‘Distributors’ role important in handling investor sentiments’

Can you tell us a little bit about FIFA and what it does?

FIFA is an association of mutual fund distributors and advisors established about 10-12 years ago. We are a consortium representing over 2,700 individual mutual fund distributors. We started as an association with two basic objectives: one was knowledge-sharing among our networks to drive better practice and ensure favorable results for our investors, and the other was for the individual mutual fund distribution community. To create a common voice. , so that the upcoming regulations can be actively shared. We are focusing on individual distributors, and one must be aware that distribution in India is done across three broad channels- banking, national distributors and individuals.

Starting from 2018, SEBI had prescribed certain Total Expense Ratio (TER) caps, and also made some changes on distributions; For example, getting rid of advance commission. After that, there has been a wave of mergers and consolidations among independent financial advisors (IFAs). From a bird’s eye view, do you see this trend continuing? Do you see this as a direct result of the drop in commission?

I don’t think the trend towards consolidation is driven by the extent of TER. I think it is being driven more by the emerging environment. In that, as an individual distributor, what is becoming more apparent is that you need both breadth and depth of knowledge. Financial markets have become so dynamic that new asset classes are appearing. And so, there is a sense for people to come together and pool their knowledge to gain an understanding of the market. Secondly, even with the digitization of how to do your practice, how do you better serve your customers, which is again very dynamic. The way technology is changing, it is affecting business models. Once again, it makes sense to collaborate with like-minded people when you consider the breadth of knowledge and impact of technology for an individual distributor.

CAMS and KFintech have launched a free website called MF Central for MF services and eventually transaction requests. This performance was seen as the primary function of a distributor. How does that role change going forward?

I don’t see the role changing. Primarily, the role of a distributor is to take new investors to mutual funds. There is a long way to go to convert household savings into productive financial assets. Real wealth is created by people who are not tempted by fear and greed, and I think that, in order to handle investor sentiments, this is a very important role that any distributor plays. This is a complete conversation that is required during investment; Especially at a time when there is an economic crisis, or there is a political crisis, or external events are accompanied by aftershocks. So, while service is an important element, I don’t think that was the key role that a distributor was playing. Every family needs someone to serve them not only on the paper filling part, but also on the emotional part, understanding and wisdom.

Finally turning to the question of nomenclature, SEBI has said that mutual fund distributors cannot use the term IFA, or financial advisor. Given that a significant portion of your membership consists of distributors, are you considering renaming FIFA, or have any other thoughts on this?

Given that option, we have not taken a final decision. I think SEBI regulations directly affect individual distributor, but I don’t think it directly affects us as an association.