Regulatory changes test Indian IFAs
Recent regulatory changes in India may persuade distributors to abandon selling mutual funds and to focus, instead, on distributing insurance and other fixed deposit products, according to a new report published by Celent.
The report, released today, claims regulatory changes in the Indian mutual fund industry have effectively reshaped the market, particularly the removal of the so-called entry load.
It said to keep the distributors in business, fund houses will have to offer compensation from their own pockets. “This increased expense, lack of organised distribution channels and decline in profitability may force some smaller players to quit the business and could result in industry consolidation.”
The Celent report predicted that, as a result, direct sales would make significant headway, mostly in urban areas.
It said although direct sales only accounted for 10 per cent of mutual funds sold in the top eight cities, they were likely to grow significantly by 2012, while independent financial advisers in semi-urban areas would be affected most by the change in regulation.
AUTHOR
Mike Taylor
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