Not many keen to take up mutual fund distributorship

Sneha Padiyath Updated - January 28, 2013 at 11:06 PM.

Distributors’ interest in the mutual fund industry seems to be waning. Data on the Association of Mutual Funds in India (AMFI) Web site shows that the number of additional distributors between September 2011 and 2012 was 3,030 taking the total number of distributors to 86,240.

This is much lower than the 8,290 additional distributors who joined the industry in the period between September 2010 and 2011. As at end September 2011, the number of distributors in the industry stood at 83,210. The total number of distributors as of end September 2010 was 74,920.

Analysts said that low commission along with poor fund performance leading to investor apathy were among some of the reasons for the distributor community losing interest in the mutual fund industry.

In the one-year period ending September 2012, all quarters except the September quarter saw an increase. As at end September 2012, the total number of individual AMFI Registration Number (ARN) holders was 79,639 and the number of corporate ARN holders was 6,601. A year back, these numbers stood at 76,788 and 6,422, respectively.

Requirement more

While data for the December quarter is unavailable, Deputy Chief Executive of AMFI V. Ramesh said 988 distributors have been added. “Sales of mutual funds have to be more. The waiving off of registration charges will increase feet on the ground. We need a lot of distributors in the smaller cities and towns.”

AMFI had earlier this month announced the waiving off of registration charges for individual distributors enrolling between the period February 1, 2013 and June 30. The one-time registration fee for individual distributors stands at Rs 5,000.

Fund house officials and analysts, while accepting that there has been an increase in registration numbers, said that the number was not good enough.

50% only active

“In a country like India, 3,000 (more) distributors do not mean anything. Also, the number of distributors is just one side of the story. The real story is how many of them are really active,” said Dhirendra Kumar, Chief Executive Officer, Value Research.

Industry trackers said that the number of active distributors was about 50 per cent of the total number of distributors registered. More and more distributors have been exiting the mutual fund business owing to the low commission.

The capital market regulator, SEBI, has taken several measures to revive distributor investor including the recent measure to expand the existing network of distributors by adding new categories.

Ambiguous definition

The new cadre of distributors consists of financial product agents, postal agents, retired Government and semi-Government officials, retired teachers and retired bank officers with a service of at least ten years, among others and are allowed to sell ‘simple and performing products’. The industry remains unclear over the definition of ‘simple’ products.

Kumar added that next year about 50,000 to 1 lakh new distributors could be added, especially with the addition of the insurance agents to the list, who number about 24 lakh.

>sneha.p@thehindu.co.in

Published on January 28, 2013 17:33