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The
distribution game
SHOBHANA
SUBRAMANIAN & NIREN SHAH
Selling
mutual fund schemes is a profitable proposition these days given
that the number of investors is growing
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About
five years back, Premal Mehta gave up his job as the head
of distribution at DSP Merrill Lynch AMC to start his own
financial advisory services firm Wealth First. Today, he has
close to 1000 clients in Mumbai and Ahmedabad. It’s
been just about a year since Neha and Dinesh Khemlani quit
their plum jobs at Standard Chartered and Societe General
to set up their own financial solutions outfit.
With
more investors looking to park their savings in financial
products including mutual fund schemes, selling these products
has become a worthwhile occupation. And whether it’s
banks or individuals, they’re all taking the business
seriously.
Consider
the numbers: equity assets with mutual funds has grown by
about 600 per cent from Rs 47,000 crore in March 1993 to Rs
3,26,292 crore at the end of March 2007.
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SAURABH
SONTHALIA
CEO, AIG Asset Management
IFAs
are found across the country and cater to people in the vicinity
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Over
the past year, such assets have grown by more than 40 per cent,
though the majority of the growth was fuelled by debt funds, which
grew by 92 per cent.
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The
increase in equity and liquid funds at 24 and 17 per cent,
respectively was far lower. Today, barely 30-40 per cent of
the corpus with mutual funds is accounted for by retail investors,
though their numbers are swelling. According to RBI data,
the percentage of households investing in equities, bonds
and mutual funds rose to 4 per cent in 2005-06 from less than
2 per cent in 2004-05.
REDISTRIBUTION
OF MARKET SHARES
Today
the pie is shared more or less evenly by the three main categories
of distributors: banks, regional and national distributors
and independent financial advisors. But that wasn’t the
case five years back; at the time banks and IFAs had a much
lower share: it was the national distributors that dominated
the business.
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MUKUL
GUPTA
CEO, Birla Sunlife AMC
Banks
are focussing on fee-based activity to diversify revenue streams
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However,
today many more individuals are setting up shop and they seem to
be gaining market share incrementally, cashing in on the growth
of the investor population. Thus, fund houses may have to rely increasingly
on IFAs since awareness is increasing even in the smaller towns
where it might be difficult for organised distributors to set up
infrastructure.
Says
Vivek Kudva, president, Franklin Templeton, “Unlike other Asian
countries where the banking channel has the lion’s share in
mutual fund inflows, in India, IFAs play quite a big role in the
mutual fund distribution landscape.” Little wonder that the
number of IFAs today is estimated at around 70,000 compared with
10,000 about five years back.
Continued
on next page
Business
Standard •
FUND
MANAGER • October 2007
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