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WE have to fight for mutual fund ombudsman than only we can solve all legal problems

The only solution is all of us should be united and raise one strong voice. It is very clear regulators and AMCs are trying to eliminate IFAs from the industry. But they need long term investments. For that they will use IFAs in full swing for time being. It is evident in the case of UTI. Around 8000 crore for which they need not pay any distributor commission as it has become direct now. Any way those assets are going to stay for a long term. They are I mean AMCs are very keen to increase these kind of AUM in the medium to long term. Regulators and AMCs are keeping IFAs in a uncomfortable stage, knowing that they will leave one day then the total AUM will become direct. AMCs are playing dual role. Instead of spreading awareness of the importance of IFAs among the investor community, they are speaking it only in IFA meetings. On the other side they are building very strong channel to increase the direct share. Please be united and raise voice. This is the only solution. Please be United.

why the service tax has to be imposed on IFAs.If it is to be imposed then investor may be imposed who is the beneficiary of the product

In the guise of upfront+ trail fund houses keep paying lower trail commissions of around 0.5% or even lower that make it impossible to survive and force the codes of IFAs to lapse. We shouldn’t forget the fact the benefits of lapsed code AUM accrue to fund houses. As long as the benefit of lapsed codes keeps accruing to the fund houses more and more codes will be lapsed using such paltry trail commissions. The conflict of interest should be eliminated by moving the lapsed code AUM to direct and upfront commissions should be banned.

The news that a fund house proposed a trail of 0. 20% in upfront + trail format, if true, is indicative of things to come if upfront commissions are alive. As we are doubting for a long time now higher upfront commissions are being paid to divert the attention from only trail model. Sooner or later we will have neither upfront nor higher trail.

Codes of small distributors will continue to lapse as happened in the past if the minimum commissions are not set by SEBI . If there are no small distributors there will be no one serve small investors too.

It is highly unjust towards IFAS.

I completely agree that low trail commissions of around 0.5% and lapsing of codes of IFAs are closely interlinked. As long as there is a direct benefit to the fund houses in lapsing codes we will see more and more IFAs leaving the industry. It is unfair on the clients too that in case of lapsed code AUM, invalid code AUM, no code AUM, without getting any advice or service they are being charged full expense ratio. AUM without any active code or lapsed code AUM should be transferred to direct. I support the suggestion that SEBI should prescribe a minimum trail of around 1% so as to safe guard small distributors.

The effort to limit trail commissions as indicated by cafemutual and to continue with upfront commissions is what is all wrong with brokerage structures and the attitude which lead to the exodus of thousands of IFAs. The more the number of IFAs left the better is the ability to pay upfront commissions to bigger distributors(commissions saved from lapsed code AUM). As long as there is no prescribed minimum trail commission by SEBI and as long as the benefit of lapsed code, invalid code, no code AUM keep accruing to fund houses, IFA codes will keep on lapsing. Lapsed code AUM should be transferred to direct and a minimum trail commission should be prescribed by the regulators to save IFAs.

Mr Sam hit right on the nail. In the recent union budget the finance minister has proposed the merger of schemes. We hope AMCs may merge the old direct plan assets and lapsed code assets with new direct plans. As somebody said SEBI is the final authority to suggest AMCs to merge the above three. There is a superb article about lapsed code assets in the Money Life. http://www.moneylife.in/article/are-fund-houses-using-direct-plans-to-benefit-themselves/40905.html

Good Article on Lapsed Code AUM published by Money Life. http://www.moneylife.in/article/are-fund-houses-using-direct-plans-to-benefit-themselves/40905.html

I also agree to the same. I am also facing the similar situation. My AUM under reliance is being shown by them but they are not paying the Trail on the same inspite of code renewal in the recent few months back whereas DSP has paid the trail to me. I am of the view that the fund houses are playing a game with trail on their own.

I agree with you

Is this truth ? Why mf companies are not saying anything regarding this. it is good if they give clarification. Need to know the truth.

This is the real issue friends. In lapsed code AUM , the brokerage is happily UNPAID , while the client is fully charged. Keep aside this service tax noce for a minute( Birth , taxes and Death are in evitable in ones life). An IFA''s basic remuneration it self held back, all the while , they are chaging to the clients.This shall be objected on all counts. Coming to the service tax : there is nothing to panic , its an indirect tax , ultimately it has to be borne by the investors, but primarily , it will have to be borne by the receiver of the service , in our case the AMC. Surely the liability to pay it is with the AMC .

UTI not showing direct plan expense ratio in % in fact sheet and on its website too probably indicates UTI is not being as aggressive as some other fund houses are with direct share class. Probably it indicates the negative impact of direct share class on amcs after a certain threshold. We can be sure if lapsed code AUM is transferred to direct and if there is transparency in accounting, amcs that are now trying to threaten us by sending repeated mails to investors about direct will not do it.

Yes, I feel your view is valid.

I fully subscribe the vison and ideas

yes i too agree this.

I fully agree with the suggestion and would support this move

No doubt it is serious flaw,and this discrepancy must be removed.

Agree. Shift Lapsed Code Assets to Direct Immediately.

100% Agree with you. Lapsed code assests shuold be transfered to direct plan.

Even when the ARN number of the IFA /distributor is clearly mentioned on the application , if the EUIN is missing (or not clear) , investment is being treated as DIRECT. That being done , when the ARN itself expires , why is the investment not being transfered to direct? This is a very simple question. All the AUM with lapsed ARN codes must be transfered to DIRECT class.

Fund houses not solving the service issues even after years of repeated requests for streamlining processes and bringing in common applications across the industry, is probably their way of telling that they don’t want small investors, the troubles associated with them and the small advisers who bring them in too. May be the benefits accruing from lapsed codes are enticing the fund houses to put pressure on the lower rung IFAs with these service issues and with lower trail commissions. But, can the industry and the country afford to let this attitude continue?

If there is a direct benefit for the mutual fund companies in lapsing the codes Amcs may do it. Lapsed code AUM should be transferred to direct.

Huge lapsed code AUM and the profits it is generating for fund houses could be a certain reason for paying lower trail commissions of around 0.4 to 0.5% to small distributors. Probability of National Distributors’ hand in such low trail commissions can not be ignored too as they are also direct beneficiaries of lapsed code AUM. But, all this is certainly affecting not only the moral of small distributors who want to work honestly but also hurting the investors too as without advisors they may not get service and advice and may not be willing to invest in mutual funds at all. Crores of investors directing their savings to other financial products and land could be because of this unhealthy practice. In the interest of the industry it is better that lapsed code AUM is transferred to Direct.

Huge lapsed code AUM and the profits it is generating for fund houses could be a certain reason for paying lower trail commissions of around 0.4 to 0.5% to small distributors. Probability of National Distributors’ hand in such low trail commissions can not be ignored too as they are also direct beneficiaries of lapsed code AUM. But, all this is certainly affecting not only the moral of small distributors who want to work honestly but also hurting the investors too as without advisors they may not get service and advice and may not be willing to invest in mutual funds at all. Crores of investors directing their savings to other financial products and land could be because of this unhealthy practice. In the interest of the industry it is better that lapsed code AUM is transferred to direct option.

The Lapsed code AUM of all the AMCs should be disclosed as Direct, so as to bring the transparency to the whole industry. All the big fund houses are playing their unfair part in this regard.

Artificially high difference between direct and regular of upto 2% as some fund houses are showing will be detrimental to the small investors that we serve as they will be paying for the expenses of HNIs. To reduce the gap, lapsed code AUM should be transferred to Direct.

I fully endorse with your view. This should be taken up very seriously so that the small distributors are protected

I have an additional issue here. I had an ARN code in my name, then took up a job, so my ARN was cancelled and I had to use a corporate ARN. I then left my job and restarted business as an IFA under my own name again. Though I had both ARNs as an IFA under the same name, it is difficult for us to get the AUMs transferred under the new code, because clients do not cooperate. This may be happening for many IFAs and I wonder how many AUMs are locked under this category, again to the sole benefit of AMCs.

In fact, if the lapsed code AUM is transferred to direct scheme, with each lapsing code, the direct scheme AUM keeps on increasing, meaning additional pressure on mf companies. If lapsed code AUM is transferred to direct, the mf companies may grant our long standing wish of allowing higher trail commissions to distributors even if we do not renew codes after 5 years as in insurance industry.

Now I understand why mf companies don’t give us benefits that are similar to insurance industry. We all know in insurance after 5 years of service an agent gets commission on existing policies even if code lapses. But, as the mutual fund companies are profiting from lapsed codes in mutual funds, they are not willing to give a similar benefit to us. Lapsed code AUM should be transferred to direct.

An IFA would not like to lapse his code. Even then if ARN code is lapsing, there is an urgent need to look into the matter and save the IFAs from lapsing their codes.

Dear Mr.Hinen Shah, if AMCs are allowed to allocate lapsed code AUM to be serviced by some other distributors, it could be far more dangerous for small distributors. An environment may be created to lapse the codes of small distributors deliberately(we should not forget that in case of a sub-broker’s code lapse the benefit is now going to National distributors and low trail commissions are definite reason for sub-broker code lapse ). If the client indeed wants to have a distributor service him he has the option anyway. The best way is to safeguard small distributors is to get the lapsed code AUM transferred to Direct so that there is no benefit to anybody in creating an environment to lapse codes(lower trail commissions,etc).

Thank you Mr. Sam to bring such topic to the notice of IFAs. I strongly believe the same that other AMCs should transfer this AUM under direct channel. I also want to suggest one option that AMCs should give chance to manage this AUM to other active IFAs in the same area. This should be with some systematic and organise way. This will also help to provide better services to Investors.

SEBI should look in to it.

it seems to be big scam in mf industry.

OMG!!!!! What is SEBI and AMFI doing about this? all want to know.

Theoretically,there should be a uniform practice across the industry.Need to check if there is such,currently in place. It is for the regulator to ensure that happening.Institute of Chartered Accountants of India (ICAI ) from time to time releases Accounting Standards and the adherence to that is ensured by the Auditors.In case of deviations/Violations Auditors do qualify the same in Audit Reports.The Audit Reports provide the first Red flag for any lapses,deviations,systemic Irregularities.

It could be better if there was a RTI on how these funds are being used. This disclosure of how the funds are used would be the big scam and would make people sit up and do something.

Fully agreed with the idea.

It seems that AMCs trying to be aggressive with Direct share class is on a deceptive front to hide their own fear of Direct share class. Lack of transparency in accounting seems to be their strength. Investors are losing hundreds of crores due to this lack of transparency and small distributors too are being thrown out of business with lower trail commissions. The only remedy seems to be associations should request SEBI to get the lapsed code AUM transferred to Direct. I''m surprised no association is talking about this crucial issue until now in open!

Excellent initiative !! My wholehearted support for this

UTI not showing direct plan expense ratio in % in fact sheet and on its website too probably indicates UTI is not being as aggressive as some other fund houses are with direct share class. Probably it indicates the negative impact of direct share class on amcs after a certain threshold. We can be sure if lapsed code AUM is transferred to direct and if there is transparency in accounting, amcs that are now trying to threaten us by sending repeated mails to investors about direct will not do it.

Checked the NAVs of UTI opportunities fund and it seems the difference between Direct and Regular is around 0.60%(as the percentage is not given, calculated it from NAV approximately). That tells us that if lapsed code AUM is transferred to Direct, gap between Direct and Regular will automatically reduce and we will be saved.

Really shocking to know that lapsed code AUM is in upwards of Rs.1,00,000 Crore. Obviously we are talking about the years of hard work and failed dreams of thousands of distributors whose hard work is profiting someone else. This should stop. It seems the best way for it is to get the lapsed code/Invalid code AUM transferred to direct share class. Regulators /Government may look into it seriously.

1% Trail on around 1 Crore AUM would have given an approximate monthly income of Rs.10,000/- Most of the distributors who left the industry had around One Crore AUM or even more. Had there been trail they would not have left the industry and the clients would not have suffered. It is difficult to assume that fund houses would behave in the same manner as they are doing now(paying low trail commissions and letting the codes lapse) if there is no direct benefit for them from lapsing codes. Lapsed code AUM should be transferred to Direct.

Lapsed code AUM should be transferred to Direct Share Class for the sake of small distributors.

It is an anomaly that only UTI is showing the lapsed code AUM under direct. Mr.Sinha(Chairman, SEBI) was the CEO of UTI Mutual Fund when direct was introduced in its earlier avatar(when there was no price differential between direct and regular) and he may have been instrumental for this accounting practice of UTI. Had UTI not showed lapsed code AUM under direct, we would never have known that lapsed code AUM could be this big. It is neither fair to the clients, nor to the distributors who work hard to bring in the AUM if the commissions of lapsed codes go to fund houses. Lapsed code AUM should be transferred to Direct.

I agree with ur view

IT IS IDEAL FOR IFYS

I to agree with your views.

As long as there is conflict of interest amcs may develop ways(like paying lower trail commissions etc) to create an environment to get the codes lapsed. The best way to eliminate this conflict of interest would be to get the lapsed code/invalid code AUM transferred to Direct plans.

All the AMC s should show the laped code AUMs as direct ITS NOT FAIR ON THE PART OF AMC TO CHARGE THE EXPENSE RATIO TO THE INVESTORS THERE BY PROTECTING MF INDUSTRY ITSELF.

I really believe it is unfair for the investor that commissions of the lapsed code AUM are diverted. Either the distributor who worked to mobilize the AUM should benefit or the investor should benefit. All the fund houses should follow the example of UTI Mutual Fund and transfer the lapsed code AUM to direct share class.

Banning upfront commissions and bringing in transparency in payment of commissions is the only way we could survive in this industry from all the big sharks.

I WAS A N IFA , NOW AM NOT DOING THE SAME, MY DAD IS ALSO IN SAME BUSINESS HE HAS HIS ANOTHER ARN ,

This shows that an IFA can not get RETIREMENT. once he/she had not renew they will loose their Trail Income. in other field Govt is worried about pension/source of Regular income for Senior Citizens. WHY not for IFA? (All MLAs, MPs, Counselors are getting Regular income after their Term till alive) then why SEBI/AMFI not allowed Trail non stop till he AUM in the Code?

It is a wonderful news and I congratulate the initiator for this subject matter. In this regard, I would like to suggest that the AMCs should come forward voluntarily in the interest of the investors by informing them that the ARN holders names have lapsed and they should immediately take actions to get their holdings converted to Direct Mode. As we know that there is much difference between Direct scheme and scheme through ARN holders. Many of the investors are not aware of that how much they are loosing in non-direct mode. Because most of the investors are not fully conversed with operating system of Mutual funds. SEBI should also take up the matter with Association of Mutual Funds Distributors (AFMI). The Govt. agency should also take up this matter seriously and the benefits should not be allowed to be enjoyed by AMCs rather it must be passed on to existing investors.

Thank you for raising the issue . It would be better if commissions under such lapsed/invalid code AUMs are written back to scheme to eliminate the conflict of interest.

Dear Sir My ARN code was expiring in NOv 2011 I cleared that Exam in Oct 2011. However I did not submit That certificate of Passing to AMFI as I was unaware of the rule that if it is not submitted to AMFI I would loose trail commission. It came to my Knowledge only in June 12. However it was too late as 6 months had expired.and as per the rule I lost the commission. I being a small distributor I did not took up the fight on the simple ground that submitting the certificate to AMFI is only a procedural lapsed which I committed. I had cleared my exam in Oct 11 that is well before Nov 11 that is month of my ARN getting expired.The Exam was conducted by an Institution authorised by AMFI and was cleared as per rules.Can you help in such cases to get the commission.

Dear Murali, What you are refering is called poaching.The poching ( stealing of AUM and clients generated by another distributor) will immediately stop , if upfronts are banned and all trail model is started. Precisesly thats is what we are asking for. Even the lapsed code AUM is similar that in one sense. So we shall demand that no code shall lapse at all , once , an IFA does one full term of service , and he shall continue to receive the trail.When , one gets such remuneration , its a clear motivation to bring in more AUM. Direct is in no way competetion to reatil IFA''s on the grounds of quality of service and client interest.

Ppl in high profile think in a/c rooms. Think they are in US. Even former sebi Chief c b bhave thinks the same way. Present sebi chief even though from MF industry wants separate direct nav. Ppl collect info from us including office place and apply directly to save on nav. Change the system that suits in India.

Something really didn’t sync. All this while older/bigger distributors are openly asking for upfront commissions in the guise of support to new distributors. But upfront + trail is there since inception of the industry and didn’t stop IFAs from leaving the industry. Now it is becoming a bit clearer. It seems these older / bigger distributors are in collusion with fund houses that don’t want to give only trail and in the process are making hefty upfront commissions themselves.

The data just confirms the long standing belief in the IFAs that they are just being used and thrown out like tissue papers. Hope regulator takes corrective action for bringing in transparency and safeguarding IFAs.

I am agree with uniyal sir. distributor collect 30 paise 40 paise after his fund house making money. by the way i am agree that investor can change his distributor if not getting service. but firslty we should stop to fund house to sell scheme direct because they investor we are direct but they do not tell investor that direct mean less expense and no service. even they advise investor to which scheme they should take. even it is not legal as per sebi guideline

Lapsed ARN code may be due to various reasons like ARN holder died or he/she is not keeping good health or he/she is too old to renew the same. Under such situation ARN holder or his nominee should keep getting his brokerage/commission because he has earned it with hard work.No other agency or individual are entitled to enjoy the fruit of poor ARN holders hard work. If a Govt. servant dies his pension if enjoyed by his nominee and not other Govt servant/pensioners. Therefore ARN holders brokerage should go to him only or his nominee irrespective of ARN code renewed or not or Euin mapped or not mapped.

Written before also but no response recieved. About not renwal.

Trail is the best way,,increase the trail n stop the upfront,,,but do not allow switch from one broker code to other broker because it create malpractise or wrong practice. One IFA do hard work to get busness switch allow to benifit other IFA without any effots...

Investor should be given option to change its broker and the new broker will receive trail commission

distributor must get his share/brokerage of lappsed ARN. this is serious issue. i also say furthur that not giving his rightful share is a straight way offence,what AMFI doing in this matter. Fund houses stealing the share.

I wanted to know how the ARN code gets lapsed.

TRAIL COMMISSION MAY BE PAID AFTER ARN IS LAPSED

WHY IFAs Nominee don''t get trail or upfront commission, If IFA is no more. Just like in LIC - where if the agent/advisor is no more his nominee gets heredatory commision.

I never received my commission from SBI CAP Securities for Muthoot Finance NCD from FEB 2014. Many emails sent to SBICAP and to Muthoot Finance and no one responding. Please pay my commission as soon as possible.

eye opener. Point is very valid. To avoid conflict of interest it must be done

Sir, madam, My pending trial brockerage icici prudential mutualfund is the period from April 2014 to December 2014. kindly arrange to release the pending brockerage of this period. with regards, VINOD A 9496238097

Sir, madam, My pending trial brockerage icici prudential mutualfund is the period from April 2014 to December 2014. kindly arrange to release the pending brockerage of this period. with regards, VINOD A 9496238097

Sir, madam, My pending trial brockerage is the period from April 2014 to December 2014. kindly arrange to release the pending brockerage of this period. with regards, VINOD A 9496238097

on 19.06.2014 i switched over from IDFC Asset Allocation to IDFC Premier equity which was already in my ARN. while switching over I forget to mention EUIN. I noticed this on 22.08.2014 while sending request for consolidation / up-dation of PAN on other folio of same investor and wrote mail to update EUIN no. Sicce this was more than one month, AMC refused to pay me Upfront as well as trail. amount involve is approx 6 lacs and the same money is with IDFC since 2010. Please let me know the solution.

Just as in life insurance industry ...the agent gives up the business and the company services the orphaned policy and saves on the commission , which in turn is profit .

SEBI should take initiative on it. It should not allow to go to direct AUM unless the investor ask the change. Instead the law should be changed to pay the trail commission to the IFA irrespective of whether he renew the ARN or not. He may not be allowed to do the new business , if ARN not renewed. Upfront should be banned immediately for the well-being of the industry.

As Mr.Sam Koshy pointed out, had there been 1% trail to even the smallest IFA, the IFAs would not have left the industry. But, probably not much money would have been left with fund houses too if these small IFAs stayed put(continued) in the industry to pay High upfront commissions to big distributors.

My ARN has expired and I m not receiving my commission even for the work done before expiry of ARN. What to do?

If are lapsed than commission used for current arn further services like medical education insurance etc

In a meeting conducted recently for financial planning aspirants, one of the well known distributors said that trail will be reduced to 0.35% . The entry fee for the meeting is Rs.1500/- . The total attendance is around 50 IFAs. Approximately 10 prominent speakers were there and most of them flown in to Hyderabad. I am sure not even their flight ticket expenses to Hyderabad would be compensated by the entry fee, leave aside the venue rent and compensation for these high profile personalities. It is big question mark who is paying these propagators of financial planning and what their motive is in mentioning that the trail may become 0.35% after 8-10 years? It seems these activities are being conducted to keep upfront alive and terrorise IFAs in the guise of educating them.

If this trends continues the more the number of distributors brought in to the industry, the more the number of codes that lapse, the bigger seems to be the profit. I guess that is the reason that people never talk about sustaining the existing distributors by giving a higher trail but always talk about how upfront commissions are needed for new distributors. By the time a new distributor realizes the income he is getting is too low and un-sustainable it will be too late. He leaves the industry and there will be some more profit to Amcs as long as there is no transparency.