'Fund companies should stop rewarding distributors with junkets'

At the AMFI summit, HDFC chairman Deepak Parekh urges the fund industry to grow assets prudently.
By Ravi Samalad |  23-08-18 | 
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Ravi Samalad is Assistant Manager - Editoral for Morningstar.in.

Speaking at the second AMFI Mutual Fund Summit, HDFC chairman Deepak Parekh urged the industry to stop the practice of luring distributors with foreign junkets to gather assets. He said this practice is prevalent in insurance industry too.

He urged SEBI to look into this matter if AMCs don’t toe the line. “While commissions are capped, there are concerns over how distributors are being incentivised. A few AMCs deviate to grow business as there is intense competition. Mis-selling due to incentives hurts investors. At this juncture, most retail investors in India need handholding and are unwilling to pay advisory fee. The challenge is to inculcate a culture where distributor recommends a fund to an investor based on the merits of the fund and not based on the amount of commission he/she receives,” said Parekh.

Industry participants said there is a need for self-regulatory authority for distributors.

Striking an optimistic note, Parekh estimated that the industry assets are set to double from the current Rs 23 lakh crore to Rs 50 lakh crore in the next five years. However, he said that the industry should grow business prudently. He cited increased awareness about mutual funds, shift from physical to financial assets, growing middle class and job opportunities augur well for the fund industry.

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