUND OFFERS.then only the AMC will learn to mind the interests of the investors and the industry

Generally most of these upfront commissions go to the big distributors. When the media cries foul as it is doing now, the regulator will be forced to take some harsh steps(like doing away with commissions all together as that is the only thing left isn’t it) that in all likelihood are going hurt the small distributors the most( as happened in the past with entry load ban) making their survival difficult. The less the number of small distributors the more beneficial it is to the large and / or organised distributors. So these big distributors keep on pushing for upfront commissions in one guise or the other as it helps them strengthen their hold on the industry further.

If anything history has taught us is that most fund houses, especially the established ones with strong alternative distribution channels to back them up, would never want to do away with upfront commissions as that will be more profitable for them. They would never want to migrate to only trail model that starts at 1% to even the smallest of distributors. These established found houses encourage NFOs and closed ended funds through upfront commissions.

Dear Brijesh Bhai, Very valid and ground realities you have shared which are experienced by every IFA. Definitely AMCs should give a thought about it for the common benifit of AMCs, IFAs as well as Investors. Kudos to u.........

Exellent.They have not learnt lessons and they wont in future too.Now we hav to learn lessons.Sell only time tested good performing funds even if it gives us lesser income.After all investor is king for us and no one else is.

A good article to advise AMC to think from the past errors and do constructive work with thehelp of IFA

dear friends i totally agree with the views mentioned by mr brijesh.. how ever i would like to add that ,,AMCS RMS, SALES PEOPLES all are worried about there servival, so they will for sure play there roll. BUT we as IFAs and wealth creators for our investors should not fall in trap os whatever..may be high upfront, may be trips to exotic destinations , wet parties etc. it is for sure that they will get there job here or there but once proven to be wrong doer we IFAs will loose our bread and butter for ever ..SO BE CAREFUL

I totally agree with you Sir. During our last weeks Wealthforums Group discussions, one of the CEO told that we have to have long term vision in this industry, but sorry to inform that many of Closed ended equity funds NFOs are still launched by AMCs. Also, we as distributors, are educating our clients to have long term vision, but this short term Equity NFOs are spoiling our education efforts. By showing short term gains, we cannot achieve great long term results. Our MFDA (Gujarat) association is planning to stop working with such short sighted AMCs.

Added to the above, one more argument that AMCs favor themselves, are manufacturing is my prerogative. To distribute or not to distribute it is your wish.

While points raised regarding trial are all valid & many AMCs do seem to be involved in asset gathering via NFOs and harping on recent performance, there is another point which needs to be considered. All trail model which makes sure that unnecessary churning is kept out; makes it very difficult for new IFA to survive initial years. New IFAs will not joint this industry on the basis of trail income. Some new business model will have to be developed which takes care of this issue.

Very Relevant Issues from Mr. Brijesh Dalmia ! Also the IFA enablement program is a very good proposal. AMCs should ponder over and take it to SEBI.

Good sugestions in fantastic way put across.

Distributors have to be careful but its very difficult to keep behaving against the tide as one sees opportunities are seized by other in front of you and then you feel lost. You advise a client not to get carried away by such schemes and after few days/months you find that he has done against your advice with the help of some other IFA/Bank ETC. Both the parties have to be more prudent, the distributor and the AMCs.

Such anamolies has happened in the past, it is happening now also and will happen in future. Its the distributor who needs to learn from their mistakes and make sure that they do not repeat the mistakes which they have made in the past. Manufacturers are there to promote their products. Now its upto the conscience of distributor whether to sell it or not.

Agree with most points raised by BD, As said its all an AUM gathering exercise, finally higher the AUM higher will be the money made by the AMCs, the smaller ones simply do not have the muscle power(read financial power) to stand up to the big guys. A manufacturer will say i am in the business of making products you sell it to who ever needs it, it is another thing that higher pay outs may cause mis selling. the regulator finally needs to ponder over the blanket ban on commissions in open ended products compared to what is happening in close ended schemes. The higher exit load strategy does not make sense, an open ended product must have the flexibility of allowing the investor to exit the scheme when he wants for whatever reason.

Excellent piece. Most of these points are the plain common sense. Thanks

All views expressed by Mr Brijesh Dalmia is absolutely correct. Its time to ponder by the AMCs and they should remain careful. But what I like the most is "IFA enablement Programs" section. AMCs should approach (if they think merit in it) to regulators with this idea.