An organised distribution network will prove to be more sustainable for fund houses, according to a Price Waterhouse Coopers (PWC) report on the Indian mutual fund industry.

The report has suggested that the industry consider increasing the trail commissions of distributors with each passing year. For instance, the trail commission can be higher in the second and third year as compared to what is paid in the first year, it said.

This would serve two purposes — investor would stay invested in the fund for a longer time, thereby reducing the redemption pressures, and the distributor is encouraged to earn a higher trail commission in proportion to the longevity of the investor remaining in the fund.

Building and scaling up any distribution channel depends heavily on the confidence of the investor. For this fund houses should ensure transparency in business, focus on post-sales services, provide ease of access to investors and have a robust technology infrastructure, said the report.

The report also suggested that the mutual fund industry should leverage other channels such as PSU banks, post offices and even insurance companies through the same platform to ensure deeper penetration.

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