New distributors flocking to mutual funds

The individual financial adviser (IFA) force increased by 9,505 from 68,020 in December 2016 to 77,525 as on September 2017.
By Ravi Samalad |  06-12-17 | 
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Ravi Samalad is Assistant Manager - Editoral for

With rising inflows in mutual funds, the Rs 21 lakh crore mutual fund (MF) industry is seeing a steady increase in new distributors joining the MF fold. In the calendar year till September 2017, 11,630 distributors (corporates, individuals and new cadre) have joined the industry. Encouragingly, the individual financial adviser (IFA) category has contributed majorly to this growth. The IFA force increased by 9,505 from 68,020 in December 2016 to 77,525 as on September 2017.

If we take into account employees holding Employee Unique Identification Number (EUIN), the total feet-on-street distributors (excluding non-individual distributors) has gone up by 40,346 from 1.67 lakh to 2.07 lakh during the same period. Of 2.07 lakh distributors, 87,994 are individual mutual fund distributors while 1.19 lakh are employees. This suggests that banks and national distributors are ramping up their relationship managers (RM) force (29,494 new EUINs issued) to cater to the increased demand for mutual funds.

“We are adding 400 new partners on our platform every month. We have a big focus on attracting new talent to grow our business. Since markets are supportive, a lot of new distributors are joining the industry. While markets are favorable at this juncture the tide could turn. To help them sustain, we train our partners to remain focused and have patience to reap the benefits in the long run” says Neeraj Choksi of NJ India. NJ India is the country’s largest distribution house having 20,000 sub-brokers managing assets worth Rs 54,00 crore in mutual funds.

The growth in new ARN registrations can be attributed to a number of factors. The awareness about mutual funds has increased dramatically due to the regulatory thrust on AMCs for investing in creating awareness. Fund houses as well as AMFI are flush with funds to popularize MFs. The media blitzkrieg has created curiosity about MFs and the popularity is spreading through word of mouth from existing investors. This coupled with the sustained rally in market has made investors as well as distributors happy. The increased demand for mutual funds could be leading to more players taking up MF distribution. Moreover, B15 distributors are entitled to earn higher commissions as compared to T15 distributors. Industry experts say that many brokers are also taking a shine to mutual funds, realizing the long-term revenue potential in the form of trail commissions.

“Association of Mutual Funds in India’s (AMFI) campaign is having a positive effect. New distributors are gaining confidence that distribution could be a good career option. Earlier, only 10,000-15,000 distributors were brining volumes. Now, the distribution is more widespread. The strong inflows, especially through SIPs, is testimony to the fact that the distribution base is expanding. I believe that the current base of distributors is still small. We would need more feet-on-street advisers as the demand for the product is increasing,” says G Pradeep Kumar, CEO, Union KBC Mutual Fund.

It is not only individuals who are taking to MF distribution. The distribution space is attracting talent from asset management firms, wealth management/banks and new age robo advisers that are backed by investors. e-wallets like Paytm and ecommerce sites are expected to sell mutual funds on their platform soon. Freecharge already offers Reliance Liquid Fund to its subscribers.

While this is certainly a healthy sign, we are nowhere close to the 21-lakh agency force of life insurance industry. Life Insurance Corporation of India (LIC) alone has 11 lakh agents.

The competition is heating up in the insurance space as well. Home grown e-commerce site Flipkart is reportedly awaiting IRDAI’s nod to offer insurance policies. Interestingly, IRDAI has issued guidelines for allowing agents, brokers, insurance marketing firms and web aggregators to sell insurance policies by floating an e-commerce platform called as Insurance Self-Network Platform (ISNP).

While technology will play a big role in scaling up, we would need more distributors on ground to provide a personal touch to investors. Without enough number of distributors, Indian households who have never participated in equities could be at the risk of being unadvised.

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