Better alternative to commission disclosure in statement of account can be learnt from IRDA , similar recommendation was given by Sumit Bose committee , IRDA has accepted it and asked insurance companies to disclose commission on written application from client for disclosure of commission SEBI can do similar thing , by doing same , it can create transparency It will protect the intermediarys concerns there are direct and regular plan ,,,,,,if transparency is to maintain, it should be maintain 100 % ,,not only with regular plans instead of disclosing commission in account statement voluntarily, system should be arranged to disclose all the expense details including distributors incentives, management fees ,marketing expenses in both direct as well as regular plan , only if clients asks for it formally through written application

The buyer need to know what he is expected to get and at what cost. In case of Mutual Fund the investor need to know the cost of managing its fnd , the mention of TER (That also in percentage terms) is required and also is enough . There does not seems to be any logic to mention the bifircation of components of TER . I dont think bifurcation will help in anyway to the investor . The mention of brokerage amount will confuse him only .(The investor will think that brokerage is only cost to him and fund houses are providing free services)The alternate logical solution may be mention of TER charged to fund, that also in percentage terms- not in amount terms. We need to maintain this stand and continue to impress upon Regulator either direct or through AMFI . I am not in favour of any alternate solution other than mentioning of TER (In percentage terms) only

Well articulated and valid points suggested by author. AMFI should consider these points seriously and convince SEBI from insisting unwarranted and unjustified commission disclosure to be printed in SOA. SEBI should focus and concentrate their energy and and resources on better ways to grow the MF space and constructive ways to increase penetration rather than harping on distributor commissions.

IF SEBI WANT TO DISCLOSE THE COMMISION IN MF THEN IT ALSO DISCLOSE COMMISSION IN INSUARNCE AND ALL CHIT FUNDS AND WATCH ALL TYPES OF CHITFUND SCHEMES WHICH ARE CHEATED THE INVESTORS.

Mr. Vijay, IFA comunity is thankful to you for writing your views on this burning issue. Additionally you have provided a platform so that all IFA across the country can express their views here. I believe that Investors have mis-sold various investment products in other investment avenues. We all know that. Mutual Funds investments have came out with clear winner in Investors protection. Last two years data is proof that investors are happy with MF investing. By disclosing commission, there is probability that investors will again move to those old traditional investment avenues. even 10% loss of investors count will eat out growth of entire MF industry. We will end up by reaching to square one.

My only argument with SEBI is that......there is a direct plan in place. If commission/trail paid to IFA/distributors disturbs you.....go for the direct plan. Very simple.....

Very nicely explained . Specially point 7 is very relevant . I hope AMFI do the needful . Any industry to grow need distribution system In place . There is some issue that is why new distributors are not coming . We all need to do a lot in our own ways .

Good thoughts Mr. Vijay. Fee Disclosure is a serious point of conflict that can arise between advisors & investors. The FOCUS needs to change. For a country of our size, 12 - 13 lac crore AUM with ONLY 3-5 % penetration is a BIG Reason to Worry. SEBI & AMFI need to see beyond micro managing the small industry that the Mutual Fund Industry currently is. Vision for reaching 25 % penetration with Rs. 50 - 75 lac Crore+ of AUM should be the goal. If this goal is achieved it will help in many ways. Excellent Long Term Capital Flows, Attracting New Advisors in, Huge tax flows to the Government & a Very Good option for long term investors besides making INDIA less dependant on FII money, resulting in stable stock markets. It is time for all of us who are a part of this Industry to take the RIGHT DECISIONS for the benefit of all concerned.

Very well explained points.Specially points 7,8,&9 satisfies all the requirement put forth by SEBI.HOPE GOOD WILL AND POSITIVE ATTITUDE PREVAILS. RAMESH R BHANUSALI.

Why commission disclosure? Comm is charged to Investors, so they shld b aware of the rate. It is the logic bhind the disclosure. Bt question is “Why Comm is charged to Investors without any consent from them?” All empanelled distributors are providing services to AMCs. So all comm shld b paid by & charged to AMC. If I am empanelling distributors to expand my business, I shld pay for it. How can I expect my customers to pay for it? The issue will automatically b solved, if the comm is paid from AMC accnt. Who will loose if Comm is paid from AMC accnt? Direct or Corporate & Informed Clients, who basically blong to higher income group. I agree with Mr Bhatt & Mr Koshy. It shld b mandatory for all direct clients to pass a minimum level of investor education test. Also there shld b no protections of lower charges for any class, to establish LEVEL PLAYING FIELD for all investors. Distributors provide last mile connectivity, whereas disclosures & dual TERs can remove distributors

Valid points Mr. Vijay i agree with you

Firstly Thanks to Mr.Vijay giving 10 points that AMFI should communicate to SEBI. It will surely help the Investor as well advisors community. As far as Investors community they will be more informed about the expenses on there investments. And planned disclosure helps advisor community . I really liked three points out of all which surely SEBI and AMFI should consider . point no. 2 , 4 & 10 . I again thanks Mr.Vijay taking efforts and forward the relevant communication to AMFI.

it is more appropriate and valid in the present context and highly appreciable. after all the IFAS have also to lead a respectable life and meet their daily chores. AMFI is not representing and disengaged with the views of distributor working. we wish more dialogue is essential for proper understanding in the present day working. also treat MF business as more employee as well as their employment needs proper understanding

Points mentioned are very valid & logical. The SEBI mandarins ,are against Disributor commissions. It is better that they stop the commissions totally or the distributor system totally. By disclosing the commission in the a/c statement, SEBI is inducing the investor to ask for a pass back.

If commissions are to be disclosed, then the following have to be simultaneously mentioned in all account statements. 1. SEBI fees collected from the AMC and the portion paid by investor. 2. Total expenses paid by the investor to the AMC against his investment. 3. Portion of AMC salary attributable to the fees collected. 4. Advertisement expenses charged for the investment. 5. Publish the commission paid to various categories of Distribution on the Fund website. 6. Any pending SEBI inquiries against Fund personnel. This would help the investor check if the information provided by the distributor is correct. This will also remove the requirement of annual self certification statement that the commission is being disclosed by the distributor to the investor. This information will put the commission in perspective

Though I am repeating myself as I had earlier written an article, I would like to state that disclosure of commission will badly hurt retail business, the one that SEBI intends to grow. Already retail investors penetration is low, on the top you have such regulations. I would like to ask regulator why number of distributors not growing. Please understand that the cost of managing retail business is very high and one needs to understand realities on ground.

Front Running charges ( Top 100 funds ) Fund Merger Charges Advertisement charges on TV Commercials Investment management fee, Fund Managers Royalty Fees R&T charges, ( *Chennai Floods situation for CAMS) Custodian fee Electricity charges Blue Dart Courier charges Creeping Aquisition charges (Fidelity, Deutsche Morgan Stanley ) All charges must be disclosed right away

Mr.Vijay, your 10 points are 10 commandments. I do not know why SEBI is always harping on the payment of commission to distributors in the name of investors protection, who are the life line of business promotion and for disclosure in SOAs when already exists a route for informed investors or otherwise to invest directly to save on distribution commission. It is certainly not in the interest of investors but may satisfy the regulator of having super power.

….. In fact the industry Continues to deliver benchmark meeting performance and distributors have channelised all time high savings to MF INDUSTRY in the face of systematic FII outflows. We are in The MAKE IN INDIA week: the MF industry is clearly Made in India and distributed in India -Needs to be encouraged - Rules and regulations need to be reduced and simplified rather than difficult and complex. What is not required, not done elsewhere in the world should not be thrust without a proper discussion and debate with the concerned stakeholder .And if something is not need we should not be suggesting alternatives which are again unnecessary to appear politically correct and submissive These are my personal views and may not represent the views of my firm or the organisation I represent.

Dear Vijay , Your points 1 - 5 are bang clearly state the case for no need for further disclosures. Hence their is no case for any alternative additional disclosures. As a responsible intermediary between Manufacture and Distrbutors awilling to disclose the fees you receive from each Manufacture and also give a full breakdown of all the costs you incur? In 2013 SEBI removed the limit on Management Fees and made the TER fungible between Management Fees and other expenses on grounds that Industry has matured. Is there any reason to believe that industry has since 2013 not delivered investment performance; is there any reason to believe that investors have missold. Continues…

I agree with Mr.Vijay Disclosing commission on account statements is like postmortem analysis. Investors MUST know the TER and other relevant details befire taking investment decisions.

Very True. The last two points are worth implementing. SEBI should look at overall scenario betterment instead of completely focussing on investor wellbeing only. If distributors and adviosrs are constantly stressed due to changes in regulatory environment, very soon distributors and advisors will move away from this industry thus resulting in lesser people catering to the retail segment. This will hurt the retail investors badly and the purpose of SEBI will be lost totally.

Point no. 7 is really killer one against the present debate.

The suggestions are logical. Especially point number 7. An investor has to be informed about the expense breakup details before taking an investment decision. There is no logical point in investor protection by informing the breakup after investing. Investors should be seriously thinking about staying invested instead of distracting too much of their attention to such points. Let them spend their time on staying invested. Direct plan investors should mandatorily pass a minimum level of investor education test. Frequent changes in regulations are not helpful for any industry to grow. Its time to seriously consider the valid points raised by Mr Vijay. It will surely help the investor community to be more informed about the expense on their investments. Thanks Mr Vijay for presenting the valuable points.

very well written sir. This is the true picture of the industry, why industry is nt attracting the talent because of all these problems. again alots of thanks .

Well witen sir

Let me start with the following lines : " we distributors are the most hated persons in the closed door of SEBI & they(SEBI) are truly unpredictable like that of sensex. Mr Vijay , you have given point by point detailed aspect on the matter of disclosing commission and SEBI should must consider it before we move into wrong direction.

Excellent write up Mr. Vijay Hope it is heard by AMFI and taken up for discussion in their board meeting. Meanwhile I congratulate Mr. Rajendran, CEO, AMFI and his team for ably handling the issues. I request AMFI team to considering these valuable points. Espexially point number 7. We see most of the direct clients or booking their losses during this market fall, but we the Advisors advise our clients and hold them and ask them to stay invested for a better period to come. To overcome the above situation SEBI should come out with a regulation that all direct investors should write a minimum qualification exam to invest direct. Once again thanks to Mr Vijay

Thanks Vijay for reflecting the true concerns. I would also like to add: Over and above the expense ratio the holding pattern of the investors ie., what % of the Aum the investor holds is a major factor which will also have a major effect on the return of the investors if those investors who have huge corpus moves out. Although there is existing regulations on this it is only on records no investor knows about these.

Sir Well said and discussed about frequent changes in regulations which certainly deters orderly growth of our Industry as well as Distributors. Will SEBI heed our Voice?

SEBI WILL TRY TO DO WHAT THEY FEEL IS GOOD FOR INVESTOR. DISCLOSING TOTAL SHARE BROKERS COMMISSION IN TRADING ACCOUNT & DISTRIBUTORS COMMISSION FOR MUTUAL FUND IS WELCOME. NEW IFAs ADDITIONS ARE NOT ENCOURAGING, NEW COMERS ARE NOT READY TO JOIN THE PROFESSION MAINLY BECAUSE OF COMMISSION THEY RECEIVE IN INITIAL 10 YEARS AND BECAUSE OF REGULATORY CHANGES OR MARKET CONDITIONS. IF IFAs STAY IN THE BUSINESS FOR 10 YEARS, THEY COULD GET SOME REASONABLE PAY. KINDLY SEE THE BOTTOM OF THE PYRAMID(IFA COMMUNITY) BEFORE BRINGING ANY RULES OR TAKING ANY STEPS. IF AN IFA IS GETTING 10 SIPs of Rs.1000 each, EVERY MONTH FOR 60 MONTHS, HE MAY RECEIVE APPROXIMATELY AN ANNUAL INCOME OF BELOW Rs.2 lakhs provided all SIPs are continued. REQUEST SEBI TO CONSIDER ALL IFAs INCLUDING SMALL IFAs BEFORE INTRODUCING ANY NEW REGULATION. IT IS HARD TO FIND, AN INVESTOR WHO LOST MONEY IN ANY DIVERSIFIED MF, WHO STAYED FOR 10 YEARS IN THAT FUND. INVESTOR LOST MONEY IN EQUITIES BECAUSE OF HIGH CHURNING.

Tell Mr UKSINHA TO publish his salary and allowances on statements and the concerned companies Fund manager salary also....... The distributors who are working for the betterment of clients......will suffer a lot.....

investor is very well aware about the direct investment in mutual fund and knows about the charges mentioned in the KIM. so there is no need to disclose in the statement of account. Also the distributor sells only faith to the customers. and will not cheat with the customers. Disclosing commission in the S.O.A. is harmfull for distributor and AMC.

While one is right in pointing out "there isnt any use by simply informing SEBI to not go ahead and proper representation has to be made", AMFI on its own, lacks the will power and courage to do so. With SEBI known for its obsession of getting so called "reforms", does go ahead. .let me play a devils advocate: #1: wouldnt it help the IFA community to showcase the meagre amount of payout being doled out for the humungous extent of service given by IFA to the client? Would I be right in saying for a Rs 5000 sip, one would get 0.85% and further deduction of Service tax on it. #2: wouldnt this move of disclosures put pressure on Insurance products to disclose commissions? They range from 12-60% of the premium. I am of the opinion, if one were to concentrate and focus on "customer/client" every commotion around in the industry is immaterial. The genuine customer does understand the hardworking and efforts his/her IFA puts in.

Your 10 point list is perfect. All the advisors work in the interest of their clients only. No one would like to cheat their client. Trail commission is a win win situation for investor, advisor and AMC. Also there is direct plan available, so anyone can go if they want to invest directly. I think disclosing the commission on the statement may be harmful to MF industry as whole. As you rightly said, investor may feel cheated. Regards Nikhil

Well said.presented our case convincingly and authoritively.