The Hindu Business Line : More agents to get mutual funds ticking

Mutual fund distributors may soon be as commonplace as the insurance agents who accost you with their selling pitch at every turn. A booming stock market and growing investor interest in mutual funds has helped swell the number of mutual fund agents over the past few months.

"We have certified 8,000 new agents since September 2003," says Mr A.P. Kurien, chief of the Association of Mutual Fund of India (AMFI) — the nodal agency which certifies new mutual fund distributors. This is a big number, given that AMFI had only 11,000 certified agents in its fold just four months ago, in September.

A growing number of agents seem to prefer working on a freelance basis. Of the 19,000 certified distributors with AMFI, 15,000 are freelancers, not affiliated to the banks or distribution companies such as Bajaj Capital or Birla Sun Life Distribution, which also sell mutual fund products.

Individuals who take up the mutual fund agency range from B-school graduates to retired bankers.

With the VRS schemes of the public sector banks relieving hordes of middle management executives of their jobs, many have made a beeline to distributing financial products.

"They have the contacts, know the depositors who have money and are familiar with the terminology and basic financial parameters" says Mr Vijaykumar, Manager, Agency Training for Prudential ICICI, explaining why retired bankers flock to mutual fund distribution. The lack of an age bar and relatively low cost of acquiring the AMFI qualification are also incentives, he feels. The training cost for the AMFI certification is Rs 500 and the basic course is done in about four days.

But, he says, that the mutual fund market has not matured to the level where it would enable agents to live off this profession on a full-time basis. "Mutual fund agency is still not on the same level as life insurance agency which not only offers a higher commission but also allows for a regular flow in the succeeding years."

His view is echoed by Mr M.S. Suresh, 46, who took VRS from Bank of Baroda in October 2001. Mr Suresh has about 600 clients to whom he sells financial products, including mutual funds. But, he says that his earnings from MF distribution alone may not be enough to support him. So he also distributes life insurance for ICICI Prudential, and general insurance on behalf of New India Assurance. "I work from 9 to 6 or 7 p.m. I enjoy my work and have no regrets on taking the VRS," he says.

The entry of a large number of freelance agents is a development that mutual fund houses maybe happy about, since it gives them more clout. Mutual fund houses rely heavily on their top institutional distributors who bring in as much as 50 per cent of their business.

This makes it difficult for fund houses to bargain down brokerage costs, that are in the region of 1.5 per cent to 2 per cent, especially for equity products. With a SEBI fixed limit of 2.5 per cent on expenses, they find little room for manoeuvre. Greater competition in the distribution industry would also be good for small investors. With more freelance agents entering the field, they would stand a better chance of getting some personal attention, which is reserved only for high net worth individuals with a few lakh of rupees to invest.

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